SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1997
Commission file number 0-17774
SAFETECH INDUSTRIES, INC. (FORMERLY, BERNSTEIN/LEIBSTONE ASSOCIATES, INC.)
(Exact name of registrant as specified in its charter)
New York 11-1996121
(State of Incorporation) (IRS Employer Identification Number)
4900 Dyer Blvd., Riviera Beach, Florida 33407
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (561) 844-2442
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.01 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. YES: X
NO: .
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB [X]
Issuers revenues for the fiscal year ended March 31, 1997 were $5,627,120.
As of June 30, 1997, 17,843,677 shares of the registrant's common stock were
outstanding. The aggregate market value of the common stock held by non-
affiliates of the registrant on that date was $7,655,448 computed at the
closing price on that date.
Documents Incorporated by reference: None
Transitional Small Business Disclosure Format: Yes No X
PART 1
Item 1. Business
Safetech Industries, Inc., formerly known as Bernstein/Leibstone
Associates, Inc. (the "Company") was incorporated in the state of New York in
1962. Historically, the Company operated two divisions; a packaging division
that designed and marketed a complete line of flexible and rigid packaging,
and a Textile division that supplied blind and handicapped workshops with the
textiles required to fulfill state and federal government contracts.
On July 7, 1995, Bernstein/Leibstone Associates, Inc., Archway Capital,
Inc. ("Archway") and William Leibstone Associates, Inc. ("WLAI"), an entity
owned by the former majority stockholder of the Company, entered into an
agreement to exchange shares of the Company's common stock for shares of
Archway's common stock on a one-for-one basis. On July 14, 1995, all
outstanding shares of Archway were exchanged by the shareholders for
restricted shares issued by the Company. The agreements further provided for
the sale of the former packaging and textile divisions to WLAI. As a result
of these transactions, the Company's continuing operations became those of
Archway and its subsidiaries.
Archway was formed in September 1994 as a holding company for the purpose
of investing in other businesses and providing management expertise in such
subsidiaries with the intention of developing new products, ideas and
techniques in areas of business clearly identified as unique or niche markets.
In October 1994, International Fire Safety Products, Inc. was organized as a
wholly owned subsidiary for the purpose of manufacturing retardant technology
products in a variety of forms. This subsidiary had no significant operations
for the years ended March 31, 1997 and 1996 and is currently inactive.
Effective April 1, 1995, Archway acquired a majority interest in
Clearshield Manufacturing Corp. ("Clearshield"), a Florida corporation engaged
in the manufacturing, sale and distribution of a patented clear hurricane
shutter system, utilizing a three-for-one share exchange. Archway issued
9,071,700 shares to the shareholders of Clearshield in exchange for 3,023,900
shares of Clearshield. Clearshield's wholly owned subsidiaries, Clearshield
of Palm Beach County, Inc. and Palmco Builders Inc. are engaged in the retail
sale and installation of hurricane protection products, respectively.
In October 1995, PC International Trading Corp. ("PC"), a wholly owned
subsidiary, was organized for the purpose of distributing recycled plastic and
hardware supplies. PC's primary customer has been Clearshield. This
subsidiary has adopted the trade name Safetech Distributing and expanded its
product line to include different types of hurricane panels, including the
Clearshield panel.
In October 1996, the Company formed ST Telecom Corp., a wholly owned
subsidiary, to explore opportunities in the telecommunications industry,
including prepaid long distance telephone cards and prepaid cellular service
cards. This subsidiary had only limited activity during the year ended March
31, 1997.
In December 1996, the Company formed Storm Depot of Florida, Inc. ("Storm
Depot"), a wholly owned subsidiary, to sell hurricane products on a factory
direct retail basis. The first Storm Depot location opened in February 1997.
Effective March 31, 1997, Storm Depot acquired Palmco Builders, Inc.
("Palmco") from Clearshield of Palm Beach County, Inc., aligning all retail
sales and installation of hurricane products under the Storm Depot umbrella.
Substantially all of the Company's operations are in only one industry
segment - the manufacture, distribution and installation of hurricane
protection systems. The Company's products are sold in the coastal areas of
the United States and in islands of the Caribbean, principally Puerto Rico and
the Virgin Islands. The Company had no significant foreign sales. As such,
no separate industry segment information is presented.
Products
The Company's largest subsidiary is Clearshield which is 57% owned by the
Company. Clearshield was incorporated in the State of Florida in March 1994.
Clearshield's principal product is a transparent storm shutter assembly that
is lightweight and of relatively simple construction, easy to install and
remove, and capable of sufficiently resisting direct impacts from windborne
debris during a storm. The storm shutter assembly is used to protect glass
windows and doors in homes, office buildings and other walled structures from
the destructive forces associated with storm systems such as hurricanes. The
system includes corrugated panels of a shatter resistant, transparent and
opaque polycarbonate material that is secured to a walled structure using
various mounting hardware and configurations.
Living in coastal areas of the south, southwest and southeast portions of
the United States means living with hurricanes, or the threat of hurricanes.
Building codes are constantly being reviewed and upgraded. Many homes damaged
by hurricanes in the past could have minimized the damage had they been
properly protected. Four weak areas in homes cause most of the damage:
windows, doors, garage doors and wood gable ends. Once one of these entry
points fails, the entire house is at the mercy of the hurricane because no
house is designed to sustain wind inside. One of the main methods of
protecting a home is hurricane shutters.
There are five primary types of commercial hurricane shutters; accordion
shutters, rolling shutters, standard awnings, bahama shutters and storm
panels. Clearshield panels fall into the last category which, until the
development of the Clearshield clear polycarbonate panel, consisted mainly of
panels made from aluminum or steel. There are many different styles and
strengths of commercial storm panels available. What makes the Clearshield
panels more desirable than aluminum or steel include; (1) they are much
lighter making them easier to install; (2) they are made of clear see-through
material which allows natural light to enter the home alleviating the
claustrophobic, tunnel-like feeling during loss of electrical power or during
an actual storm; (3) they improve the home's security as the clear panels
allow police, fire and rescue personnel to easily see into a home to ensure
that occupants are safe; and (4) they will not deteriorate, corrode or rust.
While the Company believes that the Clearshield product is a superior
hurricane panel when compared to the other types of hurricane panels, there is
a strong demand for the other types of hurricane panels. In order to expand
our sales to our customers and meet their need for these alternate products,
PC has expanded its product line to include all forms of hurricane shutters,
including aluminum and steel panels and accordion shutters.
Clearshield manufactures its product under the authority of a License
Agreement with Clearshield, Inc., an affiliate through common shareholders.
Clearshield, Inc. is the owner of the Clearshield Trademark and United States
Patent No. 5,457,921 covering the storm shutter assembly. The License
Agreement provides for a fee of $350,000, a royalty on future transparent
panel sales and entitles Clearshield to use the patent and trademark
throughout the State of Florida for an initial term of 20 years.
The manufacturing process is accomplished through the profile extrusion
of pelletized polycarbonate material into the form for storm panels/hurricane
panels. Extrusion technology has been utilized for other thermoplastic
materials, but it is uncommon for the products to be made in a profile of this
size. Typically, extrusions manufactured of polycarbonate are of dimensions
of six inches or less. Clearshield panels are thirteen inches wide, which
requires the use of state-of-the-art technology and methods.
The clear panel is manufactured from clear polycarbonate which is readily
available from a number of suppliers. Clearshield has also developed the
technology to manufacture colored panels using recycled polycarbonate in
ground or pelletized form. The regrind is also readily available from a
number of suppliers.
Because of the highly seasonal nature of hurricane protection products,
the Company is researching additional products to reduce its reliance on a
seasonal product. During the past fiscal year, Clearshield began research and
development of a new plastic lumber line. The production process utilizes
Clearshield's existing extrusion capabilities and will provide the Company
with a product line with year-round sales capability and broad market
potential. The Company plans to market the product on a national basis
through its present distribution system. Introduction of the plastic lumber
line is planned for the third quarter of the upcoming fiscal year, after
hurricane season.
Sales and Markets
Beginning in February 1997, Clearshield changed its product delivery
focus to only sell through major retailers and distributors. The largest
distributor is PC, which in turn sells the products through a network of
authorized dealers who provide full sales and installation services. There
were approximately 50 active dealers as of March 31, 1997. Clearshield of
Palm Beach County, Inc., a wholly owned subsidiary of Clearshield, is an
authorized dealer in South Florida, selling directly to builders and
individual homeowners through its own sales force. Installation services were
performed by Palmco Builders Inc., a wholly owned subsidiary and state
licensed general contractor. To expand the installation operation and remove
the perception of only selling the Clearshield product, effective April 1,
1997, the direct sales and installation operations have been acquired by Storm
Depot. Storm Depot sells to the do-it-yourselfer through the factory outlet
store and offers full installation services through its Palmco subsidiary.
To reach the do-it-yourself portion of the hurricane protection market,
Clearshield's products are sold through The Home Depot, a national retail home
improvement chain. Sales to The Home Depot accounted for 40% of the Company's
consolidated net sales for the year ended March 31, 1997. The Company's
products will be sold through additional retail chains covering an expanded
geographic region during the upcoming hurricane season.
Clearshield's competition in the hurricane protection industry comes from
alternate products offered by its competitors. Competing products range from
plywood used by do-it-yourselfers to other forms of hurricane shutters
including accordion shutters and metal panels, which are now offered by the
Company through Storm Depot and PC. There are no other clear panel systems on
the market giving Clearshield a unique niche in the industry.
The hurricane protection market is a seasonal business following the
hurricane season which runs from June 1 to November 30. Customers begin to
build their inventory as the season approaches and reduce their levels as the
season winds down. The Company follows this same pattern in managing its
inventories and employment levels.
Backlog
At March 31, 1997, the Company had open orders of approximately $435,000
as compared to $345,000 as of March 31, 1996. All of these orders were filled
during the normal course of operations.
Employees
At March 31, 1997, the Company had a workforce of approximately 35
people. None of the Company's workforce is represented by a collective
bargaining unit and the Company considers its relations with its workforce to
be good.
Item 2. Properties
The Company leases two facilities in Riviera Beach, Florida to serve its'
manufacturing and distribution needs; a 19,000 square foot manufacturing
facility at a current monthly rent of $6,784, and a 27,000 square foot
distribution center at a current monthly rent of $8,944 that also has 8,000
square feet of office space that serves as the Corporate Offices . The
Company believes its facilities are adequate to satisfy its requirements for
the foreseeable future.
Item 3. Legal Proceedings
The Company's Clearshield subsidiary is a party in a lawsuit entitled
Clear Investments, Inc. v. Clearshield Manufacturing Corp., Case No. CL 94-
5898 AF. now pending in the Circuit Court of the Fifteenth Judicial Circuit in
and for Palm Beach County, Florida, where a former director and attorney for
Clearshield, through his company, Clear Investments, Inc. has filed suit to
receive 600,000 shares of stock of Clearshield that were originally allocated
to him in May 1994. Subsequent to that time, the former director and attorney
resigned from Clearshield as director and attorney. The Company has retained
counsel and believes they have a meritorious defense to the allegations
contained in the complaint.
Notwithstanding the above, in September 1996, a settlement in principle
was reached in this matter, subject to documentation and execution of a
settlement agreement. A motion was filed to abate the case and the court has
entered an order closing the file for administrative purposes, while retaining
jurisdiction for the purpose of enforcing the settlement. As of August 1,1997
the documentation and execution of a settlement agreement is still pending.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter ended March 31, 1997.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The common stock of the Company has been traded over-the-counter since
May 15, 1989 and is quoted electronically through the National Association of
Securities Dealers' Electronic Bulletin Board under the symbol SFTH (formerly
BLAI). The high, low and closing prices per share of the common stock for the
years ended March 31, 1997 and 1996 appear in the following table.
Year ended March 31, 1997
Quarter High Low Close
First $2.69 $ 1.37 $ 2.50
Second 3.19 1.25 1.50
Third 1.69 .68 .93
Fourth 1.25 .63 1.09
Year ended March 31, 1996
Quarter High Low Close
First $1.12 $ .50 $ .50
Second 2.75 .44 2.19
Third 2.25 .94 1.09
Fourth 2.69 1.00 1.91
As of March 31, 1997, there were approximately 262 shareholders of record
of the Company's common stock, without taking into account any shares held in
street name by nominees.
The Company has not paid a cash dividend and does not anticipate that it
will in the foreseeable future. The Company intends to retain future earnings
to finance the expansion of its business.
Item 6. Management's Discussion and Analysis
On July 7, 1995, Bernstein/Leibstone Associates, Inc.(the "Company"),
Archway Capital, Inc. ("Archway") and William Leibstone Associates, Inc.
("WLAI"), an entity owned by the former majority stockholder of the Company,
entered into an agreement to exchange shares of the Company's common stock for
shares of Archway's common stock on a one-for-one basis. Effective April 1,
1995, Archway acquired a majority interest in Clearshield Manufacturing Corp.,
a Florida corporation in the business of manufacturing clear polycarbonate
hurricane protection panels, utilizing a three-for-one share exchange. The
Company currently owns approximately 57% of Clearshield.
The acquisitions of the Company and Clearshield by Archway have been
accounted for using the purchase method in accordance with APB Opinion No. 16.
Accordingly, the accompanying Condensed Consolidated Financial Statements are
those of Archway, including the results of operations for the Company and
Clearshield from their respective acquisition dates.
The Company's primary operation is its Clearshield subsidiary. Demand
for the Clearshield product has exceeded the Company's production capacity
each of the past two years. The Company added a second production line in the
fourth quarter of the fiscal year ended March 31, 1996, a third line in the
second quarter of the current fiscal year and a fourth line in the third
quarter of the current fiscal year. These additional lines, along with
production efficiencies have increased production capacity from approximately
60,000 linear feet per week to 205,000 feet per week, a 242% increase.
