POWER SPECTRA INC /CA/, S-3, 1996-08-23

POWER SPECTRA INC /CA/
S-3, 1996-08-23
COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH

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As Filed with the Securities and Exchange Commission on August 23, 1996
Registration No. 333-________

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

--------------

FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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POWER SPECTRA, INC.
(Name of registrant in its charter)

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California 94-2687782
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

Power Spectra, Inc.
919 Hermosa Court
Sunnyvale, CA 94086
(408) 737-7977
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)

--------------

Gordon H. Smith
Power Spectra, Inc.
919 Hermosa Court
Sunnyvale, CA 94086
(408) 737-7977
(Name, address, including zip code, and telephone number,
including area code, of agent for service of process)

--------------

Copies to:
Grover T. Wickersham
Debra K. Weiner
Grover T. Wickersham, P.C.
430 Cambridge Avenue, Suite 100
Palo Alto, CA 94306

Approximate date of commencement of proposed sale to the public: As
soon as practicable after the Registration Statement becomes effective.

If any 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. [ ]

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<PAGE>

CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Proposed Proposed
maximum maximum
Title of each class of Amount to offering price aggregate Registration
securities to be registered be registered per unit(1)(2) offering price(2) fee
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<S> <C> <C> <C> <C>
Common Stock (3) 10,475,383 $1.06 $11,103,906 $3,828.93
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<FN>

(1) These figures are estimates made solely for the purpose of calculating the
registration fee pursuant to Rule 457(c).

(2) Proposed maximum offering price is based on the closing bid price of the
Common Stock on the Electronic Bulletin Board on August 21, 1996.

(3) Registered for resale by certain Selling Shareholders.

</FN>
</TABLE>

================================================================================

The registrant hereby amends the 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>

<TABLE>

POWER SPECTRA, INC.
Cross Reference Sheet Between Items of Form S-3 and Prospectus

<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover of Prospectus .................................. Facing Page; Outside Front
Cover Page

2. Inside Front and Outside Back Cover Pages
of Prospectus............................................... Inside Front Cover Page; Outside
Back Cover Page

3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges ......................... Prospectus Summary; Risk Factors

4. Use of Proceeds ............................................ Prospectus Summary; Use of Proceeds

5. Determination of Offering Price ............................ Outside Front Cover Page; Plan of
Distribution

6. Dilution ................................................... Not Applicable

7. Selling Security Holders ................................... Selling Shareholders

8. Plan of Distribution ....................................... Inside Front Cover Page; Plan of
Distribution

9. Description of Securities to be Registered ................. Description of Securities

10. Interests of Named Experts and Counsel ..................... Legal Matters

11. Material Changes ........................................... Not Applicable

12. Incorporation of Certain Information by Reference .......... Information Incorporated by Reference

13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities ............................. Not Applicable

</TABLE>

<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 accepted 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 any such State.

<PAGE>

Subject to completion dated August 23, 1996

10,475,383 Shares
POWER SPECTRA, INC.
Common Stock

All of the 10,475,383 shares (the "Shares") of common stock, no par
value (the "Common Stock") of Power Spectra, Inc. (the "Company") offered hereby
are offered for resale by the holders thereof (the "Selling Shareholders"), or
by their pledgees, donees, transferees or other successors in interest
(sometimes referred to as the "Sellers"). Of the Shares offered for resale by
the Selling Shareholders (i) 5,418,373 Shares were acquired by certain Selling
Shareholders in a private placement conducted during 1995 and 1996 (the "Common
Stock Private Placement"), (ii) 645,757 Shares are issuable upon conversion of
shares of the Company's Series A Preferred Stock, which were acquired by certain
Selling Shareholders in exchange for then-outstanding convertible debentures in
1993; (iii) 1,476,302 Shares are issuable upon conversion of shares of the
Company's Series B Preferred Stock, which were acquired by certain Selling
Shareholders in a private placement in 1994 and 1995, (iv) 2,709,186 Shares are
issuable upon exercise of warrants that were issued to investors in Common Stock
Private Placement (the "Investors' Warrants"); and (v) 225,765 Shares are
issuable upon exercise of warrants that were issued to the agents who assisted
in the Common Stock Private Placement (the "Agents' Warrants"). The Sellers may
offer and sell the Shares from time to time in brokerage transactions (which may
include block transactions), in the over-the-counter market or negotiated
transactions at prices and terms prevailing at the times of such sales, at
prices related to such market prices or at negotiated prices. Such Shares may be
sold directly to purchasers, through broker-dealers acting as agents for the
Sellers or to broker-dealers who may purchase the Sellers' Shares as principals
and thereafter sell the Shares from time to time in the over-the-counter market,
in negotiated transactions or otherwise, or by a combination of these methods.
Broker-dealers who effect these transactions may receive compensation in the
form of discounts or commissions from the Sellers or from the purchasers of the
Shares for whom the broker-dealers may act as an agent or to whom they may sell
as a principal, or both. See "Plan of Distribution."

The Company will not receive any part of the proceeds from the resale
of the Shares by the Sellers. The Company will, however, receive the net
proceeds from the exercise of the Investors' Warrants, if and when they become
exercisable and are exercised, and the Agents' Warrants, when and to the extent
they are exercised. The Company will bear the costs relating to the registration
of the Shares, estimated to be approximately $32,000. The Sellers and
broker-dealers, if any, acting in connection with such sales, might be deemed to
be "underwriters" within the meaning of Section 2(11) of the Securities Act and
any commission received by them and any profit on the resale of such securities
might be deemed to be underwriting discounts and commissions under the
Securities Act.

The Company's Common Stock is currently traded in the non-Nasdaq
over-the counter market under the symbol "PWSP." The closing bid price of the
Company's Common Stock on the OTC Electronic Bulletin Board on August 21, 1996
was $1.06.

The securities offered hereby are speculative, involve a high degree of
risk and should not be purchased by any investors who cannot afford the loss of
their entire investment or by persons who require current income. See "Risk
Factors" on Page 7.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE 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>

ADDITIONAL INFORMATION

The Company is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; at its New York Regional Office, 7 World Trade Center,
13th Floor, New York, New York 10048; at its Pacific Regional Office located at
5757 Wilshire Boulevard, Suite 500 East, Los Angeles, California 90036; and at
its Chicago Regional Office, 500 West Madison, 14th Floor, Chicago, Illinois
60661. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549.

The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Act"), with
respect to the securities offered hereby. This Prospectus does not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. The
Registration Statement, including exhibits thereto, may be inspected and copied
at public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such material may be obtained by mail at prescribed rates from the Public
Reference Branch of the Commission at its principal office in Washington, D.C.
20549. Statements contained in this Prospectus as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference to the exhibit for a more complete description
of the matter involved.

2
<PAGE>

INFORMATION INCORPORATED BY REFERENCE

The following documents heretofore filed by the Company with the
Commission are by this reference incorporated in and made a part of this
Prospectus:

(i) The Annual Report on Form 10-K for the year ended December
31, 1995, filed pursuant to Section 13 of the Exchange Act
(including documents incorporated therein by reference);

(ii) The Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, filed pursuant to Section 13 of the
Exchange Act;

(iii) The description of the Company's Common Stock, no par
value, contained in Form 8-A, filed pursuant to Section
12(g) of the Exchange Act, including any amendments or
reports filed for the purpose of updating such
description.

All reports filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of this offering shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that the statement is
modified or superseded by any other subsequently filed document which is
incorporated or is deemed to be incorporated by reference herein. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.

This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. The Company will cause to be furnished
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any documents described above, other than certain exhibits to such documents.
Request should be addressed to: Power Spectra, Inc., 919 Hermosa Court,
Sunnyvale, California 94086, Attention: Chief Financial Officer, telephone (408)
737-7977.