Additionally, the Company procured equipment for two additional lines with a
combined capacity of 100,000 linear feet per week. The Company hopes that it
is still unable to meet peak demand with this additional capacity.
The Company currently has approvals to sell its products in Dade, Broward
and Palm Beach Counties and has applied for approval with the Southern
Building Code Congress. These are the only counties that currently have a
product approval program. Additionally, the Company is expanding its product
line to offer all forms of hurricane shutters, including steel and aluminum
panels, and accordion shutters. All of these products will meet the product
approval requirements of the above mentioned counties. These additional
products compliment the existing line and will enable the Company to better
service the consumer and our dealer network.
Because of the highly seasonal nature of hurricane protection products,
the Company is researching additional products to reduce its reliance on a
seasonal product. During the third quarter, the Company's Clearshield
subsidiary began research and development of a new plastic lumber line. The
production process utilizes Clearshield's existing extrusion capabilities and
will provide the Company with a product line with year-round sales capability
and a broad market potential. The Company plans to market this product on a
national basis through its present distribution system. Introduction of the
plastic lumber line is planned once the hurricane season ends.
During the third quarter of the current fiscal year, the Company formed
ST Telecom Corp., a wholly owned subsidiary to explore opportunities in the
telecommunications industry. The initial opportunities encompassed prepaid
long distance cards and prepaid cellular service cards. This subsidiary had
limited activity during the year in terms of both revenues and expenditures.
Additionally, at the end of the third quarter the Company announced that it
would begin selling hurricane products on a factory direct basis through a new
subsidiary, Storm Depot of Florida, Inc. The first Storm Depot location
opened in February 1997. The Company expects this new subsidiary to be a
solid contributor to the Company's future growth.
Liquidity and Capital Resources
On May 22, 1996, the Company, WLAI, William Leibstone and TTSB, Ltd., an
Ohio limited liability company ("TTSB") entered into an agreement whereby TTSB
purchased the WLAI note payable to the Company dated July 14, 1995 in the
amount of $941,348, in exchange for a note from TTSB in the amount of
$1,013,663. The TTSB note is secured by a pledge of 506,000 shares of stock
in the Company assigned to TTSB by William Leibstone, which shares are being
held by a financial intermediary on behalf of the Company. In connection with
this agreement, William Leibstone made a loan to the Company in the amount of
$100,000.
Under the terms of the Stock Pledge Agreement of the same date between
the Company and TTSB, the Company can request partial prepayments of the note,
which prepayments will be made with the proceeds of sales of the pledged
shares. TTSB shall not be obligated to sell the pledged shares or make the
prepayment unless it receives at least $2.28 per share for the first 200,000
shares and $2.50 for the remaining shares. The Company receives the first
$2.00 per share as prepayment on the note. As of March 31, 1997, TTSB has
sold 469,000 of the pledged shares, making prepayments on the note totalling
$938,000.
The Company used its available resources to, acquire needed equipment to
expand its production capacity, engage in research and development of new
products, invest in trading securities, fund its operating losses and maintain
its key staff through the off season. This past off season was slower than
that of the past few years and, combined with these other cash requirements,
has resulted in the Company being in an extremely tight liquidity position.
To provide additional working capital to enter the upcoming hurricane
season, In March 1997, the Company offered up to $750,000 principal amount of
4% convertible subordinated debentures that mature March 31, 1998 in an
offshore transaction under Regulation S of the Securities Act of 1933, as
amended ("Securities Act"). As of March 31, 1997, the Company had received
subscriptions for $250,000 of the debentures. Additional subscriptions
totalling $500,000 were received subsequent to March 31, 1997. The debentures
are unsecured obligations of the Company and have not been registered under
the Securities Act. Each of the debentures is convertible at the option of
the holder at any time after 40 days following the issuance of such debenture
and prior to maturity into shares of the Company's common stock at a
conversion price of 75% of the five day average closing bid price per share as
reported by the principal exchange over which the Company's common stock is
traded. The offering terminated upon the Company's acceptance of
subscriptions for the full offering.
Results of Operations
Net sales for the year ended March 31, 1997 were $5,627,120 compared to
$3,233,096 for the year ended March 31, 1996, a 74% increase. The growth in
sales is a result of expanding customer awareness at the retail level,
purchased by the do-it-yourselfer through a national home improvement chain,
or purchased by homeowners through our growing dealer network. The sales
growth was achieved in spite of the confusion caused by the recision of the
Company's Dade County product approval in July 1996 and its later
reinstatement in December 1996.
During the fourth quarter of the year ended March 31, 1996, the Company
rolled out its product at one national home improvement chain in preparation
for the 1996 Hurricane season. For the 1997 hurricane season, the Company's
products will be in three national home improvement chains. The rollout of
the products to all three chains will be in the first quarter of the upcoming
year. As a result of this change in the rollout schedule, sales for the
fourth quarter of the year ended March 31, 1997 were down from those of the
fourth quarter of the year ended March 31, 1996.
Because of reduced sales in the second half of the year, the Company
limited its production to prevent an unnecessary inventory buildup. With the
reduced production levels and increased production capacity, the Company
experienced unfavorable manufacturing variances resulting in a decrease in its
gross margins from 16.5% for the year ended March 31, 1996 to 15.3% for the
year ended March 31, 1997. The Company anticipates improvement in its margins
as its production volume increases to satisfy demand for the upcoming
hurricane season.
During the second half of the year ended March 31, 1997, the Company
found it necessary to expand its administrative ranks to better manage the
business and expand its product offerings for next season. With these
additional costs, selling, general and administrative expenses increased to
$2,264,369 for the year ended March 31, 1997 compared to $1,534,471 for the
year ended March 31, 1996, a 47.6% increase. In relative terms, selling,
general and administrative expenses declined as a percentage of sales from
47.5% for the year ended March 31, 1996 to 40.2% for the year ended March 31,
1997. The Company anticipates continued reduction in these costs as a
percentage of sales.
Interest income primarily is from the note received in the sale of the
Company's former packaging and textile divisions, and the subsequent sale of
the note. The decline in interest income between years is due to the
repayments made on the note during the year ended March 31, 1997.
Item 7. Financial Statements and Supplementary Data
The following financial statements are filed with this report:
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Certified Public Accountants
To the Board of Directors
and Shareholders
Safetech Industries, Inc.
& Subsidiaries
Riviera Beach, Florida
We have audited the accompanying consolidated balance sheet of Safetech
Industries, Inc. & Subsidiaries (formerly known as Bernstein/Leibstone
Associates, Inc. & Subsidiaries) as of March 31, 1997, and the related
consolidated statements of operations, changes in shareholders' equity and
cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit. The consolidated financial statements of Safetech Industries, Inc. &
Subsidiaries as of March 31, 1996 were audited by other auditors whose report
dated October 22, 1996, on those statements included an explanatory paragraph
describing conditions that raised substantial doubt about the Company's
ability to continue as a going concern.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the March 31, 1997 consolidated financial statements referred
to above present fairly, in all material respects, the financial position of
Safetech Industries, Inc. & Subsidiaries, as of March 31, 1997 and the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the consolidated
financial statements, the Company incurred a net loss of $1,156,674 during the
year ended March 31, 1997, and, as of that date, had a working capital
deficiency of $1,475,487 and a negative net worth of $343,976. These
conditions raise substantial doubt about the Company's ability to continue as
a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ SCHMIDT, RAINES, TRIESTE,
DICKENSON & ADAMS, P.L.
Boca Raton, Florida
August 7, 1997
SAFETECH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
1997 1996
ASSETS
CURRENT ASSETS:
Cash $ 12,795 $ 14,457
Trading Securities, at fair value 73,661 -
Accounts Receivable, less allowance
for doubtful accounts of $80,000
in 1997 and $70,000 in 1996 159,494 399,792
Subscription Receivable 225,000 -
Notes Receivable 6,000 973,348
Inventories 650,989 660,367
Deferred Tax Asset, net of
valuation allowance - -
Other Current Assets 30,102 38,470
1,158,041 2,086,434
PROPERTY & EQUIPMENT, at cost:
Manufacturing Equipment 988,580 529,028
Leasehold Improvements 182,066 152,395
Furniture, Fixtures & Office Equipment 95,633 78,249
Vehicles 29,989 26,689
1,296,268 786,361
Less accumulated depreciation
and amortization (385,399) (185,508)
910,869 600,853
OTHER ASSETS:
License Fee, net of accumulated
amortization 313,542 331,042
Notes Receivable 85,099 -
Investments 45,000 60,000
Deferred Tax Asset, net of
valuation allowance - -
Due from Officer 285,807 140,398
Other 23,157 19,878
752,605 551,318
Total Assets $ 2,821,515 $ 3,238,605
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
<PAGE>
SAFETECH INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 AND 1996
(Continued)
1997 1996
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts and Deposits Payable $ 1,874,476 $ 1,047,085
Accrued Expenses 254,844 300,820
Notes Payable 250,000 150,000
Subordinated Debentures Payable 250,000 -
Current Portion of Long-Term Debt 4,208 -
2,633,528 1,497,905
LONG-TERM DEBT 20,611 -
MINORITY INTEREST 511,352 928,002
SHAREHOLDERS' EQUITY:
Common Stock, $.01 par value; 20,000,000
shares authorized, 17,391,700 shares
issued and outstanding at March 31,
1997 and 1996 173,917 173,917
Additional Paid-in Capital 1,335,016 1,335,016
Accumulated (Deficit) (1,852,909) (696,235)
(343,976) 812,698
Total Liabilities & Shareholders' Equity $ 2,821,515 $ 3,238,605
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
<PAGE>
SAFETECH INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
1997 1996
Net Sales $ 5,627,120 $ 3,233,096
Cost of Sales 4,766,014 2,698,251
861,106 534,845
Selling, General and Administrative Expenses 2,264,369 1,534,471
Loss from Operations 1,403,263 999,626
Other Expense (Income):
Interest Income (34,614) (75,396)
Interest Expense 18,550 14,804
Realized Loss on Trading Securities 189,453 -
Holding Loss on Trading Securities 7,719 -
Other, net (352) (13,035)
180,756 (73,627)
Net Loss Before Income Taxes and
Minority Interest 1,584,019 925,999
Provision for Income Taxes - -
Minority Interest 427,345 358,467
Net Loss $ 1,156,674 $ 567,532
Net Loss per Share $ .07 $ .03
Weighted Average Common Shares Outstanding 17,391,700 16,223,481
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE>
<TABLE>
<CAPTION>
SAFETECH INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
Common Stock Common Stock Additional
$.01 Par Value No Par Value Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995 - $ - 4,220,000 $ 320,230 $ - $ (128,703)
Acquisition of interest in
Clearshield Manufacturing Corp 9,071,700 247,355
Business combination with
Archway Capital Inc. 17,391,700 173,917 (13,291,700) (567,585) 1,335,016
Net (Loss) (567,532)
Balance at March 31, 1996 17,391,700 173,917 - - 1,335,016 (696,235)
Net (Loss) (1,156,674)
Balance at March 31, 1997 17,391,700 $173,917 - - $1,335,016 $(1,852,909)
The accompanying notes to consolidated financial statements are an integral part of these consolidated statements.
</TABLE>
<PAGE>
SAFETECH INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1997 AND 1996
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,156,674) $ (567,532)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Minority Interest (427,345) (358,467)
Depreciation and Amortization 217,390 140,061
(Increase) in Trading Securities (73,661) -
Decrease (Increase) in Accounts
Receivable 240,298 (361,793)
Decrease (Increase) in Inventories 9,378 (629,730)
Decrease (Increase) in Other Assets 5,089 (11,515)
Increase in Accounts and
Deposits Payable 827,391 885,362
(Decrease) Increase in Accrued Expenses (45,976) 206,022
Common stock of majority owned subsidiary
issued in exchange for services - 26,333
Net cash (used in) operating activities (404,110) (671,259)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment (480,131) (331,963)
Repayments on Notes Receivable and
Investments 979,000 -
(Increase) in Notes Receivable (81,751) -
(Increase) in Due from Officer (145,409) (93,710)
Net cash (used in) investing activities 271,709 (425,673)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in Notes Payable 100,000 -
(Payments) on Long-Term Debt (4,956) -
Proceeds from Subordinated Debentures 25,000 -
Proceeds from issuance of common stock
by majority owned subsidiary 10,695 1,099,417
Cash acquired in acquisition of Clearshield - 6,484
Net cash provided by financing activities 130,739 1,105,901
NET INCREASE (DECREASE) IN CASH (1,662) 8,969
CASH, AT BEGINNING OF PERIOD 14,457 5,488
CASH, AT END OF PERIOD $ 12,795 $ 14,457
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE>
SAFETECH INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Entity:
On July 7, 1995, Bernstein/Leibstone Associates, Inc.(the "Company"),
Archway Capital, Inc. ("Archway") and William Leibstone Associates, Inc.
("WLAI"), an entity owned by the former majority stockholder of the
Company, entered into an agreement to exchange shares of the Company's
common stock for shares of Archway's common stock on a one-for-one basis.
On July 14, 1995, all 13,291,700 outstanding shares of Archway were
exchanged by the shareholders for restricted shares issued by the
Company. The agreements further provided for the sale of the former
operating divisions to WLAI in exchange for a note. The share exchange
with Archway and the disposition of the former operating divisions have
been accounted for in accordance with APB Opinion No. 16. As such, the
consolidated financial statements include the accounts of Archway, its
wholly and majority owned subsidiaries, and the Company from the date of
its acquisition. All intercompany accounts and transactions have been
eliminated in consolidation.