No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized. This Prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any securities in any
jurisdiction to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create an implication that there has
been no change in the facts herein set forth since the date hereof.

3
<PAGE>

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. This Prospectus contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The forward-looking
statements contained herein are subject to certain risks and uncertainties,
including those discussed herein and in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995 and Quarterly Report on Form 10-Q
for the period ended June 30, 1996, that could cause actual results to differ
materially from those projected or discussed. Investors are cautioned not to
place undue reliance on these forward-looking statements, which reflect
management's analysis only as of the date hereof. The Company undertakes no
obligation to publicly release the results of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.

The Company

Power Spectra, Inc. (the "Company") develops, designs and markets a
family of products that use proprietary high speed semiconductor devices that
generate extremely rapid, high power electromagnetic impulses. The Company
believes these products can significantly improve the performance of radar,
communication and electronic warfare (AEW@) systems. The Company was
incorporated in 1979 for the purpose of developing precise power switching
devices capable of operating at voltages and speeds superior to conventional
devices then available.

Since the mid-1980's, the primary business focus of the Company has
been the development of the Bulk Avalanche Semiconductor Switch ("BASS"), an
optically-triggered, high-powered switch that has been developed and patented by
the Company. The BASS technology has evolved from two important factors: the
maturing of Gallium Arsenide ("GaAs") technology for high-speed semiconductor
applications and the patented Bulk Avalanche process developed by the Company's
founder. GaAs allows significantly faster electron travel in semiconductors and
is much more resistant to radiation bombardment, a factor that is important in
military and space applications.

The BASS is a solid-state GaAs device roughly the size of a
conventional power transistor and is triggered by a small external semiconductor
laser diode. In its "off" state, very high impedance is achieved by the
high purity of GaAs. Switching is achieved when electrons and holes are rapidly
accelerated within the field of the device. By this means, the BASS changes from
a non-conducting to a conducting state in approximately 20 trillionths of one
second. Because conduction is enabled and controlled throughout the volume of
the BASS, extremely high voltages can be controlled, presently in excess of 15
kilovolts. In addition, because of the uniform turn-on throughout the bulk of
the BASS, very rapid turn-on, high voltage, high current pulses can be
generated. The Company believes that the BASS can enable the development of high
resolution imaging radar, new systems of electronic warfare and other
applications.

The Company's second generation GaAs switch, a PSIristorTM, has many of
the BASS switch characteristics, but with differences in input power, cost and
package size. The PSIristor is smaller, less costly to manufacture, more
efficient and operates at lower power levels. From a customer's perspective, the
Company's PSIristor bridges the gap between the BASS and conventional power
semiconductors. The Company licensed its PSIristor technology from the Ioffe
Physical-Technical Institute in St. Petersburg, Russia under a licensing
agreement that includes the payment by the Company of licensing and R&D fees,
as well as long-term sales royalties, also payable by the Company, in exchange
for exclusive worldwide product marketing rights (except in the former Soviet
Union).

Since its inception, nearly all of the Company's revenues have come
from defense-related research and development contracts related to BASS
development and applications. The Company currently is seeking to exploit its
technology in both military and commercial applications. Possible military
applications include suppression of enemy air defenses, aircraft and tank
self-protection, anti-ship defense, communication jammers, foliage and earth
penetrating radar and secure communications systems. In commercial and
industrial markets, the Company has identified a number of promising, new
applications that include laser-based measurement systems, hazardous waste
detection and subterranean oil and mineral detection for geological exploration.
During 1996, the Company entered into two joint ventures, PEAC Airborne
Technologies, Ltd. and LandRay Technologies, Inc., in order to develop and
exploit new business opportunities which the Company believes are possible based
upon its ultra-wideband ground penetrating radar ("UWB GPR") technology.

The Company was incorporated in the State of California in 1979. Its
principal executive offices are located at 919 Hermosa Court, Sunnyvale,
California, and its telephone number is (408) 737-7977.

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4
<PAGE>

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<TABLE>

The Offering

<S> <C>
Common Stock Offered by the Selling Shareholders ...................... 10,475,383 Shares

Common Stock Outstanding .............................................. 16,030,562 shares as of July 31, 1996(1)

Risk Factors .......................................................... An investment herein involves a high degree of
risk and should not be considered by investors
who cannot afford to lose their entire
investment. See "Risk Factors."

Use of Proceeds ....................................................... The Company will receive no proceeds from the
sale of the Shares offered hereby by the
Selling Shareholders

OTC Electronic Bulletin Board
Trading Symbol ...................................................... PWSP

<FN>

- ----------
(1) Does not include (i) up to 1,291,962 shares issuable upon exercise of
outstanding options granted pursuant to the Company's stock option plans;
(ii) up to 102,994 shares issuable upon exercise of certain outstanding
warrants; or (iii) up to 2,122,059 shares issuable upon conversion of
outstanding convertible Series A and B Preferred Stock. Also does not
include up to 2,934,951 shares issuable upon exercise of warrants owned by
the Selling Shareholders, 2,709,186 of which become exercisable only under
certain conditions which the Company believes, but cannot guarantee, will
not be satisfied, but if satisfied, will not be exercisable until no
earlier than September 1997. Assuming conversion of all outstanding Series
A and Series B Preferred Stock, the underlying shares of which are being
offered for resale hereby by the Selling Shareholders, the Company would
have 18,152,621 shares of Common Stock outstanding. Assuming, in addition,
the exercise of all of the warrants, the underlying shares of which are
being offered for resale hereby by certain of the Selling Shareholders
(but no other warrants or outstanding options), the total number of shares
of Common Stock outstanding would equal 21,087,572.

</FN>
</TABLE>

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<PAGE>

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<TABLE>

Summary Financial Information

The following table reflects selected financial data for the five
fiscal years ended December 31, 1995. The selected financial data as of and for
each of the years in the five-year period ended December 31, 1995, are derived
from the audited financial statements of the Company. The financial statements
as of December 31, 1995, and for the year then ended, have been audited by Grant
Thornton LLP, Independent Accountants, and are incorporated by reference into
this Prospectus. The balance sheet as of December 31, 1994, and related
statements of operations, stockholders' equity, and cash flows for the two years
then ended, have been audited by Ernst & Young LLP, Independent Auditors, and
are incorporated by reference into this Prospectus. The 1993 balance sheet data,
and the 1992 and 1991 selected financial data presented below, were derived from
the Company's audited financial statements for those periods, but are not
presented elsewhere in this Prospectus or incorporated by reference. The summary
financial data as of and for the six months ended June 30, 1995 and 1996 have
been derived from the Company's unaudited financial statements which, in the
opinion of management, reflect all adjustments (consisting solely of normal
recurring adjustments), necessary for a fair presentation of the results for
these periods and as of such dates. The summary financial data provided below
for the six months ended June 30, 1996 are not necessarily indicative of the
future results of operations or financial performance of the Company. The data
set forth below should be read in conjunction with the financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" incorporated by reference from the Company's annual
reports on Form 10-K and quarterly reports on Form 10-Q incorporated herein by
reference.

Statements of Operations Data:

<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
------------------------------------------------------------------------ ------------------------------
1991 1992 1993 1994 1995 1995* 1996*
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues ........ $ 6,958,899 $ 5,635,697 $6,052,692 $ 3,060,098 $ 1,429,625 $ 846,000 $ 358,000
Net income (loss)
applicable to common
shares ............. 262,408 (786,139) 146,293 (1,216,907) (2,751,425) (1,224,000) (1,994,000)
Net income (loss) per .
common share ....... $0.03 ($0.08) $0.01 ($0.12) ($0.25) ($0.12) ($0.13)
Weighted average
shares outstanding . 10,056,027 9,801,598 9,890,553 10,014,163 11,181,541 10,063,486 15,075,640

</TABLE>

<TABLE>

Balance Sheet Data:

<CAPTION>
December 31,
---------------------------------------------------------------------------
1991 1992 1993 1994 1995 June 30, 1996*
---- ---- ---- ---- ---- --------------
<S> <C> <C> <C> <C> <C> <C>
Current assets ........ $2,565,759 $1,794,321 $1,908,681 $661,045 $2,929,050 $2,958,000
Current liabilities ... 1,102,283 1,729,520 524,393 585,769 962,314 879,000
Working capital ....... 1,463,476 64,801 1,384,288 75,276 1,966,736 2,079,000
Total assets .......... 3,206,205 2,339,927 2,362,679 1,289,955 3,442,208 3,492,000
Long term debt ........ 800,000 -- -- -- -- --
Stockholders' equity .. 1,303,922 610,407 1,838,286 704,186 2,479,894 2,613,000

<FN>
- -----------
* In thousands, except per share information.
(1) Based upon the weighted average number of Common shares outstanding during
the period, excluding shares issuable upon exercise of outstanding options
and warrants or conversion of the Series A and Series B Preferred Stock.
The effect of inclusion of such shares would be anti-dilutive.
</FN>
</TABLE>

No cash dividends on Common Stock have been paid by the Company since
its inception. The Company has no plans for payment of cash dividends on Common
Stock in the foreseeable future, and intends to retain its earnings, if any, for
the development of its business. The Company is required to pay cash dividends
on its Series A Preferred Stock issued in 1994, and on its Series B Preferred
Stock issued in 1995. Dividends payable on both series of the Preferred Stock on
December 31, 1995 were $49,201 and were paid subsequent to year end.

- --------------------------------------------------------------------------------

6
<PAGE>

RISK FACTORS

An investment in the Company involves a high degree of risk. In
addition to the other information contained in this Prospectus, prospective
investors should carefully consider the following Risk Factors in evaluating an
investment. Purchase of the securities offered hereby should not be considered
by persons unable to afford the loss of their entire investment.

This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results of operations could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in the following risk
factors and elsewhere in this Prospectus.

History of Losses; Accumulated Deficit. Since its inception, the
Company has generally operated at a loss as government contract revenues, which
represent most of the historical revenues of the Company, and other sources of
income were insufficient to cover general and administrative, research and
development and other costs incurred by the Company. The Company recorded net
losses of ($2,562,230), ($1,112,507) and ($786,139) for the years ended December
31, 1995, December 31, 1994 and December 31, 1992, respectively, and net income
of $172,608 for the year ended December 31, 1993. At June 30, 1996, the Company
had an accumulated deficit of approximately ($13,074,000). The Company expects
that it will continue to incur losses for the foreseeable future and does not
expect to become profitable until its contract revenues increase substantially
from current levels or it begins to receive significant product sales and
license and/or royalty income. There is no assurance that the Company will
achieve profitable operations in the foreseeable future, if at all.

Product Development and Enhancements. The development of high power
switching components and products is a complex engineering effort involving
significant risk. While the Company believes it has completed development of its
core technology, significant additional development efforts must be made in
order to achieve commercial acceptance of its products. There is no assurance
that the Company will succeed in this effort.

Complex Manufacturing Process. The manufacture of semiconductor-based
power switching devices is highly complex and sensitive to a wide variety of
factors, including the level of contaminants in the manufacturing environment,
impurities in the materials used and the performance of personnel and equipment.
The Company has periodically experienced yield problems, and there can be no
assurance that these problems will not reoccur. Should the Company experience
protracted production delays attributable to manufacturing complexity, its
ability to deliver products would be materially affected.

Historical Dependence on Boeing Relationship. From October 1988 through
July 1994, the Company received approximately $23,500,000 in research funding
from Boeing Electronics Company for development and enhancement of the BASS
technology and products. In the years ended December 31, 1994, 1993 and 1992,
the Company recognized revenues of $1,600,000, $3,100,000 and $3,700,000,
respectively, in connection with the Boeing Research Agreement. Although the
Company successfully completed several contracts throughout the duration of this
relationship, during 1994, Boeing made the strategic decision to focus its
resources on its missile and aircraft business. As part of this decision, Boeing
reorganized its electronics company and consolidated it with its Defense and
Space Group. The Company will have to look to alternative revenue sources to
replace the revenues generated by the Boeing

7
<PAGE>

relationship, and there is no assurance that the Company will successfully be
able to do so in the short-term, if at all.

Dependence on Boeing Equipment. Boeing has granted the Company the
right to use its equipment on a loaned basis for the Company's purposes, subject
to annual renewal. Additionally, should the Company desire to acquire title and
ownership of the loaned equipment, Boeing and the Company will attempt to
negotiate appropriate consideration in return for the transfer of title and
ownership. However, there is no assurance that an agreement satisfactory to the
Company can be reached. If Boeing chooses to no longer loan the equipment to the
Company, as it may do in its sole discretion, and an acceptable agreement for
the Company's purchase of the equipment cannot be attained, the Company would be
required to find alternative sources of equipment, either for purchase or rent,
or would have to outsource its manufacturing while still in possession of a
manufacturing facility. Any of these circumstances could cause delays in the
manufacture and delivery of the Company's products and could have a material
adverse impact on the Company's results of operations.

Expiration of Air Force Contract. The Company's current cash position,
together with anticipated cash flows from operations, is expected by management
to be sufficient to finance the Company's operations through December 31, 1996.
However, the Company's contract with the United States Air Force expires in June
1996, and such contract has been a significant source of revenues since it was
awarded to the Company in 1990. The aggregate contract value has increased over
the period of the contract, from the Phase I cost-plus-fixed-fee value of
$5,192,744 to $10,517,881 as of February 8, 1995. With the termination of the
Air Force contract, it will be necessary to find alternative sources of revenue,
and there is no assurance that the Company will be successful in accomplishing
this result. If the Company is not successful in replacing the revenue and cash
generated by the Air Force contract, the Company, as presently sized, would
continue to experience significant operating losses and significant negative
cash flow. Eventually, the Company would be required to significantly reduce its
operations. There can be no assurance that the Company's current level of
operations will be able to be maintained.

Dependence on Government Contracts. A material portion of the Company's
business results from contracts with or for government agencies. The Company
expects to continue to be dependent upon such contracts for a substantial
portion of its revenues for the foreseeable future. Government contracts
generally provide for the termination or adjustment of material terms of such
contracts at the election of the government, and the government may pursue
contractual, administrative, civil and criminal remedies for improper or illegal
activities associated with obtaining and performing government contracts.
Administrative remedies include suspension, debarment or ineligibility of all or
part of a company from receiving government contracts and government-approved
subcontracts. Any such action by the government could have a material adverse
impact upon the Company's business. Moreover, general political and economic
conditions, which cannot be accurately predicted, directly and indirectly affect
the quantity and allocation of expenditures by governmental agencies. Therefore,
cutbacks in the federal budget could have a material adverse impact on the
Company's results of operations so long as the Company remains dependent on
government contracts.