Archway was formed in September 1994 as a holding company for the purpose
of investing in other businesses and providing management expertise in
such subsidiaries with the intention of developing new products, ideas
and techniques in areas of business clearly identified as unique or niche
markets. In October 1994, International Fire Safety Products, Inc., a
wholly owned subsidiary, was organized for the purpose of manufacturing
retardant technology products in a variety of forms. In April 1995,
Archway acquired a majority interest in Clearshield Manufacturing Corp.
("Clearshield"), a company engaged in the manufacturing, sale and
distribution of a patented clear hurricane shutter system. Clearshield's
wholly owned subsidiaries, Clearshield of Palm Beach County, Inc. and
Palmco Builders Inc. are engaged in the retail sale and installation of
hurricane protection products, respectively. In October 1995, PC
International Trading Corp., a wholly owned subsidiary of Archway, was
organized for the purpose of distributing recycled plastic and hardware
supplies.
The Company and all of its subsidiaries are located in the City of
Riviera Beach, Palm Beach County, Florida.
The Company has reported losses since its formation in September 1994.
At March 31, 1997, the Company has negative working capital of $1,475,487
and deficit shareholders' equity of $343,976. To improve its financial
position, the Company is engaged in efforts to (1) increase sales through
increased production capacity, additional products, and additional
customers and geographic markets; (2) reduce its operating costs; and (3)
develop new products for use outside of the hurricane protection
industry. There can be no assurance that the Company will be successful
in these efforts.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents includes
cash in banks.
Fair Value of Financial Instruments
Trading securities are accounted for in accordance with Statement of
Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". This accounting standard
requires trading securities to be recorded at fair value (quoted market
price) with any holding gains or losses included in earnings. Realized
gains and losses are computed using the first-in, first-out method.
The Company's other financial instruments are valued at cost which
approximates fair value.
Accounts Receivable
The Company's Clearshield of Palm Beach County, Inc. subsidiary uses the
completed contract method of accounting for financial reporting purposes.
Revenues and costs are recognized when the contract is substantially
completed. Most contracts are of short duration taking only a few days
to complete once the work commences. Contract deposits are recorded as a
liability until the contract is substantially completed. Costs incurred
on contracts in progress are not material at March 31, 1997 and 1996.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market. Inventories by major class are as follows:
1997 1996
Raw Materials $ 219,969 $ 106,895
Finished Goods 430,020 553,472
$ 650,989 $ 660,367
Property & Equipment
Property and equipment is recorded at cost and depreciated using the
straight line method over the estimated useful lives of the assets.
Leasehold improvements are depreciated over the shorter of the estimated
life of the asset or the term of the lease. Depreciable lives by asset
class are as follows:
Manufacturing Equipment 3 to 7 years
Leasehold Improvements 3 to 4 years
Furniture, Fixtures & Office Equipment 5 to 7 years
Vehicles 5 years
License Fee
The Company's Clearshield subsidiary has entered into a License Agreement
with Clearshield, Inc., an affiliate through common shareholders,
providing exclusive rights to manufacture and distribute a patented
hurricane shutter system throughout the state of Florida. The cost of
the License was $350,000 and is being amortized on a straight line basis
over the twenty year life of the agreement. Additionally, the License
Agreement provides for the payment of a royalty based on sales of the
patented product. Royalty expense for the years ended March 31, 1997 and
1996 was approximately $232,600 and $88,600, respectively.
Investments
Long term investments at March 31, 1997 consist of a parcel of land held
for resale and one mortgage note receivable. A second mortgage note
receivable was paid in full during the year ended March 31, 1997.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements in accordance with Financial Accounting Standard
No. 109, "Accounting for Income Taxes". This accounting standard
requires the asset and liability method of accounting for income taxes
and the recognition of future tax costs and benefits measured by enacted
tax rates attributed to taxable and deductible temporary differences, net
operating loss carryforwards and tax credits to the extent that
realization of such costs and benefits is more likely than not to occur.
Restricted Stock
As of March 31, 1997 and 1996, there were 17,391,700 common shares issued
and outstanding. Of these shares, 13,291,700 are restricted shares under
Rule 144 of the Securities Act of 1933.
Net (Loss) per Share
Net (Loss) per share is computed on the basis of the weighted average
number of common and common equivalent shares outstanding during each
period. Common equivalent shares outstanding for the year ended March
31, 1997 are not included in the Net (Loss) per share calculation as they
are antidilutive. There were no common equivalent shares outstanding
during the year ended March 31, 1996.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect reported amounts. Actual results may differ from
reported amounts.
Concentration of Credit Risk
The Company operates within one business segment with the majority of its
sales in the state of Florida. The Companys largest customer, a national
retail home improvement chain accounted for 40% and 30% of consolidated
sales for the years ended March 31, 1997 and 1996, respectively.
2. ACQUISITIONS AND DIVESTITURES
On July 7, 1995, the Company, Archway and WLAI, an entity owned by the
former majority stockholder of the Company, entered into an agreement to
exchange shares of the Company's common stock for shares of Archway's
common stock on a one-for-one basis. On July 14, 1995, all 13,291,700
outstanding shares of Archway were exchanged by the shareholders for
restricted shares issued by the Company. In connection with the above
referenced agreement, the Company sold the net operating assets of its
textile and packaging divisions to WLAI. WLAI issued a note to the
Company in the amount of $941,348 which is secured by 1,100,000 shares of
stock of the Company owned by William Leibstone. The note was for a term
of three years and bears interest at the rate of 9% per annum, compounded
quarterly. The fair value of the Company as acquired was determined to
be its net book value considering the values of the securities exchanged
and the agreement to sell the net operating assets of the former
operating divisions.
Effective April 1, 1995, Archway acquired a majority interest in
Clearshield, a Florida corporation in the business of manufacturing clear
polycarbonate hurricane protection panels, utilizing a three-for-one
share exchange. Archway issued 9,071,700 shares to the shareholders of
Clearshield in exchange for 3,023,900 shares of Clearshield which equaled
69% of the then issued and outstanding shares of Clearshield. The fair
value of the shares issued for the interest in Clearshield was determined
to be the net book value of the interest acquired.
The acquisitions of the Company and Clearshield by Archway have been
accounted for using the purchase method in accordance with APB Opinion
No. 16. Accordingly, the accompanying Statements of Operations includes
the results of operations for the Company and Clearshield from their
respective acquisition dates.
3. FINANCING ARRANGEMENTS
At March 31, 1997 and 1996, the Company's debt consisted of the
following:
1997 1996
Notes Payable-
Note Payable to Clearshield, Inc.
with interest at 8%, payable in
twelve monthly installments
commencing in October 1995 $ 150,000 $ 150,000
Note payable to former majority
shareholder with interest at
7%, payable in ten monthly
installments commencing in
July 1997 100,000
$ 250,000 $ 150,000
Convertible Subordinated Debentures
Payable $ 250,000 $ -
Long-term debt-
Obligation under capital lease,
with interest at 12.15% $ 24,819 $ -
Less-current portion 4,208
$ 20,611 $ -
The note payable to Clearshield, Inc. represents a portion of the cost of
the License Agreement with the Company's Clearshield subsidiary. No
payments have been made on this note as of March 31, 1997.
In March 1997, the Company offered up to $750,000 principal amount of 4%
convertible subordinated debentures that mature March 31, 1998 in an
offshore transaction under Regulation S of the Securities Act of 1933, as
amended ("Securities Act"). As of March 31, 1997, the Company had
received subscriptions for $250,000 of the debentures. Additional
subscriptions totalling $500,000 were received subsequent to yearend.
The offering terminates upon the earlier of the Company's acceptance of
subscriptions for the full offering, or on April 30, 1997, unless
extended for up to 90 additional days by the Company, or terminated
earlier, at any time. The offering was extended by the Company until
July 1997.
The debentures are unsecured obligations of the Company and have not been
registered under the Securities Act. Each of the debentures is
convertible at the option of the holder at any time after 40 days
following the issuance of such debenture and prior to maturity into
shares of the Company's common stock at a conversion price of 75% of the
five day average closing bid price per share as reported by the principal
exchange over which the Company's common stock is traded. Subsequent to
yearend, $250,000 of debentures were converted into 451,977 shares of the
Company's common stock.
4. NOTES RECEIVABLE
On May 22, 1996, the Company, William Leibstone Associates, Inc.("WLAI"),
William Leibstone and TTSB, Ltd., an Ohio limited liability company
("TTSB") entered into an agreement whereby TTSB purchased the WLAI note
payable to the Company dated July 14, 1995 in the amount of $941,348, in
exchange for a note from TTSB in the amount of $1,013,663. The TTSB note
bears interest at the rate of 9% per annum, compounded semi-annually and
payable at maturity, is due on May 22, 1998 and is secured by a pledge of
506,000 shares of stock in the Company assigned to TTSB by William
Leibstone, which shares are being held by a financial intermediary on
behalf of the Company. Under the terms of the Stock Pledge Agreement of
the same date between the Company and TTSB, the Company can request
partial prepayments of the note, which prepayments will be made with the
proceeds of sales of the pledged shares. TTSB shall not be obligated to
sell the pledged shares or make the prepayment unless it receives at
least $2.28 per share for the first 200,000 shares and $2.50 for the
remaining shares. The Company receives the first $2.00 per share as
prepayment on the note. As of March 31, 1997, TTSB has sold 469,000 of
the pledged shares, making prepayments on the note totalling $938,000.
5. LEASE COMMITMENTS
The Company leases certain of its facilities, equipment and vehicles
under capital and operating leases. The following is an analysis of the
assets under capital leases included in property and equipment at March
31, 1997. These assets are pledged as collateral under the capital lease
obligation.
Manufacturing Equipment $ 29,775
Less accumulated depreciation 1,631
$ 28,144
Future minimum lease payments on all leases as of March 31, 1997 are as
follows:
Capital Operating
Leases Leases
Year ending March 31,
1998 $ 6,994 $ 198,535
1999 6,994 147,411
2000 6,994 118,433
2001 6,994 119,345
2002 4,663 121,849
Thereafter - 139,809
32,639 $ 845,382
Less amount representing interest 7,820
Present value $ 24,819
Total rental expense for operating leases charged to operations was
approximately $153,000 in 1997 and $105,000 in 1996.
6. INCOME TAXES
The components of the provision for income taxes for the years ended
March 31, 1997 and 1996 are comprised of the following:
1997 1996
Current:
Federal $ - $ -
State - -
- -
Deferred:
Federal - -
State - -
- -
$ - $ -
The components of the net deferred tax assets and the related tax
effects as of March 31, 1997 and 1996 are comprised of the following:
1997 1996
Current Deferred Tax Assets:
Bad debts $ 30,860 $ 27,003
Inventory 13,337 13,206
Accrued Expenses 25,968 -
Total Current Deferred Tax Assets 70,165 40,209
Less Valuation Allowance (70,165) (40,209)
Net Current Deferred Tax Assets - -
Noncurrent Deferred Tax Assets:
Operating Loss Carryforwards 1,059,142 597,694
Capital Loss Carryforwards 73,081 -
Total Noncurrent Deferred Tax Assets 1,132,223 597,694
Less Valuation Allowance (1,132,223) (597,694)
Net Noncurrent Deferred Tax Assets - -
Net Deferred Tax Assets $ - $ -
For tax return purposes, the Company and its subsidiaries have net
operating loss carryforwards approximating $2,787,000 that expire
beginning in the year 2010 and capital loss carryforwards approximating
$189,000 that expire in 2002. Due to limitations on the utilization of
loss carryforwards resulting from ownership changes and separate return
limitations and the uncertainty that the Company and its subsidiaries
will be able to utilize the net operating losses, capital losses and
temporary differences to offset future taxable income, a 100% valuation
allowance has been recorded against the deferred tax assets.
7. STOCK OPTIONS
The Board of Directors approved the granting of stock options to the
executive officers of the Company in connection with their approval of
the officers' compensation packages. A total of 500,000 shares of the
Company's stock has been reserved for stock options. Each of the
officers receives an immediately vested grant on the first day of each
month to purchase the stated number of shares at the prior monthend
closing price of the Company's common stock. Each option is exercisable
for five (5) years. The table below sets forth the status of the
Company's stock options for the year ended March 31, 1997. There were
no options outstanding during the year ended March 31, 1996.
Weighted-Average
Shares Exercise Price
Outstanding at April 1, 1996 -
Granted 136,000 $ 1.35
Exercised -
Forfeited -
Outstanding at March 31, 1997 136,000 1.35
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations in accounting for its stock options.
Accordingly, no compensation cost has been recognized in the accompanying
financial statements related to stock options. The weighted average fair
value of options granted during the year ended March 31, 1997 was $0.64,
which was computed using the Black-Scholes model with the following
assumptions: expected life of 3 years; expected volatility of 65%; and a
risk free interest rate of 6%. Had compensation cost for the Company's
stock options been determined based on the fair value at the grant dates
consistent with the method of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation", the Company's Net Loss and Net
Loss per share for the year ended March 31, 1997 would have been $1,244,374
and $0.07, respectively.
8. DUE FROM OFFICER
The Company has advanced funds to its Chief Executive Officer and a
corporation in which he is the sole shareholder on an unsecured basis with no
stated interest rate or repayment terms. Total advances as of March 31, 1997
and 1996 were $285,807 and $140,398, respectively.
9. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
1997 1996
Interest Paid $ 547 $ 5,924
Income Taxes Paid - -
Property & Equipment financed
under capital lease 29,775 -
10. LITIGATION
The Company's Clearshield subsidiary is a party in a lawsuit entitled Clear
Investments, Inc. v. Clearshield Manufacturing Corp., Case No. CL 94-5898
AF. now pending in the Circuit Court of the Fifteenth Judicial Circuit in
and for Palm Beach County, Florida, where a former director and attorney for
Clearshield, through his company, Clear Investments, Inc. has filed suit to
receive 600,000 shares of stock of Clearshield that were originally
allocated to him. Subsequent to that time, the former director and attorney
resigned from Clearshield as director and attorney. The Company has
retained counsel and believes they have a meritorious defense to the
allegations contained in the complaint.
Not withstanding the above, in September 1996, settlement in principle was
reached in this matter, subject to documentation and execution of a
settlement agreement. A motion was filed to abate the case and the court
has entered an order closing the file for administrative purposes, while
retaining jurisdiction for the purpose of enforcing the settlement. As of
August 1, 1997, the documentation and execution of a settlement agreement is
still pending. No adjustments have been made in the accompanying financial
statements regarding this matter.
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
Refer to Form 8-K dated July 21, 1997 which is hereby incorporated by
reference.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The directors and executive officers of the Company are as follows.
Directors are elected at the annual shareholders' meeting and serve until the
next annual shareholders' meeting. The only family relationship amongst the
directors and executive officers of the Company is that Misters David and
Garey Herter are brothers.
Director
Name Age Position Since
Darrell L. Peterson 38 Chief Executive Officer, Director 1995
Patrick T. Sullivan 41 President, Director 1995
John D. Herter 47 Treasurer, Director 1995
Garey Herter 54 Secretary, Director 1995
Bruce Livergood 55 Director 1995
Richard J. Samuels 39 Chief Financial Officer n/a
Darrell L. Peterson, was Vice President and Chief Financial Officer of the
Marbledge Group, Inc. and its subsidiaries from 1993 to 1994 and President of
one of it's subsidiaries from 1991 to 1994 before joining the Company.
Marbledge and its subsidiaries were involved in the manufacture, sales and
distribution of natural stone products. Mr. Peterson has also worked in the
real estate development business and securities business. Mr. Peterson has a
B.S. degree in Accounting from Long Island University and currently serves on
the Board of Directors of Clearshield, Inc. and H & H Ventures, Inc., a
business consulting firm.
Patrick T. Sullivan, joined the Company as President of Clearshield
Manufacturing Corp. From 1987 to 1995, Mr. Sullivan was a First Vice
President at both Prudential Securities and Smith Barney and is a Registered
Investment Advisor. Mr. Sullivan was President and owner of Sullivan
Construction, a builder of single and multi-family housing from 1982 to 1987.
Mr. Sullivan is a graduate of Emery Riddle University where he earned a B.S.
degree in Management.
John D. Herter, was the initial incorporator and President of Archway Capital
Inc. During the first half of 1994, Mr. Herter was the President and Chief
Executive Officer for Lamplighter Industries Inc., a company engaged in the
manufacture and distribution of electroluminescent lighting panels. From 1991
to 1994, Mr. Herter was Director of Operations at Brooklyn Bow International,
Inc., a manufacturer of soft goods for intimate apparel, children's wear and
specialty packaging. Mr. Herter has a B.A. degree from the University of
Southern California and is a Vice President of H & H Ventures, Inc. a business
consulting firm. Mr. Herter resigned from the Board of Directors in May 1997.
Garey Herter, currently serves on the Board of Directors of Clearshield, Inc.,
PRIDE Inc., a not-for-profit probation services company and H & H Ventures,
Inc., a business consulting firm of which he is also the President. Mr.
Herter was Chief Administrative Assistant to the Public Defender, Fifteenth
Judicial Circuit, for the State of Florida from 1984 to 1993. Prior to that
time, Mr. Herter had a career in the United States Navy from which he retired
as a Chief Petty Officer in 1984.
Bruce Livergood, has been the owner of Design Electrical Construction, Inc.,
an electrical design and construction company with a wide range of expertise
in all phases of the electrical industry since 1977. He is an active member
of Associated Builders and Contractors of Palm Beach County, Electrical
Contractors of Florida and the International Association of Electrical
Inspectors. During the 1980's, Mr. Livergood was also the owner of Baker
Knight Industries, a steel processing operation, and Adolescent Recovery
Centers, a 28-bed accredited hospital treatment facility.
Richard J. Samuels was the Chief Financial Officer and Treasurer of Wrisco
Industries Inc. from June 1987 until he joined the Company in July 1996.
Wrisco is a national distributor and value-added fabricator of prefinished
aluminum, venetian blind components and other products. From August 1979
until June 1987, Mr. Samuels worked in the Cleveland office of Arthur
Andersen, an international public accounting firm. Mr. Samuels is a CPA and
has a B.S. degree in business from Indiana University. Mr. Samuels tendered
his resignation in October 1997.
Item 10. Executive Compensation
The following table sets forth certain information with respect to the
annual compensation of the Company's Chief Executive Officer for the years
ended March 31, 1997 and 1996. No other executive officer received
compensation exceeding $100,000 during these fiscal years.
Annual Compensation
Name and Other Stock
Principal Position Year Salary Compensation Options
Darrell L. Peterson,
Chief Executive Officer 1997 $90,000 $ 8,000 (1) 50,000
1996 67,600 34,200 (2) -
(1) Other compensation includes Company provided group insurance and a car
allowance.
(2) Other compensation includes a bonus for past uncompensated services and
Company provided group insurance.
The Board of Directors approved the granting of stock options to the
executive officers of the Company in connection with their approval of the
officer's compensation packages. Each of the officers receives a grant on the
first day of each month to purchase the stated number of shares at the prior
monthend closing price of the Company's common stock. Each option is
exercisable for five (5) years. No options were exercised during the year
ended March 31, 1997.
The table below sets forth the monthly stock options granted to the
Company's Chief Executive Officer.
Percent of
Number Total Options
of Granted to Exercise
Name and Options Employees in Price Expiration
Principal Position Granted Fiscal Year Per Share Date
Darrell L. Peterson,
Chief Executive Officer 5,000 3.7% $ 2.50 7/1/2001
5,000 3.7 2.00 8/1/2001
5,000 3.7 1.59 9/1/2001
5,000 3.7 1.50 10/1/2001
5,000 3.7 1.03 11/1/2001
5,000 3.7 1.12 12/1/2001
5,000 3.7 .93 1/1/2002
5,000 3.7 1.03 2/1/2002
5,000 3.7 1.00 3/1/2002
5,000 3.7 1.09 4/1/2002
The directors of the Company do not receive compensation for serving in that
capacity. They are reimbursed for certain travel related and other out-of-
pocket expenses incurred to attend Board of Directors and stockholder
meetings.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of June 30, 1997 with respect
to the beneficial ownership of shares of common stock by (i) each person known
by the Company to be the owner of more than five percent of the outstanding
shares of common stock, (ii) the Company's Chief Executive Officer, (iii) each
director of the Company, and (iv) all executive officers and directors of the
Company as a group.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Darrell L. Peterson
Chief Executive Officer ,
Director
2001A Australian Ave.
Riviera Beach, FL 33404 3,250,000 (1)(2) 18.03%
Patrick T. Sullivan
President, Director
2001A Australian Ave.
Riviera Beach, FL 33404 52,000 (2) .29%
John D. Herter
Treasurer, Director
2001A Australian Ave.
Riviera Beach, FL 33404 183,000 (2) 1.02%
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Garey Herter
Secretary, Director
2001A Australian Ave.
Riviera Beach, FL 33404 3,540,000 (1) 19.64%
Bruce Livergood
Director
1002 S.E. First Street
Boynton Beach, FL 33412 800,000 4.44%
Richard J. Samuels
Chief Financial Officer
2001A Australian Ave.
Riviera Beach, FL 33404 22,000 (2) .12%
Gregory Kostrzecha
2001A Australian Ave.
Riviera Beach, FL 33404 960,000 5.33%
All Executive Officers and
Directors as a Group
(Six Persons) 7,247,000 40.21%
(1) Includes 600,000 shares owned by a company controlled by Mr. Peterson
and Mr. Herter.
(2) Includes stock options for 65,000, 52,000, 39,000 and 22,000 shares for
Mr.'s Peterson, Sullivan, Herter and Samuels.
Item 12. Certain Relationships and Related Transactions
The Company has advanced funds to its Chief Executive Officer and a
corporation in which he is the sole shareholder on an unsecured basis with no
stated interest rate or repayment terms. Total advances as of March 31, 1997
were $285,807.
The Company's Clearshield subsidiary has entered a License Agreement with
Clearshield, Inc., an affiliate through common shareholders. The cost of the
License Agreement was $350,000 plus a royalty on certain sales. Royalty
expense for the year ended March 31, 1997 was approximately $232,600.
PART IV
Item 13. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. The Consolidated Financial Statements together with Report of
Independent Certified Public Accountants are filed as Item 7 of this
report.
2. Exhibits
Exhibit No. Description
2.1 Master Agreement dated July 7, 1995 by and among
Bernstein/ Leibstone Associates, Inc., William Leibstone
Associates, Inc., and Archway Capital Inc. was filed as
Exhibit 1 to Form 8-K/A dated July 14, 1995 and is
herein incorporated by reference.
2.2 Asset Exchange Agreement dated July 14, 1995 by and
among Bernstein/Leibstone Associates, Inc., William
Leibstone Associates, Inc., and William Leibstone was
filed as Exhibit 2 to Form 8-K/A dated July 14, 1995 and
is herein incorporated by reference.
3.1 Restated Certificate of Incorporation of
Bernstein/Leibstone Associates, Inc. was filed as an
Exhibit to the Company's Registration Statement on Form
S-18 filed on April 4, 1989 and is herein incorporated
by reference.
3.2 Bylaws of Bernstein/Leibstone Associates, Inc. was filed
as an Exhibit to the Company's Registration Statement on
Form S-18 filed on April 4, 1989 and is herein
incorporated by reference.
3.3 Certificate of Amendment of the Certificate of
Incorporation of Bernstein/Leibstone Associates, Inc.
dated January 31, 1997.
4.1 Form of Common Stock Certificate of Bernstein/Leibstone
Associates, Inc. was filed as an Exhibit to the
Company's Registration Statement on Form S-18 filed on
April 4, 1989 and is herein incorporated by reference.
4.2 Confidential Regulation S Offering Memorandum dated
March 17, 1997 for $750,000.00 Bernstein/Leibstone
Associates, Inc. 4% Convertible Subordinated Debentures
due 1998.
10.1 License Agreement between Clearshield, Inc. and
Clearshield Manufacturing Corp. dated March 10, 1995 was
filed as an Exhibit to the Company's Form 10-K for the
year ended March 31, 1996 and is herein incorporated by
reference.
.
10.2 Lease for Riviera Beach, Florida manufacturing facility
dated April 1, 1994 was filed as an Exhibit to the
Company's Form 10-K for the year ended March 31, 1996
and is herein incorporated by reference.
10.3 Lease for Riviera Beach, Florida distribution facility
dated July 22, 1996 was filed as an Exhibit to the
Company's Form 10-K for the year ended March 31, 1996
and is herein incorporated by reference.
10.4 Agreement dated May 22, 1996 by and among the Company,
TTSB, Ltd., William Leibstone Associates, Inc.,and
William Leibstone was filed as an Exhibit to the
Company's Form 10-K for the year ended March 31, 1996
and is herein incorporated by reference.
11.1 Statement regarding computation of per share earnings
21.1 Subsidiaries of Registrant
27 Financial Data Schedule
(b) No reports on Form 8-K were filed for the three month period ended
March 31, 1997.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
SAFETECH INDUSTRIES, INC.
By: /s/ Darrell Peterson Date: November , 1997
Darrell Peterson, Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
By: /s/ Darrell Peterson Date: November , 1997
Darrell Peterson, Chief Executive Officer,
and Director
By: /s/ Patrick T. Sullivan Date: November , 1997
Patrick T. Sullivan, President and Director
By: /s/ Garey Herter Date: November , 1997
Garey Herter, Secretary and Director
By: /s/ Bruce Livergood Date: November , 1997
Bruce Livergood, Director
<PAGE>
SAFETECH INDUSTRIES, INC.
FORM 10-K FOR THE YEAR ENDED MARCH 31, 1997
INDEX TO EXHIBITS
Exhibit No. Description Page
2.1 Master Agreement dated July 7, 1995 by and among
Bernstein/ Leibstone Associates, Inc., William
Leibstone Associates, Inc., and Archway Capital Inc.
was filed as Exhibit 1 to Form 8-K/A dated July 14,
1995 and is herein incorporated by reference.
2.2 Asset Exchange Agreement dated July 14, 1995 by and
among Bernstein/Leibstone Associates, Inc., William
Leibstone Associates, Inc., and William Leibstone was
filed as Exhibit 2 to Form 8-K/A dated July 14, 1995
and is herein incorporated by reference.
3.1 Restated Certificate of Incorporation of
Bernstein/Leibstone Associates, Inc. was filed as an
Exhibit to the Company's Registration Statement on
Form S-18 filed on April 4, 1989 and is herein
incorporated by reference.
3.2 Bylaws of Bernstein/Leibstone Associates, Inc. was
filed as an Exhibit to the Company's Registration
Statement on Form S-18 filed on April 4, 1989 and is
herein incorporated by reference.
3.3 Certificate of Amendment of the Certificate of
Incorporation of Bernstein/Leibstone Associates, Inc.
dated January 31, 1997.
4.1 Form of Common Stock Certificate of
Bernstein/Leibstone Associates, Inc. was filed as an
Exhibit to the Company's Registration Statement on
Form S-18 filed on April 4, 1989 and is herein
incorporated by reference.
4.2 Confidential Regulation S Offering Memorandum dated
March 17, 1997 for $750,000.00 Bernstein/Leibstone
Associates, Inc. 4% Convertible Subordinated
Debentures due 1998.