8
<PAGE>

Limitations on Protection of Intellectual Property. The Company
believes its ability to compete effectively with other companies may be
materially dependent upon the proprietary nature of its technologies. The
Company holds a number of domestic patents covering various aspects of its BASS
technology but has no patents or patent applications pending on its PSIristorTM
technology. There is no assurance that any additional patents will be granted to
the Company or that the Company's patents will provide meaningful protection
from competition. Moreover, there can be no assurance that any patents will be
upheld by a court should the Company seek to enforce its rights against an
infringer or that the Company will have sufficient resources to prosecute its
patent and other intellectual property rights. Furthermore, issuance of a valid
patent does not prevent other companies from independently developing technology
similar to the Company's, and there can be no assurance that any particular
aspect of the Company's technology will not be found to infringe the claims of
other existing patents. In addition to patent protection, the Company relies to
a significant extent on proprietary know-how and trade secrets particularly with
respect to its PSIristor, which it considers a highly proprietary invention.
There can be no assurance, however, that others will not independently develop
superior know-how or obtain access to know-how and trade secrets used by the
Company that the Company now considers proprietary.

Future Reliance upon Distributors. Historically, the Company has relied
primarily upon a direct sales organization and, to a lesser extent, upon
manufacturers' representatives to sell and distribute its commercial products.
In order to materially increase revenues and achieve sustained profitability (of
which there is no assurance) as the Company continues to commercialize its
products, it expects that it will be required to depend to a far greater degree
upon distributors. While any particular distributor may have an extensive
distribution network, distributors typically represent other third-party
suppliers, including competitors of the Company, to whom it may devote greater
time, effort and attention. There can be no assurance that the Company will
successfully establish the requisite distribution relationships or that those
relationships will result in increased revenues.

Competition. The markets for the Company's products are highly
competitive and characterized by rapid technological change, sudden price
fluctuations, rapid rates of product obsolescence, periodic shortages of
materials and variations in manufacturing yields and efficiencies. The Company's
competitive position is affected by all of these factors and by industry
competition for effective sales and distribution channels. The Company's
potential and existing competitors include major ultrasonic proximity sensor
vendors, four of whom constituted approximately 67% of the market in 1993. Most
of the Company's competitors have substantially greater financial, technical,
marketing and other resources than does the Company. Principal competitive
factors include price, performance and features. The Company expects that its
markets will become more competitive in the future, and there is no assurance
that the Company will be able to successfully compete in its selected markets.

9
<PAGE>

Need to Successfully Launch and Fund New Ventures. The Company believes
it must continue to seek and obtain other sources of revenue to continue
operations. As part of this strategy, the Company recently negotiated a joint
venture, called PEAC Airborne Technologies, Inc. and completed the formation of
a second joint venture, called LandRay Technologies, Inc. Both ventures will
require additional funding in order to enable the Company and its joint venture
partners to carry out their respective plans of operations.

PEAC will initially seek $7,000,000 in equity financing. Upon
successful completion of the offering, the Company will receive a portion of the
net proceeds to develop its ultra-wideband ground penetrating radar ("UWB GPR")
technologies. Failure of PEAC to raise the necessary financing will have a
material adverse impact on the Company's revenues and cash flows.

Although the Company has entered into the LandRay joint venture, its
success is dependent upon demonstrating the feasibility of UWB GPR systems
capable of locating and identifying minerals and oil and gas formations. There
is no assurance that LandRay and the Company will be successful in this regard.
Failure of LandRay and the Company to adequately demonstrate such feasibility
will have a material adverse impact on the Company's revenues and cash flows.

There can be no assurances that the proposed PEAC joint venture will be
consummated, that the PEAC and LandRay joint ventures will be able to raise
adequate funding on acceptable terms, that the Company will be able to
successfully enter into any additional suitable partnership or joint venture
arrangements or that such arrangements, when entered into, will prove to be
beneficial for the Company and its shareholders. There also can be no assurance
that the proposed joint venture agreements, if consummated, will generate
sufficient revenues to replace the revenues previously generated by the Air
Force contract. Failure to succeed in one or more strategic partnerships or
joint venture relationships could have a material adverse effect on the
Company's plan of operations and results.

Potential Volatility of Stock Price. The market price of the Common
Stock may be highly volatile. Factors such as variations in the Company's
revenues, earnings and cash flow, and announcements of technological innovations
or price reductions by the Company, its competitors or providers of alternative
products and processes could cause the market price of the Common Stock to
fluctuate substantially. In addition, the securities markets have recently
experienced significant price and volume fluctuations that have particularly
affected technology-based companies, and resulted in changes in the market
prices of the stocks of many companies that have not been directly related to
the operating performance of those companies. Such broad market fluctuations may
adversely affect the market price of the Common Stock following this offering.

10
<PAGE>

No Assurance of Nasdaq Trading. The Company's Common Stock is currently
traded in dealer transactions on the Electronic Bulletin Board maintained by the
National Quotation Bureau, Inc., an over-the-counter market in which liquidity
is typically limited and price volatility can be great. The Electronic Bulletin
Board is generally considered to be a less efficient market because, among other
reasons, it does not automatically provide real time quotation. The Company's
Common Stock is currently not eligible for quotation on The Nasdaq SmallCap
MarketSM as of the commencement of this offering, and there is no assurance that
the Company will meet the eligibility requirements for quotation on Nasdaq in
the foreseeable future. Until the Common Stock is approved for Nasdaq trading,
if ever, holders of the Common Stock will be required to sell their securities
through the facilities of the OTC Electronic Bulletin Board.

USE OF PROCEEDS

The Shares being offered hereby are being offered for resale by the
Selling Shareholders, or by their pledgees, donees, transferees or other
successors in interest, and the Company will receive no proceeds from the resale
of the shares of Common Stock being offered hereby.

To the extent Selling Shareholders exercise the Investors' Warrants or
the Agents' Warrants, of which there is no assurance, the Company will receive
the exercise price applicable thereto. Such proceeds, if any, will be applied to
working capital and used for general corporate purposes. The exercise price of
the Investors' Warrants is not determinable as of the date of this Prospectus;
the exercise price of the Agents' Warrants equals $1.32 per share.

11
<PAGE>

SELLING SHAREHOLDERS

An aggregate of 10,475,383 Shares of Common Stock may be offered by
certain securityholders of the Company (the "Selling Shareholders") who acquired
these Shares in private transactions. Of these Shares, (i) 5,418,373 Shares were
acquired by certain Selling Shareholders in the Common Stock Private Placement
in 1995 and 1996, (ii) 645,757 Shares are issuable upon conversion of shares of
the Company's Series A Preferred Stock, which were acquired by certain Selling
Shareholders in exchange for then-outstanding convertible debentures in 1993;
(iii) 1,476,302 Shares are issuable upon conversion of shares of the Company's
Series B Preferred Stock, which were acquired by certain Selling Shareholders in
a private placement in 1994 and 1995; and (iv) 2,934,951 Shares are issuable
upon exercise of the warrants that were acquired in the private placement
referred to in (i), including 225,765 warrants issued to agents who assisted in
the placement.

The Selling Shareholders may offer the Shares owned by them for sale as
principals for their own accounts at any time and from time to time, in the
over-the-counter market at prices prevailing at the time of sale. The Selling
Shareholders may also offer the Shares in private sales at prices to be
negotiated. The Company will not receive any of the proceeds from the sale of
such securities. Selling Shareholders are not obligated to reimburse the Company
any portion of the expenses incurred by the Company in this offering.

<TABLE>

The following table sets forth the name of each such securityholder for
whom the Company is registering Shares of Common Stock for resale to the public
and (ii) the number and percentage of shares of Common Stock beneficially owned
by each such holder as of July 31, 1996 and after the offering (assuming the
sale of all of their Shares offered hereby). To the extent the Shares represent
shares issuable upon conversion of the Series A or Series B Preferred Stock, or
shares issuable upon exercise of warrants, such conversion or exercise must take
place prior to the sale of the Shares offered hereby. Material relationships
between certain of the Selling Shareholders and the Company are set forth in the
footnotes to the table. Except as indicated in the footnotes to this table, the
persons named in the table have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them, subject to
community property laws, where applicable. The footnotes follow the table.

(Continued on following page.)

12
<PAGE>

Beneficial Ownership Beneficial Ownership
Prior to Offering(1) Warrant Following Offering
----------------------- Shares Shares ----------------------
Number of Percent to be to be Number of Percent
Name Shares Owned Sold(2) Sold(3) Shares Owned
- --------------------------------- --------- ------- ------- ------- --------- -------
First Interstate Bank for
J. Haldan(6) 678,196 4.1 408,196 0 270,000 1.7
David J. and Karen C.
Holmgren(7) 454,364 2.8 454,364 0 0 --
Robert A. Leisses(8) 410,010 2.6 97,510 32,750 312,500 1.9
William B. Cormack(9) 361,245 2.2 89,628 54,538 271,620 1.7
Barry Reder(10) 342,371 2.1 185,608 80,000 156,763 *
Robert Cromarty(11) 290,248 1.8 40,819 0 135,409 *
Robert and Justyna Cromarty(12) 249,429 1.5 114,020 25,000 135,409 *
Vanna Cahill(13) 236,874 1.5 236,874 0 0 --
Anthony G. Andrikopoulos(14) 176,819 1.1 12,804 0 164,015 1.0
Oxcal Venture Fund, L.P.(15) 159,475 * 159,475 47,727 0 --
Charles Schwab & Co., Inc.
FBO Richard A.
Williams IRA(16) 158,177 * 12,804 0 145,373 *
Gene J. Kennedy(17) 156,282 * 45,608 10,000 36,329 *
Michael L. Meyers(18) 154,500 * 78,000 39,000 76,500 *
Michael I. Gamble(19) 151,698 * 8,163 0 143,535 *
William B. Van Horn(20) 147,787 * 57,618 54,538 90,169 *
James Piloni(21) 107,228 * 9,796 0 97,432 *
Cal Central Trust, Ttee FBO
Frederick S. Moore(22) 100,861 * 51,861 0 49,000 *
Edgar E. Sharp 100,000 * 100,000 50,000 0 --
Paul and Laura Escobsa(23) 91,000 * 63,000 31,500 8,000 *
Richard S. Smolan Trust 90,000 * 90,000 45,000 0 --
Alex. Brown & Co., Ttee FBO
Barry Reder IRA(24) 88,163 * 88,163 40,000 0 --
Robert W. Lishman, Jr.(25) 86,144 * 19,206 68,171 66,938 *
First Trust Corporation
FBO Gene Kennedy(26) 81,391 * 74,891 0 6,400 *
Peter M. Turner(27) 68,812 * 38,412 0 30,400 *
Charles C. Thieriot
Revocable Trust 68,182 * 68,182 34,091 0 --
European Industries
Establishment(4)(28) 64,020 * 64,020 21,250 0 --
William T. Weyerhaeuser(28) 64,020 * 64,020 0 0 --
C. Davis Weyerhaeuser(28) 64,020 * 64,020 0 0 --
Edward J. Lamb(29) 54,233 * 12,804 0 41,429 *
Jeffry A. Bernstein 50,000 * 50,000 25,000 0 --
Hugh L. McEntire 50,000 * 50,000 25,000 0 --
B. Castle Smith 50,000 * 50,000 25,000 0 --
Gordon H. Smith(30) 45,182 * 10,000 5,000 35,182 *

(Continued on following page.)

13
<PAGE>

DSLT, Inc.(31) 40,819 * 40,819 0 0 --
Frances Dinkelspiel and
Gary Wayne 40,000 * 40,000 20,000 0 --
Henson L. Jones, Jr.(32) 39,500 * 10,000 5,000 29,500 *
Steven Dinkelspiel 37,000 * 37,000 18,500 0 --
Paul Escobosa (33) 37,000 * 20,000 10,000 0 --
Richard D. James(34) 32,010 * 32,010 0 0 --
George H. Weyerhaeuser(34) 32,010 * 32,010 0 0 --
Elliott and Patricia Fox(35) 31,091 * 24,491 0 6,600 *
Hauser Revocable Family Living
Trust(36) 27,102 * 8,163 0 18,939 *
Sugarman Family Partners(37) 25,500 * 22,728 11,364 2,772 *
Patrick J. Shanahan(36) 25,054 * 8,163 0 16,891 *
Gensler Family Trust(35) 24,491 * 24,491 0 0 --
Charles F. Lowrey Trust
U/A 1/29/86(14) 22,804 * 12,804 0 10,000 *
Jonathan R. Bass 20,000 * 20,000 10,000 0 --
Pensco Pension Services, Inc.
FBO Paul Escobosa -
IRA (38) 17,000 * 17,000 8,500 0 --
Michael B. Combs(39) 15,156 * 10,000 5,000 5,156 *
William J. Skibbe 15,000 * 15,000 7,500 0 --
Kent T. Baum 13,636 * 13,636 6,818 0 --
Mitchell Milias(14) 12,804 * 12,804 0 0 --
James A. Johnson(14) 12,804 * 12,804 0 0 --
Nicholas David Holmgren(40) 20,000 * 20,000 0 0 --
Alexander John Holmgren(40) 20,000 * 20,000 0 0 --
Michael I. and Charlotte A.
Gamble(41) 10,000 * 10,000 5,000 0 --
Katherine H. Reder (Barry
Reder, Custodian,
U/CUMGA)(42) 10,000 * 6,000 3,000 4,000 *
Elizabeth S. Reder (Barry
Reder, Custodian,
U/CUMGA)(42) 10,000 * 6,000 3,000 4,000 *
Melville P. Steil, Jr. Ttee of
Johanna E. Steil Marital
Trust(43) 6,800 * 6,800 3,400 0 --

(Continued on following page.)

14
<PAGE>

<FN>

- -----------
* Less than 1%.

(1) Beneficial Ownership Before the Offering includes shares deemed to be
beneficially owned by the Selling Shareholder pursuant to Rule 13d-3 under
the Securities Exchange Act of 1934, as amended. Such numbers and
percentages do not include shares issuable upon exercise of warrants not
yet exercisable, although certain of such shares are being registered
hereby. Warrant shares included in this registration are included in a
separate column. Assuming effectiveness of the registration statement of
which this Prospectus is a part, certain of the warrants will be
exercisable as of the effective date. Other warrants will not be
exercisable unless certain conditions are satisfied, and in no event will
they be exercisable until at least September 1997.

(2) Includes only actual shares of Common Stock owned and shares of Common
Stock issuable upon conversion of outstanding Preferred Stock. Warrants
shares included in this registration are included in a separate column.

(3) Includes shares issuable upon exercise of warrants not currently
exercisable.

(4) The beneficial ownership interests of the selling shareholder are widely
held.

(5) Includes (i) 454,365 shares held jointly in the names of Mr. Holmgren and
his spouse and (ii) 40,000 shares registered in the names of his minor
children for whom Mr. Holmgren is custodian. Mr. Holmgren disclaims
beneficial ownership of the shares owned by his minor children. See Notes
(7) and (40).

(6) Includes 408,196 shares issuable upon conversion of outstanding Preferred
Stock.

(7) Includes 394,364 shares issuable upon conversion of outstanding Preferred
Stock. All of the shares owned by Mr. and Mrs. Holmgren jointly are
included in the total beneficially owned by Mr. Holmgren alone. See Note
(5).

(8) Includes (i) 10,000 shares owned by Mr. Leisses' spouse as to which he may
be deemed to be the beneficial owner but as to which he disclaims
beneficial ownership and (ii) 32,010 shares issuable upon conversion of
outstanding Preferred Stock.