10.1 License Agreement between Clearshield, Inc. and
Clearshield Manufacturing Corp. dated March 10, 1995
was filed as an Exhibit to the Company's Form 10-K for
the year ended March 31, 1996 and is herein
incorporated by reference.
10.2 Lease for Riviera Beach, Florida manufacturing
facility dated April 1, 1994 was filed as an Exhibit
to the Company's Form 10-K for the year ended March
31, 1996 and is herein incorporated by reference.
10.3 Lease for Riviera Beach, Florida distribution facility
dated July 22, 1996 was filed as an Exhibit to the
Company's Form 10-K for the year ended March 31, 1996
and is herein incorporated by reference.
10.4 Agreement dated May 22, 1996 by and among the Company,
TTSB, Ltd., William Leibstone Associates, Inc.,and
William Leibstone was filed as an Exhibit to the
Company's Form 10-K for the year ended March 31, 1996
and is herein incorporated by reference.
11.1 Statement regarding computation of per share earnings
21.1 Subsidiaries of Registrant
27 Financial Data Schedule
<PAGE>
EXHIBIT 3.3
F970317000686
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
Under Section 805 of the Business Corporation Law
Filer:
Incorporating Services, Ltd.
15 East North Street
Dover, Delaware 19901
970317000712
<PAGE>
F970317000686
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION
OF
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
WE, THE UNDERSIGNED, Darrell L. Peterson and Garey Herter, being
respectively the Chairman of the Board of Directors and the Secretary of
BERNSTEIN/LEIBSTONE ASSOCIATES, INC. hereby certify:
1. The name of the corporation is Bernstein/Leibstone Associates, Inc.
2. The Certificate of Incorporation of said corporation was filed by the
Department of State on April 16, 1962, under the original name Bernstein -
Leibstone Associates, Inc.
3. The First Restated Certificate of Incorporation was filed by the
Department of State on February 1, 1989.
4. The Second Restated Certificate of Incorporation was filed by the
Department of State on March 31, 1989.
5. The Certificate of Incorporation of said corporation is hereby further
amended to effect a change of the corporate name as authorized by the Business
Corporation Law:
The First paragraph of the Certificate of Incorporation is hereby restated
as amended to read as set forth herein:
First: The name of the corporation is Safetech Industries, Inc.
6. This amendment of the Certificate of Incorporation of Bernstein/
Leibstone, Inc. was authorized by vote of the Board of Directors of the
corporation followed by the affirmative vote of the holders of a majority of
all outstanding shares entitled to vote thereon at a meeting of the
shareholders of said corporation duly called and held on the 18th day of
December, 1996, a quorum being present throughout.
In WITNESS WHEREOF, we have signed this Certificate of Amendment of the
Certificate of Incorporation, this 31st day of January, 1997, and affirm that
the statements made herein are true under the penalties of perjury.
/s/ Darrell Peterson /s/ Garey Herter
Darrell Peterson Garey Herter
Chairman of the Board Secretary
bernst.1
I hereby certify that the annexed copy has been compared with the original
document in the custody of the Secretary of State and that the same is a true
copy of said original.
Witness my hand and seal of the Department of State on MAR 19, 1997
SEAL
State of New York
Department of State
/s/ Unknown
Special Deputy Secretary of State
<PAGE>
EXHIBIT 4.2
No.
Offeree
CONFIDENTIAL REGULATION S OFFERING MEMORANDUM
$750,000.00
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
(a New York corporation)
4% Convertible Subordinated Debentures due 1998
This Confidential Regulation S Offering Memorandum (this
"Memorandum) is provided in connection with an offering (the
"Offering") of up to $750,000.00 aggregate principal amount of 4%
Convertible Subordinated Debentures due 1998 (the "Offering
Debentures") of Bernstein/Leibstone Associates, Inc. (the
"Company"). There is no minimum offering or escrow of investor
funds until the Offering Termination Date (as defined). The
Debentures (as defined) are being offered in an "offshore
transaction", as defined in Regulation S ("Regulation S")
promulgated pursuant to the United States Securities Act of 1933,
as amended (the "Securities Act"), only to a limited number of
prospective purchasers who are not "U.S. Persons", as defined in
Regulation S. The Debentures will mature March 31, 1998.
Interest on the Debentures will be paid at maturity. Each of the
Debentures is convertible, at the option of the holder thereof,
at any time after 40 days following the issuance of such
Debentures, and prior to maturity, into shares ("Conversion
Shares"), and, together with the Debentures, the "Securities) of
the Company's common stock $.01 par value ("Common Stock"), at a
conversion price of 75% of the five day average closing bid price
per share of the Common Stock as reported by the NASDAQ OTC
Bulletin Board or the principal exchange over which the Common
Stock is traded prior to conversion. On March 17, 1997, the
reported closing price of the Common Stock on the NASDAQ OTC
Bulletin Board (symbol
BLAI
) was $ .87 per share.
The Debentures will be unsecured obligations of the Company and
will be subordinated in right of payment to all existing and
future Debt (as defined) of the Company. See "Description of
Debentures Subordination".
This Offering shall terminate on April 30, 1997 (or at such
earlier date as subscriptions are received for all shares),
unless extended for a period of up to 90 days (the "Offering
Termination Date").
Prospective investors should carefully consider all matters
contained herein before making an investment decision.
THE DEBENTURES AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION OF
THE DEBENTURES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD IN THE UNITED
STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S OF THE
SECURITIES ACT) EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAW. ACCORDINGLY,
THE DEBENTURES AND THE COMMON STOCK ISSUABLE UPON THE CONVERSION OF
THE DEBENTURES OFFERED HEREBY ARE BEING OFFERED AND SOLD ONLY
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT. SEE
"NOTICE TO INVESTORS".
Price to Placement Fee( ) Proceeds to
Investors Company (2)
Per Unit
Debenture(3) $ 10,000.00 $ 1,000.00 $ 9,000.00
Total (4)(5) $750,000.00 $75,000.00 $675,000.00
(1) The Debentures are being offered on a "best efforts" basis
by Bernstein/Leibstone Associates, Inc. (the "Company").
There can be no assurance that any or all of the Debentures
being offered will be sold. In addition, the Company may
offer the Debentures through registered broker-dealers. If
the Debentures are sold through broker-dealers, they may
receive commissions of up to 10% on Debentures sold by them.
As of the date hereof, no broker-dealer has been retained by
the Company to offer the Debentures. The table assumes that
commissions will be paid with respect to all the Debentures
being offered hereby. Subscription offers made are subject
to acceptance by the Company.
(2) The proceeds to the Company set forth in the table have been
computed before deduction of expenses that will be incurred
in connection with this offering, including printing, legal,
accounting, filing and other fees estimated at $10,000.00.
The net proceeds to the Company, after deducting all
expenses in connection with the Offering, are estimated to
be $665,000.00, if all Debentures are sold through broker-
dealers. See "Use of Proceeds".
MARCH 17, 1997
THIS OFFERING IS BEING MADE IN RELIANCE UPON REGULATION S FOR AN
OFFER AND SALE OF SECURITIES OUTSIDE THE UNITED STATES OF AMERICA.
EACH PURCHASER OF DEBENTURES OFFERED HEREBY WILL BE REQUIRED TO
MAKE CERTAIN
ACKNOWLEDGEMENTS
, REPRESENTATIONS AND AGREEMENTS AS
SET FORTH UNDER "NOTICE TO INVESTORS." THE DEBENTURES HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OR ANY STATE SECURITIES
LAWS AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD IN THE
UNITED STATES OR TO U.S. PERSONS (AS DEFINED IN REGULATION S)
EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS.
THIS MEMORANDUM IS SUBMITTED ON A CONFIDENTIAL BASIS TO A LIMITED
NUMBER OF INVESTORS FOR INFORMATIONAL USE SOLELY IN CONNECTION WITH
THE CONSIDERATION OF THE PURCHASE OF THE DEBENTURES. ITS USE FOR
ANY OTHER PURPOSE IS NOT AUTHORIZED. IT MAY NOT BE COPIED OR
REPRODUCED IN WHOLE OR IN PART NOR MAY IT BE DISTRIBUTED OR ANY OF
ITS CONTENTS BE DISCLOSED TO ANYONE OTHER THAN THE PROSPECTIVE
INVESTORS TO WHOM IT IS SUBMITTED. THIS MEMORANDUM, AS WELL AS
OTHER MATERIALS THAT SUBSEQUENTLY MAY BE PROVIDED BY THE COMPANY,
SHALL BE PROMPTLY RETURNED TO THE COMPANY IF THE RECIPIENT DECIDES
NOT TO PROCEED WITH THE INVESTIGATION OF, OR PARTICIPATION IN, THE
OFFERING OR IF THE OFFERING IS TERMINATED.
IN MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES OFFERED
HEREBY, PROSPECTIVE INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND
RISKS INVOLVED. THE CONTENTS OF THIS MEMORANDUM ARE NOT TO BE
CONSTRUED AS LEGAL, BUSINESS OR TAX ADVICE. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT ITS OWN COUNSEL, ACCOUNTANT AND OTHER
ADVISORS AS TO LEGAL, TAX, BUSINESS, FINANCIAL AND RELATED ASPECTS
OF A PURCHASE OF THE SECURITIES.
EACH PROSPECTIVE PURCHASER OF THE SECURITIES MUST COMPLY WITH ALL
APPLICABLE LAWS AND REGULATIONS IN FORCE IN ANY JURISDICTION IN
WHICH IT PURCHASES, OFFERS OR SELLS THE SECURITIES OR POSSESSES OR
DISTRIBUTES THIS MEMORANDUM AND MUST OBTAIN ANY CONSENT, APPROVAL
OR PERMISSION REQUIRED BY IT FOR THE PURCHASE, OFFER OR SALE BY IT
OF THE SECURITIES UNDER THE LAWS AND REGULATIONS IN FORCE IN ANY
JURISDICTION TO WHICH IT IS SUBJECT OR IN WHICH IT MAKES SUCH
PURCHASES, OFFERS OR SALES, AND THE COMPANY SHALL NOT HAVE ANY
RESPONSIBILITY THEREFORE.
THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE
FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS
OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE
ANY REPRESENTATION NOT CONTAINED HEREIN. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS
MEMORANDUM SHALL NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE SECURITIES IN ANY JURISDICTION IN WHICH, OR
TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER.
NEITHER THE DELIVERY OF THIS MEMORANDUM NOR THE SALE MADE
HEREUNDER, SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS CORRECT AS TO ANY TIME
SUBSEQUENT TO THE DATE HEREOF.<PAGE>
SUMMARY OF THE OFFERING
An investment in the Debentures is speculative and involves a high
degree of risk. The Debentures should not be purchased by persons
who cannot afford the loss of their entire investment. The
following summary should be read in conjunction with, and is
qualified in its entirety by the more detailed information
contained in this Memorandum.
The Offering - Summary of Terms of the Debentures
Securities Offered $750,000.00 principal amount of 4%
Convertible Subordinated Debentures due
March 31, 1998.
Interest Payments Each Debenture will bear interest at a
rate of 4% per annum from the date such
Debenture is issued, payable on March
31, 1998.
Conversion Each of the Debentures is convertible at the
option of the holder at any time after 40
days following the issuance of such Debenture
and prior to maturity into shares of Common
Stock at a conversion price of 75% of the
five day average closing bid price per share
of the Common Stock as reported by the NASDAQ
OTC Bulletin Board or the principal exchange
over which the Common Stock is traded prior
to conversion. See "Description of
Debentures - Conversion".
Ranking The Debentures will be unsecured
obligations of the Company and will be
subordinated in right of payment to all
existing and future Senior Debt (as
defined) of the Company. See
"Description of Debentures".
Transfer Restrictions The Debentures offered hereby have not
been registered under the Securities
Act, and such Debentures and the Common
Stock issuable upon conversion thereof
are subject to certain restrictions on
transfer. See "Notice to Investors".
Use of Proceeds The net proceeds will be used for working
capital, and for general corporate purposes.
See "Use of Proceeds".
Termination of
the Offering The Offering of Debentures hereby will
terminate upon the earlier of the
Company's acceptance of subscriptions
for all $750,000.00 aggregate principal
amount of 4% Convertible Subordinated
Debentures due 1997 or on April 30,
1997, unless extended for up to 90
additional days by the Company or
terminated earlier, at any time. See
"Subscription and Sale" and "Notice to
Investors" below.<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following
factors, among others, as well as the factors discussed under
"Business", prior to making any investment decision with respect to
the Debentures.
RISK THE ENTIRE OFFERING MAY NOT BE SOLD: Because subscriptions
to this Offering may be accepted by the Company from time to time,
it is possible that subscriptions will be accepted for less than
the ful offering amount. To the extent that subscriptions are
accepted totaling less than $750,000 are accepted, the Company may
require additional capital.
ABILITY TO REPAY INDEBTEDNESS. The Company has made no provision
for a sinking fund. The ability of the Company to repay the
principal amount plus accrued interest of the Debentures will be
dependent on profitable operations of the Company in the future,
and possibly, on the ability of the Company to obtain additional
financing.
NO DIVIDEND: The Company has not paid any dividends on its common
stock and does not anticipate the payment of dividends on the
Common Stock in the foreseeable future. Accordingly, any investor
who anticipates the need for dividends from the investment should
not purchase the Debentures.
LACK OF SEC REVIEW: Because the Offering has not been registered
under the Securities Act, this Memorandum has not been reviewed by
the SEC. Review by the SEC may have resulted in additional
disclosure by the Company.