(9) Mr. Cormack acted as an agent in connection with the private placements of
Common Stock, Series A Preferred Stock and Series B Preferred Stock. Share
total includes (i) 89,628 shares issuable upon conversion of outstanding
Preferred Stock and (ii) 27,173 shares issuable upon exercise of currently
exercisable outstanding warrants.

(10) Includes (i) 25,608 shares issuable upon conversion of outstanding
Preferred Stock; (ii) 88,163 shares held in Mr. Reder's individual
retirement account, including 8,163 shares issuable upon conversion of
outstanding Preferred Stock (see Note (24)), (iii) 10,000 shares owned by
each of Mr. Reder's minor children, for whom he serves as custodian; as to
which he may be deemed to be the beneficial owner and as to which he
disclaims beneficial ownership (see Note (42)) and (iv) 48,600 shares held
jointly with his spouse.

15
<PAGE>

(11) Includes (i) 40,819 shares issuable upon conversion of outstanding
Preferred Stock and (ii) 249,429 shares jointly owned with spouse,
including 64,020 shares issuable upon conversion of outstanding Preferred
Stock. See Note 12. Shares Beneficially Owned Following Offering reflects
sales by persons or entitles listed elsewhere in this table for whom Mr.
Cromarty may be deemed to be the beneficial owner, as referred to in Note
12 herein.

(12) Includes 64,020 shares issuable upon conversion of outstanding Preferred
Stock, but does not include shares owned in husband's name alone. See Note
(11).

(13) Includes 236,874 shares issuable upon conversion of outstanding Preferred
Stock.

(14) Includes 12,804 shares issuable upon conversion of outstanding Preferred
Stock.

(15) Includes 64,020 shares issuable upon conversion of outstanding Preferred
Stock. The beneficial owners of Oxcal Venture Fund, L.P. are Paul F. Shoen,
Steven Birnbaum and Oxcal Venture Corp.

(16) Includes 12,804 shares issuable upon conversion of outstanding Preferred
Stock. Mr. Williams is a member of the Company's Board of Directors.

(17) Includes (i) 40,000 shares issuable upon exercise of outstanding options;
(ii) 25,608 shares issuable upon conversion of outstanding Preferred Stock;
and (iii) 74,891 shares held in trust (see Note (26). Beneficial Ownership
Following Offering reflects sales by persons or entities listed elsewhere
in this table for whom Mr. Kennedy may be deemed to be the beneficial
owner, as reflected in Note 26 referred to herein.

(18) Includes 7,500 shares held for the account of Mr. Meyer's by his employer's
profit sharing plan.

(19) Includes (i) 10,000 shares held jointly with Mr. Gamble's spouse (see Note
(41)); (ii) 133,535 shares issuable upon exercise of outstanding stock
options; and (iii) 8,163 shares issuable upon conversion of outstanding
Preferred Stock. Mr. Gamble is a member of the board of directors of the
Company.

(20) Mr. Van Horn acted as an agent in connection with the private placements of
Common Stock, Series A Preferred Stock and Series B Preferred Stock. Share
total includes (i) 57,618 shares issuable upon conversion of outstanding
Preferred Stock and (ii) 27,173 shares issuable upon exercise of currently
exercisable outstanding warrants.

(21) Includes (i) 9,796 shares issuable upon conversion of outstanding Preferred
Stock and (ii) 11,432 shares held in Mr. Piloni's individual retirement
account.

(22) Includes 51,861 shares issuable upon conversion of outstanding Preferred
Stock.

(23) Includes (i) 17,000 shares held in Mr. Escobosa's individual retirement
account (see Note (38)) and (ii) 20,000 shares held in Mr. Escobosa's
individual name (see Note (33)). Beneficial Ownership Following Offering
reflects sales by persons or entities listed elsewhere in this table for
whom Mr. Escobosa may be deemed to be the beneficial owner, as reflected in
the Notes referred to herein.

(24) Includes 8,163 shares issuable upon conversion of outstanding Preferred
Stock. The total shares are included in the shares beneficially owned by
Mr. Reder, individually. See Note (10).

(25) Mr. Lishman acted as an agent in connection with the private placement of
Common Stock. Share total includes (i) 19,206 shares issuable upon
conversion of outstanding Preferred Stock and (ii) 21,395 shares issuable
upon exercise of currently exercisable outstanding warrants.

(26) Includes 74,891 shares issuable upon conversion of outstanding Preferred
Stock. Share total is included in the shares beneficially owned by Gene
Kennedy, individually. See Note 17. Mr. Kennedy is a member of the Board of
Directors of the Company.

(27) Includes 38,412 shares issuable upon conversion of outstanding Preferred
Stock.

(28) Includes 64,020 shares issuable upon conversion of outstanding Preferred
Stock.

(29) Includes (i) 41,429 shares issuable upon exercise of outstanding stock
options and (ii) 12,804 shares issuable upon conversion of outstanding
Preferred Stock. Mr. Lamb is the Company's Chief Financial Officer and
Corporate Secretary of the Company.

(30) Includes 20,000 shares issuable upon exercise of outstanding stock options.
Mr. Smith is the Chairman of the Board and Chief Executive Officer of the
Company.

(31) Includes 40,819 shares issuable upon conversion of outstanding Preferred
Stock. DSLT, Inc. is a corporation with approximately 35 shareholders.

16
<PAGE>

(32) Includes 6,000 shares owned by Mr. Jones' spouse, as to which he may be
deemed to be the beneficial owner but as to which he disclaims beneficial
ownership.

(33) Includes (i) 17,000 shares held in Mr. Escobosa's individual retirement
account; and (ii) 71,000 jointly owned with his spouse. See Note 23 and
Note 38. Beneficial Ownership Following Offering reflects sales by persons
or entities listed elsewhere in this table for whom Mr. Escobosa may be
deemed to be the beneficial owner, as reflected in the Notes referred to
herein.

(34) Includes 32,010 shares issuable upon conversion of outstanding Preferred
Stock.

(35) Includes 24,491 shares issuable upon conversion of outstanding Preferred
Stock.

(36) Includes 8,163 shares issuable upon conversion of outstanding Preferred
Stock.

(37) Michael Sugarman, M.D. is the General Partner of Sugarman Family Partners.

(38) Share total for Pensco Pension Services, Inc. is included in shares
beneficially owned by Paul and Laura Escobosa (see Note 23) and Paul
Escobosa, individually (see Note 33).

(39) Includes 5,156 shares issuable upon exercise of outstanding stock options.
Mr. Combs is the Assistant Controller of the Company.

(40) Shares are included in the total beneficially owned by David and Karen
Holmgren (see Note 5) and David Holmgren, individually (see Note 7) for
whom Mr. Holmgren serves as custodian.

(41) Shares are included in the total beneficially owned by Michael I. Gamble,
individually. See Note 19.

(42) Shares are included in the total beneficially owned by Barry Reder, who
serves as custodian for his minor children. See Note 10.

(43) The Johanna E. Steil Marital Trust and the Johanna E. Steil Credit Trust
are trusts for the benefit of Peter Steil and members of his family. Other
shares deemed to be beneficially owned by Mr. Steil include (i) 1,000
shares in trust for his minor son; (ii) 1,000 shares in trust for his minor
daughter; (iii) 1,500 shares owned by his spouse; (iv) 11,500 shares owned
by him individually; (v) 3,700 shares held as custodian for his minor son;
(vi) 5,700 held as custodian for his minor daughter; and (vii) 1,000 shares
owned by his mother-in-law.

(44) Includes 6,402 shares issuable upon conversion of outstanding Preferred
Stock.

(45) Texas Capital Securities acted as agent in connection with the private
placements of Common Stock and Series B Preferred Stock. Includes 8,559
shares issuable upon exercise of currently exercisable warrants. The
beneficial owners of Texas Capital Securities are Albert Sydney Bowers,
III, Patrick Smetek, David Smetek, Thomas Buckley, Thomas Recklang and Mike
McGinnis.

(46) Includes (i) 8,163 shares issuable upon conversion of outstanding Preferred
Stock; and (ii) 40,000 shares issuable upon exercise of outstanding stock
options. Mr. Hewitt is a member of the Company's Board of Directors.

</FN>
</TABLE>

17
<PAGE>

PLAN OF DISTRIBUTION

This Prospectus covers the resale of all or a portion of the Shares by
the Selling Shareholders, or by their pledgees, donees, transferees or other
successors in interest. Such sales may be made on one or more exchanges (if the
Common Stock is then listed, which it is not as of the date hereof) or in the
over-the-counter market, or otherwise at prices and at terms then prevailing or
at prices related to the then current market price, or in negotiated
transactions. The Shares may be sold by one or more of the following: (i) a
block trade in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (ii) purchase by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(iii) an exchange distribution in accordance with the rules of such exchange, if
the Company's Common Stock is then listed on an exchange, which it is not as of
the date hereof; (iv) ordinary brokerage transactions and transactions in which
the broker solicits purchasers, (iv) in negotiated transactions or otherwise, or
a combination of such methods. In addition, any securities covered by this
Prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule
144 rather than pursuant to this Prospectus. In effecting sales, brokers or
dealers engaged by the Selling Shareholders may arrange for other brokers or
dealers to participate. Brokers or dealers will receive commissions or discounts
from Selling Shareholders in amounts to be negotiated immediately prior to the
sale.

The Company will amend or supplement this Prospectus in the following
circumstances and to the following extent: (i) if the securities are to be sold
at a price other than the prevailing market price, to disclose such price; (ii)
if the securities are to be sold in block transactions and the purchaser intends
to resell, to disclose the nature and extent of such arrangements; or (iii) if
the compensation to be paid to broker-dealers is other than usual and customary
discounts, concessions or commissions, to disclose the terms of such
broker-dealer compensation. In the above-circumstances, no offers or sales may
be made by the Selling Shareholder until an effective amendment or prospectus
supplement is available.

The Selling Shareholders and broker-dealers, if any, acting in
connection with such sales, might be deemed to be "underwriters" within the
meaning of section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of such securities may be deemed to be
underwriting discounts and commissions under the Act. The Company will not
receive any part of the proceeds from the sale of the Shares by the Selling
Shareholders.

18
<PAGE>

LEGAL MATTERS

The validity of the Securities offered hereunder will be passed upon
for the Company by Grover T. Wickersham, P.C., Palo Alto, California.

EXPERTS

The financial statements of the Company at December 31, 1995 and for
the year then ended have been incorporated herein by reference in reliance upon
the report of Grant Thornton LLP, Independent Certified Public Accountants, and
upon the authority of said firm as experts in auditing and accounting.

The financial statements of the Company appearing in the Company's
Annual Report (Form 10-K) for the years ended December 31, 1994 and 1993 have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.

19
<PAGE>

======================================== ====================================

No person is authorized to give any 10,475,383 Shares
information or to make any
representations other than those
contained in this Prospectus, and if
given or made must not be relied upon as POWER SPECTRA, INC.
having been authorized. 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 Common Stock
or a solicitation of an offer to buy the
Shares in any jurisdiction to any person
to whom it is unlawful to make such
offer or solicitation in such
jurisdiction. Neither the delivery of
this Prospectus nor any sale made
hereunder shall under any circumstance ---------------
create any implication that there have
been no changes in the affairs of the PROSPECTUS
Company since the date hereof or that
the information herein is correct as of ---------------
any time subsequent to this date.

-----------------

TABLE OF CONTENTS _____________, 1996

Page
----
Additional Information ........... 2
Incorporation of Certain
Information by Reference ....... 3
Prospectus Summary ............... 4
Risk Factors ..................... 7
Use of Proceeds .................. 11
Selling Stockholders ............. 12
Plan of Distribution ............. 18
Legal Matters .................... 19
Experts .......................... 19

======================================== ====================================
<PAGE>

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution

The expenses payable by the Registrant in connection with the issuance
and distribution of the securities being registered are estimated to be as
follows:

SEC registration fee ................................ $3,829
Accounting fees and expenses ........................ 5,000 *
Legal fees and expenses ............................. 20,000 *
Blue sky legal fees and expenses .................... 2,000 *
Miscellaneous expenses .............................. 2,000 *
------------
Total ......................................... $32,829
============

- --------------
* Estimated expenses

Item 15. Indemnification of Directors and Officers

As permitted by the General Corporation Law of California (the
"Corporations Code"), the Company's Articles of Incorporation eliminate, to the
fullest extent permitted under California law, the personal liability of a
director to the Company for monetary damages in an action brought by or in the
right of the Company for breach of a directors' duties to the Company and its
shareholders. Under current California law, liability is not eliminated for (i)
acts or omissions that involve intentional misconduct or a knowing and culpable
violation of law; (ii) acts or omissions that a director believed to be contrary
to the best interest of the corporation or its shareholders or that involve the
absence of good faith on the part of the director; (iii) any transaction from
which a director derived an improper personal benefit; (iv) acts or omissions
that show a reckless disregard for the director's duty to the corporation or its
shareholders in circumstances in which the director was aware, or should have
been aware, in the ordinary course of performing a director's duties, of a risk
of serious injury to the corporation or its shareholders; (v) acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation or its shareholders; (vi)
contracts or other transaction between corporations and directors having
interrelated directors in violation of Section 310 of the Corporations Code; and
(vii) distributions, loans or guarantees made in violation of Section 316 of the
Corporations Code.

In addition, the Company's Articles of Incorporation and Bylaws provide
for indemnification, to the fullest extent permitted under the Corporations
Code, of directors, officers and agents of the Company and persons who serve at
the request of the Company as a director, officer, employee, trustee or agent of
another corporation, partnership, joint venture, trust or other enterprise.

II-1
<PAGE>

The Company has also entered into indemnification agreements with its
directors and executive officers, as permitted under the Bylaws. The
indemnification agreements provide that the directors and executive officers
will be indemnified to the fullest extent permitted by applicable law against
all expenses (including attorneys' fees), judgments, fines and amounts
reasonably paid or incurred by them for settlement in any threatened, pending or
completed action, suit or proceeding, including any derivative action, on
account of their services as a director or executive officer of the Company of
any subsidiary of the Company or of any other company or enterprise in which
they are serving at the request of the Company. No indemnification will be
provided under the indemnification agreements, however, to any director or
executive officer in certain limited circumstances, including knowingly
fraudulent, deliberately dishonest or willful misconduct.

Insofar as indemnification for liabilities under the Securities Act of
1933, as amended (the "Act") may be permitted to directors, officers or persons
controlling the Registrant pursuant to the foregoing provisions, the Registrant
has been informed 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.

II-2
<PAGE>

Item 16. Exhibits

4.1 Form of specimen Common Stock certificate

5.1 Opinion of Grover T. Wickersham, P.C. re legality

23.1 Consent of Grant Thornton LLP, independent certified public accountants
(see page II-8 of the Registration Statement)

23.2 Consent of Ernst & Young LLP, independent auditors (see page II-9 of
the Registration Statement)

23.3 Consent of Grover T. Wickersham, P.C. (included in Exhibit 5.1, above)

25 Power of Attorney (included on page II-6 of the Registration Statement)

II-3
<PAGE>

Item 17. Undertakings

(a) Rule 415 Offering

The Registrant hereby undertakes:

(1) To file during any period in which offers or sales
are being made, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the " Securities Act");

(ii) Reflect in the prospectus any facts or
events arising after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement;

(iii) 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) do not apply if the
registration statement is on 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 Exchange Act that are incorporated by reference in the registration
statement.