TRANSFER RESTRICTIONS ON DEBENTURES; ABSENCE OF PUBLIC MARKET FOR
DEBENTURES: The Debentures and the Conversion Shares have not been
registered under the Securities Act and are being
offred
and sold
outside the United States to Non-U.S. persons in reliance upon
Regulation S. There is no public market for the Debentures and the
Company does not intend to list the Debentures on any national
securities exchange or to seek the admission for trading in the
Nasdaq
system. Thus, potential investors should be aware that the
transfer or resale of the Debentures is limited by any and all
applicable securities laws. If Debenture holders wish to transfer
such Debentures in the future, they may only be transferred (
i
)in
a transaction complying with the provision of Rule 904 under the
Securities Act, (ii) pursuant to an exemption from registration
under the Securities Act, or (iii)pursuant to an effective
registration statement.
VOLATILITY OF STOCK PRICE: The Company s business can be very
cyclical in nature. As a result the Company s common stock may
experience substantial price volatility.
CONTROL BY CURRENT SHAREHOLDERS: Assuming the conversion of the
Debentures into COMMON SHARES, the current officers and directors
of the Company will continue to maintain control over the
operations of the Company.
COMPETITION: The Company faces intense competition in the
hurricane shutter industry. Although the Company clear hurricane
shutter technology is patented, the Company faces intense
competition from other companies offering similar products. Many
of these companies are better capitalized and have the ability to
spend significant amounts for advertising their products.
NEW PRODUCT DEVELOPMENT: The Company is attempting to broaden its
product base and is currently testing a plastic wood product
substitute There can be no assurances that the Company will be
successful in developing this product or that the product will be
accepted in the market.
ADDITIONAL RISKS: The foregoing list of risk factors does not
purport to be a complete discussion of the risks involved in this
Offering. In that regard, each prospective investor is urged to
review all corporate documents and all desired questions of the
officers and directors of the Company before determining whether to
purchase any of the Debentures.
<PAGE>
BUSINESS
Historically, the Company operated two divisions; a packaging
division that designed and marketed a complete line of flexible and
rigid packaging, and a Textile division that supplied blind and
handicapped workshops with the textiles required to fulfill state
and federal government contracts.
On July 7, 1995, Bernstein/Leibstone Associates, Inc.(the
"Company"), Archway Capital, Inc. ("Archway") and William Leibstone
Associates, Inc. ("
WLAI
"), an entity owned by the former majority
stockholder of the Company, entered into an agreement to exchange
shares of the Company's common stock for shares of Archway's common
stock on a one-for-one basis. On July 14, 1995, all outstanding
shares of Archway were exchanged by the shareholders for restricted
shares issued by the Company. The agreements further provided for
the sale of the former packaging and textile divisions to
WLAI
in
exchange for a note in the amount of $941,348 which is secured by
1,100,000 shares of stock in the Company owned by William
Leibstone. As a result of these transactions, the Company's
continuing operations are those of Archway and its subsidiaries.
Archway was formed in September 1994 as a holding company for the
purpose of investing in other businesses and providing management
expertise in such subsidiaries with the intention of developing new
products, ideas and techniques in areas of business clearly
identified as unique or niche markets.
In October 1994, International Fire Safety Products, Inc. was
organized as a wholly owned subsidiary for the purpose of
manufacturing retardant technology products in a variety of forms.
This subsidiary had no significant operations for the years ended
March 31, 1996 and 1995.
Effective April 1, 1995, Archway acquired a majority interest in
Clearshield Manufacturing Corp. ("Clearshield"), a Florida
corporation engaged in the manufacturing, sale and distribution of
a patented clear hurricane shutter system, utilizing a
three-for-one share exchange. Archway issued 9,071,700 shares to
the shareholders of
Clearshield
in exchange for 3,023,900 shares of
Clearshield
.
Clearshield
's wholly owned subsidiaries,
Clearshield
of Palm Beach County, Inc. and
Palmco
Builders Inc. are engaged in
the retail sale and installation of hurricane protection products,
respectively. In October 1995, PC International Trading Corp.
("PC"), a wholly owned subsidiary of Archway, was organized for the
purpose of distributing recycled plastic and hardware supplies.
PC's primary customer is
Clearshield
.
Substantially all of the Company's operations are in only one
industry segment - the manufacture, distribution and installation
of hurricane protection systems. The Company had no significant
export sales. As such, no separate industry segment information is
presented.
PRODUCTS
The Company's primary operating group is
Clearshield
and its
subsidiaries which are 57% owned by the Company.
Clearshield
was
incorporated in the State of Florida in March 1994.
Clearshield
's
principal product is a transparent storm shutter assembly that is
lightweight and of relatively simple construction, easy to install
and remove, and capable of sufficiently resisting direct impacts
from
windborne
debris during a storm. The storm shutter assembly
is used to protect glass windows and doors in homes, office
buildings and other walled structures from the destructive forces
associated with storm systems such as hurricanes. The system
includes corrugated panels of a shatter resistant, transparent and
opaque
polycarbonate
material that is secured to a walled structure
using various mounting hardware and configurations.
Living in coastal areas of the south, southwest and southeast
portions of the United States means living with hurricanes, or the
threat of hurricanes. Building codes are constantly being reviewed
and upgraded. Many homes damaged by hurricanes in the past could
have minimized the damage had they been properly protected. Four
weak areas in homes cause most of the damage: windows, doors,
garage doors and wood gable ends. Once one of these entry points
fails, the entire house is at the mercy of the hurricane because no
house is designed to sustain wind inside. One of the main methods
of protecting a home is hurricane shutters.
There are five primary types of commercial hurricane shutters;
accordion shutters, rolling shutters, standard awnings,
bahama
shutters and storm panels.
Clearshield
panels fall into the last
category which, until the development of the
Clearshield
clear
polycarbonate
panel, consisted mainly of panels made from aluminum
or steel. There are many different styles and strengths of
commercial storm panels available. What makes the
Clearshield
panels more desirable than aluminum or steel include; (1) they are
much lighter making them easier to install; (2) they are made of
clear see-through material which allows natural light to enter the
home alleviating the claustrophobic, tunnel-like feeling during
loss of electrical power or during an actual storm; (3) they
improve the home's security as the clear panels allow police, fire
and rescue personnel to easily see into a home to ensure that
occupants are safe; and (4) they will not deteriorate, corrode or
rust.
Clearshield
manufactures the product under the authority of a
License Agreement with
Clearshield
, Inc., an affiliate through
common shareholders.
Clearshield
, Inc. is the owner of the
Clearshield
Trademark and United States Patent No. 5,457,921
covering the storm shutter assembly. The License Agreement
provides for a fee of $350,000, a royalty on future transparent
panel sales and entitles
Clearshield
to use the patent and
trademark throughout the State of Florida for an initial term of 20
years.
The manufacturing process is accomplished through the profile
extrusion of pelletized polycarbonate material into the form for
storm panels/hurricane panels. Extrusion technology has been
utilized for other thermoplastic materials, but it is uncommon for
the products to be made in a profile of this size. Typically,
extrusions manufactured of polycarbonate are of dimensions of six
inches or less. Clearshield panels are thirteen inches wide, which
requires the use of state-of-the-art technology and methods.
The clear panel is manufactured from clear
polycarbonate which isreadily available from a number of suppliers.
Clearshield has also
developed the technology to manufacture a colored panel using
recycled polycarbonate in a ground or pelletized form. The
regrindis also readily available from a number of suppliers.
SALES and MARKETS
Clearshield
sells its products through a network of authorized
dealers who provide full sales and installation services. There
were approximately 30 active dealers as of March 31, 1996.
Clearshield of Palm Beach County, Inc., a wholly owned subsidiary
of Clearshield, is an authorized dealer in South Florida, selling
directly to builders and individual homeowners through its own
sales force. Installation services are performed by
Palmco Builders Inc., a wholly owned subsidiary of Clearshield of Palm
Beach County, Inc. and state licensed general contractor.
To reach the do-it-yourself portion of the hurricane protection market,
Clearshield's products are sold through The Home Depot, a
national retail home improvement chain. Sales to The Home Depot
accounted for 30% of the Company's consolidated net sales for the
year ended March 31, 1996.
Clearshield's competition in the hurricane protection industry
comes from alternate products offered by its competitors.
Competing products range from plywood used by do-it-
yourselfers to other forms of hurricane shutters including accordion shutters
and metal panels. There are no other clear panel systems on the market
giving Clearshield a unique niche in the industry.
The hurricane protection market is a seasonal business following
the hurricane season which runs from June 1 to November 30.
Customers begin to build their inventory as the season approaches
and reduce their levels as the season winds down. The Company
follows this same pattern in managing its inventories.
BACKLOG
At March 31, 1996, the Company had open orders of approximately
$345,000 as compared to $40,000 as of March 31, 1995. All of these
orders were filled during the normal course of operations. The
large backlog reflects the seasonality of sales and has declined as
the end of the hurricane season approached.
EMPLOYEES
At March 31, 1996, the Company had a work force of approximately
60 people, all of whom are leased by the Company from an employee
leasing company. None of the Company's work force is represented
by a collective bargaining unit and the Company considers its
relations with its work force to be good.
PROPERTIES
The Company leases a 19,000 square foot manufacturing facility in
Riviera Beach, Florida at a current monthly rent of $6,784 and a
3,400 square foot facility in West Palm Beach, Florida that serves
as its corporate offices at a current monthly rent of $3,636. In
July 1996, the Company entered a lease for an additional facility
at a current monthly rent of $8,944 with 27,000
square feet of warehouse space and 8,000 square feet of office
space located in Riviera Beach, Florida to serve as a distribution
center and corporate offices. The corporate offices were relocated
in September 1996. With the new distribution center and offices,
the Company believes its facilities are adequate to satisfy its
requirements for the foreseeable future.
LEGAL PROCEEDINGS
The Company's Clearshield subsidiary is a party in a lawsuit
entitled Clear Investments, Inc. vs. Clearshield Manufacturing
Corp., Case No. CL 94-5898 AF. now pending in the Circuit Court of
the Fifteenth Judicial Circuit in and for Palm Beach County,
Florida, where a former director and attorney for Clearshield,
through his company, Clear Investments, Inc. has filed suit to
receive 600,000 shares of stock of Clearshield that were originally
allocated to him in May 1994. Subsequent to that time, the former
director and attorney resigned from Clearshield as director and
attorney. The Company has retained counsel and believes they have
a meritorious defense to the allegations contained in the
complaint.
Notwithstanding the above, in September 1996, settlement in
principle was reached in this matter, subject to documentation and
execution of a settlement agreement. A motion was filed to abate
the case and the court has entered an order closing the file for
administrative purposes, while retaining jurisdiction for the
purpose of enforcing the settlement.
MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The common stock of the Company has been traded over-the-counter
since May 15, 1989 and is quoted electronically through the
National Association of Securities Dealers' Electronic Bulletin
Board under the symbol BLAI. The high, low and closing prices per
share of the common stock for the years ended March 31, 1997 and
1996 appear in the following table:
Year ended March 31, 1997
Quarter High Low Close
First $2.69 $1.37 $2.50
Second 3.19 1.25 1.50
Third 1.69 .68 .93
Year ended March 31, 1996
Quarter High Low Close
First $1.12 $ .50 $ .50
Second 2.75 .44 2.19
Third 2.25 .94 1.09
Fourth 2.69 1.00 1.91
As of March 31, 1996, there were approximately 245 shareholders
of record of the Company's common stock, without taking into
account any shares held in street name by nominees.
SELECTED FINANCIAL DATA
Fiscal Years Ended March 31
(in thousands except per share data)
1996 1995
Income Statement Data:
Net Sales $3,233 $ 4
Net (Loss) (568) (129)
Net (Loss) per Share $ (.03) (.03)
Balance Sheet Data:
Total Assets $3,239 $ 208
Long-Term Debt - -
Shareholders' Equity 813 192
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The composition of the Company changed dynamically between 1995
and 1996 with the acquisition of a majority interest in Clearshield
and the business combination between Archway and the Company. As
such, period to period comparisons of the Company's financial
results are not necessarily meaningful. This discussion should be
read in conjunction with the Company's Consolidated Financial
Statements and Notes thereto.]
LIQUIDITY AND CAPITAL RESOURCES
As a result of the above discussed acquisitions, the Company's
working capital increased from $121,370 to $588,529. The Company
owns all of its manufacturing equipment, leasing only its
facilities. The Company's only debt is an unsecured note payable
to
Clearshield
, Inc., an affiliate through common stockholders,
related to the License Agreement to manufacture the
Clearshield
product.
The Company anticipates it will continue to be in a tight
liquidity position for the near future as it invests its resources
in expanding its manufacturing capacity and supporting its
increasing working capital needs. Because of the strong positive
acceptance of the Company's product by the marketplace, the Company
was unable to meet the demand during the past hurricane season due
to production capacity limits. Subsequent to year end, the Company
invested in additional manufacturing equipment to increase its
capacity for the future. All of this additional equipment was
purchased outright with internal resources.
RESULTS OF OPERATIONS
As indicated above, a direct comparison of the results of
operations for 1996 and 1995 may not be meaningful due to the
acquisitions discussed above which are included only in the 1996
results of operations in accordance with generally accepted
accounting principles. These acquisitions resulted in a 740 fold
increase in sales from $4,371 to $3,233,096 and a 10 fold increase
in selling, general and administrative expenses from $139,443 to
$1,534,471. The Company anticipates continued growth in sales as
it expands its dealer base and the geographic distribution of its
products. Sales to date have been predominately in the South
Florida area. Additional markets include the islands of the
Caribbean, Mexico and the eastern and southern coastal areas of the
United States. All of these areas are susceptible to hurricanes
and therefore have a need for the Company's products.
During 1996, the Company completed the development of a colored
hurricane panel which is more cost competitive with alternate
products than the clear panel sold by the Company. The Company
incurred sizeable costs in developing the point of sale displays
and promotional materials needed to sell its products through
retail home improvement stores. These development costs will not
be repeated as sales expand. Additionally, with an increase in
sales and production capacity necessary to meet that demand, the
Company expects a reduction in its operating costs as a percent of
sales as it further leverages its resources; human, physical and
mechanical.
Interest income primarily is from interest on the note received
in the sale of the Company's former packaging and textile
divisions. This amount will decrease in the future as a
substantial portion of the note was prepaid subsequent to year end.<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering assuming full
subscription of $750,000.00 of the Offering Debentures, after
deducting estimated commission and offering expenses payable to the
Company, are approximately $665,000.00, all of which are intended
to be used for working capital and general corporate purposes.
<PAGE>
DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as
follows:
Director
Name Age Position Since
Darrell L. Peterson 37 Chief Executive Officer,
Director 1995
Patrick T. Sullivan 40 President, Director 1995
John D.
Herter
46 Treasurer, Director 1995
Garey
Herter
53 Secretary, Director 1995
Bruce
Livergood
54 Director 1995
Darrell L. Peterson, was Vice President and Chief Financial
Officer of the
Marbledge
Group, Inc. and its subsidiaries from 1993
to 1994 and President of one of it's subsidiaries from 1991 to 1994
before joining the Company.
Marbledge
and its subsidiaries were
involved in the manufacture, sales and distribution of natural
stone products. Mr. Peterson has also worked in the real estate
development business and securities business. Mr. Peterson has a
B.S. degree in Accounting from Long Island University and currently
serves on the Board of Directors of
Clearshield
, Inc. and H & H
Ventures, Inc., a business consulting firm.
Patrick T. Sullivan, joined the Company as President of
Clearshield
Manufacturing Corp. From 1987 to 1994, Mr. Sullivan
was a First Vice President at both Prudential Securities and Smith
Barney and is a Registered Investment Advisor. Mr. Sullivan was
President and owner of Sullivan Construction, a builder of single
and multi-family housing from 1982 to 1987. Mr. Sullivan is a
graduate of Emery Riddle University where he earned a B.S. degree
in Management.
John D. Herter was the initial incorporator and President of
Archway Capital Inc. During the first half of 1994, Mr. Herter was
the President and Chief Executive Officer for Lamplighter
Industries Inc., a company engaged in the manufacture and
distribution of electroluminescent lighting panels. From 1991 to 1994,
Mr.Herter was Director of Operations at Brooklyn BowInternational, Inc.,
a manufacturer of soft goods for intimate apparel, children's
wear and specialty packaging. Mr. Herter has a B.A. degree from the
University of Southern California and is a Vice President of H & H Ventures,
Inc. a business consulting firm.
Garey Herter, currently serves on the Board of Directors of Clearshield
, Inc., PRIDE Inc., a not-for-profit probation services
company and H & H Ventures, Inc., a business consulting firm of
which he is also the President. Mr. Herter was Chief
Administrative Assistant to the Public Defender, Fifteenth Judicial
Circuit, for the State of Florida from 1984 to 1993. Prior to that time, Mr.
Herter had a career in the United States Navy from which
he retired as a Chief Petty Officer in 1984.
Bruce Livergood, has been the owner of Design Electrical
Construction, Inc., an electrical design and construction company
with a wide range of expertise in all phases of the electrical
industry since 1977. He is an active member of Associated Builders
and Contractors of Palm Beach County, Electrical Contractors of
Florida and the International Association of Electrical Inspectors.
During the 1980's, Mr. Livergood was also the owner of Baker Knight
Industries, a steel processing operation, and Adolescent Recovery
Centers, a 28-bed accredited hospital treatment facility.
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect
to the annual compensation of the Company's Chief Executive Officer
for the year ended March 31, 1996. Payments were made either
directly to the officer or to a corporation in which he is the sole
shareholder. No other executive officer received compensation
exceeding $100,000.
Annual Compensation
Name and Other
Principal Position Salary Compensation
Darrell L. Peterson,
Chief Executive Officer $67,600 $34,200 ( )
( ) Other compensation includes a bonus for past uncompensated
services and Company provided group insurance.
The directors of the Company do not receive compensation for
serving in that capacity. They are reimbursed for certain travel
related and other out-of-pocket expenses incurred to attend Board
of Directors and stockholder meetings.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth information as of June 30, 1996
with respect to the beneficial ownership of shares of common stock
by (i) each person known by the Company to be the owner of more
than five percent of the outstanding shares of common stock, (ii)
the Company's Chief Executive Officer, (iii) each director of the
Company, and (iv) all executive officers and directors of the
Company as a group.
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
Darrell L. Peterson
Chief Executive Officer,
Director
2001A Australian Ave.
Riviera Beach, FL 33404 3,480,000 (1) 20.01%
Patrick T. Sullivan
President, Director
2001A Australian Ave.
Riviera Beach, FL 33404 - - %
John D. Herter
Treasurer, Director
2001A Australian Ave.
Riviera Beach, FL 33404 144,000 .83%
Garey Herter
Secretary, Director
2001A Australian Ave.
Riviera Beach, FL 33404 3,540,000 (1) 20.35%
Bruce Livergood
Director
1002 S.E. First Street
Boynton Beach, FL 33412 806,200 4.64%
Gregory Kostrzecha
2001A Australian Ave.
Riviera Beach, FL 33404 1,260,000 7.24%
Alan Singler
407 Elm Street
Terrace Park, OH 45174 1,153,050 6.63%
All Executive Officers and
Directors as a Group
(Five Persons) 7,370,200 42.38%
(1) Includes 600,000 shares owned by a company controlled by Mr.
Peterson and Mr. Herter.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has advanced funds to its Chief Executive Officer and
a corporation in which he is the sole shareholder. Total advances
as of March 31, 1996 were $140,398.
The Company's Clearshield subsidiary has entered a License
Agreement with Clearshield, Inc., an affiliate through common
shareholders. The cost of the License Agreement was $350,000 plus
a royalty on certain sales. Royalty expense for the year ended
March 31, 1996 was approximately $88,600.
DESCRIPTION OF THE CAPITAL STOCK
The total number of shares that the Company is authorized to issue
is 20,000,000 shares of common stock at a par value of $.01 per
share of which 17,391,700 are issued and outstanding. The holders
of Common Stock are entitled to one vote for each share held of
record on all matters on which the holders of Common Stock are
entitled to vote.
TAX CONSIDERATIONS
The tax consequences for foreign investors are varied depending
upon the jurisdiction of the purchasers. As a result, each
prospective purchaser should consult his or her tax advisor as to
the particular tax consequences of purchasing, holding, converting
and disposing of the debentures, including the applicability and
effect of any federal, state, local or foreign tax laws.
SUBSCRIPTION AND SALE
Each prospective investor desiring to purchase Debentures should
complete and execute the Subscription Agreement delivered with this
Memorandum. Investors are required to fill in the aggregate
principal amount of the Debentures to be purchased at the end of
the Subscription Agreement. The executed copies of the
Subscription Agreement together with the proper payment should be
returned to the Company. The Company reserves the right in its
sole discretion to reject any subscriptions in whole or in part.
If the Company rejects a subscription, all funds paid by that
subscriber will be returned without interest or deduction.<PAGE>
NOTICE TO INVESTORS
The Debentures and the Conversion Shares have not been registered
under the Securities Act and may not be offered or sold in the
United States or to , of for the account or benefit of, U.S.
persons except in accordance with applicable exemption from
registration requirements thereof. Accordingly, the Debentures are
only being offered and sold outside of the United States to Non
U.S. persons as defined in, and in reliance upon, Regulation S.
Regulation S defines Non U.S. person as a person who is not: (
i
)
a natural person resident in the United States, (ii) a partnership
or corporation organized or incorporated under the laws of the
Untied States, (iii) an estate of which any executor or
administrator of the estate who is not a U.S. person has sole or
shared investment discretion with respect to the assets in the
estate and the estate is governed by foreign law, (iv) an agency or
branch of a foreign entity located in the United States(v) a =non-
discretionary account held by a dealer or other fiduciary for the
benefit or account of a U.S. person, or (v) a partnership or
corporation organized or existing under the laws of any foreign
jurisdiction and formed by a U.S. person principally for the
purpose of investing in securities not registered under the Act
unless it is organized or incorporated, and owned by accredited
investors (as defined in Rule 501(a) under the Securities Act, who
are not natural persons , estates or trusts.
Each investor will be required to represent that the Debentures
are being acquired for such investor s own account, that such
investor acknowledges that the Debentures and the Common Stock
issuable upon conversion thereof, have not been registered under
the Act and may not be sold except as permitted by applicable
statute, and that the investor acknowledges that to insure
compliance with applicable securities laws a restrictive legend may
be placed upon the Debentures.
ADDITIONAL INFORMATION
The Company hereby offers to each prospective investor or their
representative the opportunity to ask questions of officer of the
Company concerning the terms and conditions of this Offering and
the affairs of the Company and to obtain access to all documents,
records, books and information desired in order to n=make an
informed investment decision regarding the Debentures offered
hereby or to verify or supplement the information in this
Memorandum.
THE DEBENTURES AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THE DEBENTURES (COLLECTIVELY THE "SECURITIES") HAVE
NOT BEEN REGISTERED WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1993, AS AMENDED (THE
"ACT"), OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY STATE
SECURITIES LAW. THE SECURITIES ARE BEING OFFERED PURSUANT TO THE
REGULATION S (REGULATION "S") PROMULGATED UNDER THE ACT. THE
SECURITIES MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED WITHIN
THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S.
PERSONS (AS SUCH TERM IS DEFINED IN REGULATION S) UNLESS THE
SECURITIES ARE REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS, OR SUCH OFFERS, SALES AND TRANSFERS ARE MADE
PURSUANT TO AN AVAILABLE EXEMPTION OR SAFE HARBOR FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS. TERMS USED ABOVE HAVE THE
MEANING GIVEN TO THEM BY REGULATION S.
<PAGE>
BERNSTEIN/LEIBSTONE ASSOCIATES, INC. ("Company")
(a New York corporation)
4% CONVERTIBLE SUBORDINATED DEBENTURE DUE MARCH 31, 1998
$ March , 1997
FOR VALUE RECEIVED, the undersigned Bernstein/Leibstone
Associates, Inc., a corporation duly incorporated and existing
under the laws of New York (the "Company"), hereby unconditionally
promises to pay ("Holder"), the principal sum of
United States dollars (U.S. $ ) on March 31,
1998 (the "Maturity Date") upon presentation and surrender hereof
and to pay any interest on any principal outstanding hereunder,
commencing on the date of execution, at the rate of 4% per annum
until the principal hereof is paid. This debenture ("Debenture")
is one of a series of 4% Convertible Subordinated Debentures dated
the date hereof in the original aggregate principal amount of U.S.
$[$750,000.00](the "Debentures"). All Debentures of this issue
rank equally and ratable without priority over one another,
notwithstanding the date of issuance thereof.
Interest shall be calculated on the basis of a 360 day year
comprised of twelve 30-day months. Interest shall continue to
accrue and shall not be due and payable until the maturity of this
obligation.
Any payments made under this obligation shall first be applied to
outstanding accrued interest and the remainder to principal. All
payments of principal of this Debenture shall reduce the unpaid
principal balance due hereunder but shall not extinguish this
Debenture until the principal balance and all accrued interest
hereon has been paid in full.
Holder shall have the right, at its option, at any time 40 days
after the date hereof and prior to the close of business March 31,
1998, to convert all, but not less than all, of such Debenture at
the outstanding principal amount thereof, into fully paid and non-
assessable shares (the "Conversion Shares") of the common stock,
$.01 value ("Common Stock"), of the Company at a conversion price
equal to 75% of the five day average closing bid price per share of
the Common Stock as reported by the NASDAQ Over-The-Counter
Bulletin Board (or the principal exchange over which the Common
Stock is traded.
Before Holder shall be entitled to convert the principal into
shares of Common Stock, Holder shall surrender this Debenture to
the Company, and shall give written notice in substantially the
form attached hereto to the Company, at
2001A
Australian Avenue,
Riviera Beach, Florida 33404, that Holder elects to convert the
principal into shares of Common Stock.
The Company will, as soon as practicable after such surrender of
this Debenture accompanied by the written notice and the statement
above prescribed, issue and deliver to Holder or to its nominee or
nominees, certificates for the number of shares of Common Stock
which Holder shall request and to which Holder shall be entitled
hereunder and payment in cash or by Company check of any unpaid but
accrued interest through the date of the surrender of the
Debenture. Subject to the following provisions of this paragraph,
such conversion shall be deemed to have been made as of the date of
such surrender of this Debenture; and Holder shall be treated for
all purposes as the record holder or holders of such Common Stock
on such date. The Company shall not be required to convert, and no
surrender of this Debenture shall be effective for that purpose,
while the stock transfer books of the Company are closed for any
purpose, but the surrender of this Debenture for conversion during
any period while such books are closed shall become effective for
conversion immediately upon the reopening of such books, as if the
conversion had been made on the date such shares were surrendered,
and at the conversion rate set forth above.
In lieu of issuing any fraction of a share upon the conversion of
this Debenture, the Company shall pay to the Holder hereof, for any
fraction of a share otherwise issuable upon such conversion, cash
equal to the same fraction of the then closing bid price of the
Common Stock as reported by the NASDAQ OTC Bulletin Board (or the
principal exchange over which the Common Stock is traded) on the
trading day preceding such conversion.