(2) That for purposes of determining any liability under
the Securities Act of 1933, as amended, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.

(b) Filings Incorporating Subsequent Exchange Act Documents by
Reference

The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934, as amended (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, as amended) that is incorporated
by reference in the registration statement shall be deemed to be a new
registration

II-4
<PAGE>

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, as amended, may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act 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.

II-5
<PAGE>

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, as
amended, 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 Sunnyvale, California, on August 22, 1996.

POWER SPECTRA, INC.

By: /s/ Gordon H. Smith
---------------------------------
Gordon H. Smith
Chairman of the Board and Chief
Executive Officer

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Gordon H. Smith and Edward J.
Lamb, and each of them, his attorneys-in-fact and agents, each with full power
of substitution, for him/her and in his/her name, place and stead, in any and
all capacities, to sign any or all amendments to this Registration Statement on
Form S-3, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
with this Registration Statement, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that any of
said attorneys-in-fact and agents, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

(Principal Executive Officer)

/s/ Gordon H. Smith Chief Executive Officer August 22, 1996
- ----------------------------------- and Chairman of the Board
Gordon H. Smith

(Principal Financial and
Accounting Officer)

/s/ Edward J. Lamb Chief Financial Officer, August 22, 1996
- ----------------------------------- Controller and Secretary
Edward J. Lamb

II-6
<PAGE>

/s/ Michael I. Gamble Director August 22, 1996
- -----------------------------------
Michael I. Gamble

/s/ James A. Glaze Director August 22, 1996
- -----------------------------------
James A. Glaze

/s/ John Hewitt, Jr. Director August 22, 1996
- -----------------------------------
John Hewitt, Jr.

/s/ Gene J. Kennedy Director August 22, 1996
- -----------------------------------
Gene J. Kennedy

/s/ John W. Pauly Director August 22, 1996
- -----------------------------------
John W. Pauly

/s/ Richard A. Williams Director August 22, 1996
- -----------------------------------
Richard A. Williams

II-7
<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
February 29, 1996, which appears on page 19 of the Annual Report on Form 10-K
for the Year Ended December 31, 1995 of Power Spectra, Inc., which is
incorporated by reference in this Registration Statement and Prospectus. We also
consent to the reference to us under the heading "Experts" in the Registration
Statement and Prospectus.

Grant Thornton LLP

San Jose, California
August 21, 1996

II-8
<PAGE>

Exhibit 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference of our firm under the captions "Summary Financial
Information" and "Experts" in the Registration Statement (Form S-3) and related
Prospectus of Power Spectra, Inc. for the registration of 10,475,383 shares of
its common stock and to the incorporation by reference therein of our report
dated February 17, 1995, except for Note 4, as to which the date is April 7,
1995, with respect to the financial statements of Power Spectra, Inc. included
in its Annual Report (Form 10-K) for the year ended December 31, 1995, filed
with the Securities and Exchange Commission.

Ernst & Young LLP

San Jose, California
August 21, 1996

II-9
<PAGE>

EXHIBIT INDEX

4.1 Form of specimen Common Stock certificate

5.1 Opinion of Grover T. Wickersham, P.C. re legality

23.1 Consent of Grant Thornton LLP, independent certified public
accountants (see page II-8 of the Registration Statement)

23.2 Consent of Ernst & Young LLP, independent auditors (see
page II-9 of the Registration Statement)

23.3 Consent of Grover T. Wickersham, P.C. (included in
Exhibit 5.1, above)

25 Power of Attorney (included on page II-6 of the Registration Statement)

II-10

NUMBER SHARES

[LOGO] POWER SPECTRA, INC.

INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA

SEE REVERSE FOR
CERTAIN DEFINITIONS
AND STATEMENT OF RIGHTS
GRANTED TO EACH CLASS
OF SHARES

CUSIP 736901 10 7

This Certifies That SPECIMEN

is the record holder of

FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF

POWER SPECTRA, INC.

transferable on the share register of the Corporation in person or by
duly authorized attorney upon surrender of this Certificate properly
endorsed. This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.

WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.

Dated

____________________ [SEAL] ____________________
ROBERT T. CLARKSON, MICHAEL I. GAMBLE,
ASSISTANT SECRETARY PRESIDENT

Countersigned:
American Securities Transfer, Inc.
P.O. Box 1596
Denver, Colorado 80201

By:_______________________________________________
Transfer Agent & Registrar Authorized Signature

<PAGE>

POWER SPECTRA, INC.
TRANSFER FEE $15.00 PER NEW CERTIFICATE ISSUED

Shareholders may obtain, upon request directed to the Secretary of the
Corporation at the Corporation's principal executive offices, and without
charge, a statement of the rights, preferences, privileges and restrictions
granted to or imposed upon the respective classes and series of shares
authorized to be issued and upon the holders thereof.

<TABLE>

The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:

<S> <C> <C>
TEN COM - as tenants in common UNIF GIF MIN ACT -- _______ Custodian ______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act __________________________
in common (State)

</TABLE>

Additional abbreviations may also be used though not in the above list.

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

____________________________________

For Value Received, ______________ hereby sell, assign and transfer unto

________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE,
OF ASSIGNEE)

________________________________________________________________________________

_________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________________ Attorney
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.

Dated, _______________________, 19___.

______________________________________________________________

NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.

<PAGE>

Signature Guarantee:

____________________________________________
IMPORTANT: THE SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A
REGISTERED NATIONAL STOCK EXCHANGE, OR BY A COMMERCIAL BANK OR A TRUST COMPANY.

GROVER T. WICKERSHAM

A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
430 CAMBRIDGE AVENUE, SUITE 100
PALO ALTO, CALIFORNIA 94306
TELEPHONE: (415) 323-6400
FAX: (415) 323-1108

August 22, 1996

Power Spectra, Inc.
919 Hermosa Court
Sunnyvale, CA 94086

Gentlemen:

We refer to the Registration Statement on Form S-3 (the "Registration
Statement") of Power Spectra, Inc., a California corporation (the "Company"), to
be filed with the Securities and Exchange Commission (the "Commission") covering
the registration under the Securities Act of 1933, as amended (the "Act") of
10,475,383 shares of common stock, no par value of the Company (the "Shares")
for resale by certain selling shareholders of the Company (the "Selling
Shareholders").

We have examined the Registration Statement, the Articles of
Incorporation and Bylaws of the Company and such records, certificates and other
documents as we have considered necessary or appropriate for the purposes of
this opinion.

Based on the foregoing, it is our opinion that:

1. The Company is duly organized, validly existing and in good
standing under the laws of the State of California; and

2. The Shares issued to the Selling Stockholders or issuable
upon conversion of the outstanding convertible Preferred Stock or upon exercise
of outstanding warrants as described in the Registration Statement are duly
authorized and are (or will be, when issued in accordance with the terms of the
respective instruments) validly issued, fully paid and nonassessable.

We hereby consent to the use of our name in the Registration Statement
under the caption "Legal Matters," as counsel who will pass upon the legality of
the Shares for the Company and to the filing of this opinion as an exhibit to
the Registration Statement. In giving this consent, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
or the Rules and Regulations promulgated thereunder.

<PAGE>

This opinion is rendered solely for your benefit in connection with the
subject transaction and is not to be otherwise used, circulated, quoted or
referred to without our prior written consent.

Very truly yours,

/s/ Grover T. Wickersham, P.C.

Grover T. Wickersham, P.C.