In case of any reclassification of the Common Stock, any
consolidation of the Company with, or merger of the Company into,
any entity, any merger of any entity into the Company (other than
a merger which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock),
any sales or transfer of all or substantially all of the assets of
the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or other property,
then provisions shall be made such that the Holder of this
Debenture shall have the right thereafter, during the period that
this Debenture shall be convertible, to convert this Debenture only
into the kind and amount of securities, cash and other property
receivable upon such reclassification, consolidation, merger, sale,
transfer or share exchange.
The Company shall at all times reserve and keep available out of
its authorized and unissued Common Stock, solely for the purpose of
effecting the conversion of principal hereunder, such number of
shares as shall from time to time be sufficient to effect the
conversion of all principal hereunder, from time to time
outstanding. The Company shall from time to time increase the
authorized amount of its Common Stock if at any time the number of
shares of Common Stock remaining unissued shall not be sufficient
to permit the conversion of all of the then outstanding principal
Common Stock.
The Company will pay any and all issue and other taxes that may
be payable in respect of any issuance or delivery of shares of
Common Stock on conversion of this Debenture pursuant hereto.
Payment of principal and interest with respect to the Debentures
is subordinated, in right of payment to all existing and future
Senior Debt. Senior Debt of the Company as used herein means any
(
i
) Existing Indebtedness (as defined below); (ii) Institutional
Debt (as defined below); and (iii) Purchase Money Obligations (as
defined below). "Existing Indebtedness" is all indebtedness of the
Company, other than the Debentures, outstanding on the first date
of issuance of any Debenture, whether secured or unsecured, and any
deferrals, renewals or extensions of such indebtedness or any
premium, bonds, notes evidencing such indebtedness. "Institutional
Debt" is the principal of and premium, if any, and interest on, and
any other payment due pursuant to the terms of, instruments
creating or evidencing indebtedness hereafter created, incurred,
assumed or guaranteed by the Company as of the date hereof or
indebtedness of the Company outstanding or guaranteed by the
Company as of the date hereof or indebtedness hereafter created,
incurred thereof, which is payable to banks or other traditional
long-term institutional lenders such as insurance companies and
pension funds. "Indebtedness", as applied to any entity, means any
indebtedness, contingent or otherwise in respect to borrowed money
(whether or not the recourse of the lender is to the whole of the
assets of such entity or only to a portion thereof), as evidenced
by bonds, notes, debentures or similar instruments, letters or
credit, or otherwise, or representing the deferred and unpaid
balance of the purchase price of any property or service or
interest thereon, of and to the extent such indebtedness would
appear as a liability upon a balance sheet of such entity prepared
on a consolidated basis in accordance with generally accepted
accounting principles. "Purchase Money Obligations" are
obligations which would enable the Company, or any parent or
subsidiary now existing or hereafter created, to finance the
acquisition of stock or assets, and include indebtedness to third
parties for the purpose of financing any such acquisition.
The Debentures may be declared due prior to the Maturity Date in
accordance with the terms of the following sentence, and voluntary
prepayments may be made without premium or penalty. Upon the (
i
)
failure of the Company to pay any interest or principal payment
when due, (ii) the default in the due observance or performance of
any covenant, condition or agreement on the part of the Company to
be observed or performed pursuant to the terms of the Debentures,
(iii) the entry, by a court having jurisdiction in the premises, of
a decree or order for relief in respect of the Company in a
voluntary or involuntary case or proceeding under any applicable
bankruptcy, insolvency, reorganization or other similar law now or
hereafter in effect, or the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
the Company or the order to wind-up or liquidate the affairs of the
Company and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days, and the passage of 30
days following the giving of notice by any Holder to the Company of
any occurrence of the events set forth in clauses (i) or (ii)
above, without a cure thereof by the Company shall, upon the
written notice of the Holders of greater than 50% of the
outstanding Debentures, mature the Debentures, and the principal
then remaining unpaid with interest then accrued shall at once
become due and payable, Failure to accelerate making or to exercise
any right or remedy in the case of any one or more such failures
shall not preclude the acceleration of maturity or the exercise of
any right or remedy in the case of one or more subsequent such
failures.
During the period of any default, the amounts owed under the
Debentures, including the principal outstanding and all interest
accrued, shall earn interest at the rate of 12% per annum.
No shareholder, director, officer or employee, as such, past,
present or future, of the Company or any successor corporation
shall have any personal liability in respect of the obligations of
the Company under the Debenture by reason of his, her or its status
as such shareholder, director, officer or employee. Each Holder of
a Debenture by accepting Debenture waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the Debentures.
The Company and all parties now or hereafter liable for the
payment hereof, whether as endorser, guarantor, surety or
otherwise, severally waive demand, presentment for payment, notice
of dishonor, protest and notice of protest, diligence in collecting
or bringing suit against any party hereto, and all other notices
(except as otherwise specifically set forth herein) and agree to
all extensions, renewals, indulgences, releases or changes which
from time to time may be granted by the Holder hereof and to all
partial payments hereon, with or without notice, before or after
maturity
No assignment or transfer of this Debenture shall be effective
until and unless such transfer has been registered on the books of
the Company; furthermore, each such request for transfer shall be
in the form of the attached Assignment of Debenture and shall be
accompanied by such legal opinions (regarding the matters addressed
in the introductory legend to this Debenture) and certificates of
Holder and the transferee, as the Company may reasonably request.
The Holder shall not, by virtue hereof, be entitled to any rights
of a shareholder in the Company, either at law or in equity except
as otherwise provided herein, and the rights of the Holder are
limited to those expressed in this Debenture.
If the Holder of this Debenture shall institute any action to
enforce the collection of any amount of principal of and/or
interest of this Debenture, there shall be immediately due and
payable from the Company, in the event the Holder of this Debenture
prevails in such action, in addition to the then unpaid sum of this
Debenture, all reasonable costs and expenses incurred by the holder
in connection therewith, including without limitation, reasonable
attorneys fees and disbursements.
The terms of the Debentures may be amended with the consent of the
holders of a majority in principal amount of the Debentures then
outstanding, any existing default may be waived with the consent of
the Holders of a majority in principal amount of the Debentures
then outstanding. Without the consent of any Holder, the Debenture
may be amended to cure any ambiguity, defect or inconsistency, or
to make any change that does not adversely effect the rights of any
Holder.
All agreements between the Company and the Holder hereof, whether
now or existing or hereafter arising and whether written or oral,
are hereby limited so that in no contingency whether by reason of
demand for payment or acceleration of the maturity hereof or
otherwise, shall the interest contracted for, charged or received
by the Holder hereof exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to the Holder hereof in excess of the
maximum lawful amount, the interest payable to the Holder shall be
reduced to the maximum amount permitted under applicable law; and
if from any circumstance the Holder hereof shall ever receive
anything of value deemed interest by applicable law in excess of
the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal hereof
such excess shall be refunded to the Company. All interest paid or
agreed to be paid to the Holder hereof shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full period until payment in full of the
principal (including the period of any renewal or extension hereof)
so that the interest hereon for such full period shall not exceed
the maximum amount permitted by applicable law. This paragraph
shall control all agreements between the Company and the Holder
hereof.
<PAGE>
This Debenture shall be construed in accordance with the laws of
the State of Florida and the laws of the United States applicable
to transactions in Florida .
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
By:
Name:
Title:
<PAGE>
NOTICE OF SURRENDER FOR VOLUNTARY CONVERSION
The undersigned hereby surrenders for conversion the attached 4%
Convertible Subordinated Debenture due March 31, 1998 of
Bernstein/
Leibstone
Associates, Inc., a New York corporation (the
"Company"), in the principal amount of $
(Debenture No. ) in accordance with the terms of
the Debenture relating to voluntary conversion. The undersigned
represents that he is the beneficial and record holder of the
Debenture, and that no other person has any lien, security interest
or interest of any kind in the Debenture and that no other person
has any lien, security interest or interest of any kind in the
Debenture and that he has full and legal right to surrender the
Debenture for conversion.
Dated this day of , 199 .
In the presence of:
Signature guarantee:
Signature must be guaranteed by a commercial bank. <PAGE>
ASSIGNMENT OF DEBENTURE
For value received,
hereby sells, assigns and transfers unto
[all] [$ of principal amount] [cross
one out] of the 4% Convertible Subordinate Debenture due March 31,
1998 of Bernstein/Leibstone Associates, Inc., a New York
corporation, in the principal amount of $
standing in name on the books of said corporation
(Debenture No. ), herewith, and do hereby irrevocably
constitute and appoint attorney to
transfer the said Debenture (or portion of said Debenture) on the
books of the within named corporation with full power of
substitution in the premises.
Dated:
In the presence of:
Signature guarantee:
Signature must be guaranteed by a commercial bank.<PAGE>
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
a New York corporation
$750,000.00
4% Convertible Subordinated Debentures due March 31, 1998
SUBSCRIPTION AGREEMENT
THE OFFER AND SALE OF DEBENTURES OF BERNSTEIN/LEIBSTONE
ASSOCIATES, INC., A NEW YORK CORPORATION, IS BEING MADE BY MEANS
OF A CONFIDENTIAL REGULATION S OFFERING MEMORANDUM DATED MARCH
17, 1997, AND ANY SUPPLEMENTS OR AMENDMENTS THERETO (THE
"MEMORANDUM"). THE ATTACHED SUBSCRIPTION AGREEMENT MUST BE READ
IN CONJUNCTION WITH THE MEMORANDUM BY ALL POTENTIAL SUBSCRIBERS.<PAGE>
BERNSTEIN/LEIBSTONE ASSOCIATES, INC
SUBSCRIPTION AGREEMENT
FOR
4% CONVERTIBLE SUBORDINATED DEBENTURES DUE MARCH 31, 1998
MEMORANDUM COPY NO.:
Name of Subscriber:
Address of Residence:
Subscriber's Telephone Number:
Subscriber's
Telecopy
Number:
Date of Subscription:
Principal Amount of Debentures
Subscribed for:
Minimum Purchase Price: $10,000.00
Aggregate Purchase Price:
SUBSCRIPTION PROCEDURES
Complete and sign the enclosed Subscription Agreement in
accordance with the instructions below and return it to :
Bernstein/
Leibstone
Associates, Inc., Attention: Darrell Peterson,
2001A
Australian Avenue, Riviera Beach, Florida 33404.<PAGE>
INSTRUCTIONS TO SUBSCRIBERS
IF, AFTER YOU HAVE CAREFULLY REVIEWED THE MEMORANDUM, YOU WISH TO
SUBSCRIBE, PLEASE FOLLOW CAREFULLY THE INSTRUCTIONS BELOW.
SUBSCRIPTION AGREEMENTS THAT ARE MISSING REQUESTED INFORMATION OR
SIGNATURES CANNOT BE CONSIDERED UNTIL SUCH INFORMATION AND
SIGNATURES ARE PROVIDED. ALL SUCH INFORMATION WILL BE TREATED
CONFIDENTIALLY. CAPITALIZED TERMS USED IN THIS SUBSCRIPTION
AGREEMENT AND NOT OTHERWISE DEFINED HAVE THE MEANINGS DEFINED IN
THE MEMORANDUM.
SUBSCRIPTION AGREEMENT
One purpose of the Subscription is to provide the Company with
sufficient information in connection with its intended reliance
upon certain exclusion from the registration requirements of
federal securities laws and to determine whether you meet the
minimum legal requirements under such laws to purchase the
Debentures in this Offering. The Company will be relying on the
representations and warranties made in the Subscription Agreement
and on the information supplied.
SUBSCRIPTION AGREEMENT: This Subscription Agreement must be
fully completed by any prospective Subscriber. The prospective
Subscriber should be aware of the transfer restrictions which
apply to the Debentures, as regulated by Regulation S of the
Securities Act of 1933, as amended (the "Securities Act"). The
prospective Subscriber must indicate the principal amount of
Debentures subscribed for. The completed Subscription Agreement
must be signed by the prospective Subscriber and dated.
IF YOU WISH TO RETAIN A COPY OF THIS SUBSCRIPTION AGREEMENT, PLEASE
MAKE A COPY OF IT AFTER YOU COMPLETE THE ENCLOSED DOCUMENTS AND
BEFORE SUBMITTING IT TO BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
<PAGE>
SUBSCRIPTION AGREEMENT
Bernstein/Leibstone Associates, Inc.
4900 Dyer Blvd.
Riviera Beach, Florida 33407
Ladies/Gentlemen:
A. Subscription.
1. The undersigned hereby acknowledges receipt of a copy of the
Confidential Regulation S Offering Memorandum of
Bernstein/Leibstone Associates, Inc. (the "Company") dated March
17, 1997, and hereby subscribes for the principal amount of 4%
Convertible Subordinate Debentures due March 31, (the "Debentures")
of the Company set forth on the signature page below at a purchase
price of $10,000.00 per Debenture.
2. A check or wire transfer has been delivered to the order of
the "Bernstein/Leibstone Associates, Inc. in the amount set forth
on the signature page as payment in full of the total purchase
price of the principal amount of the Debentures subscribed for.
B. Subscriber's Acknowledgments and Agreements.
The undersigned understands, acknowledges and agrees that:
1. This subscription may be accepted or rejected in whole or
part by the Company, in its sole discretion.
2. Except as provide under applicable state securities laws,
this subscription is and shall be irrevocable except that (i) the
undersigned's execution and delivery of this Subscription Agreement
will not constitute an agreement between the Company and the
undersigned until this Subscription Agreement is accepted on behalf
of the Company and, if not accepted, the undersigned's subscription
and obligations hereunder will terminate and (ii) the undersigned
can, at any time prior to acceptance of this Subscription
Agreement, request in writing that the undersigned be released from
the obligations hereunder (and the Company may, but need not, in
its discretion, elect to release the undersigned from the
subscription and from such obligations).
3. No federal or state agency has made any finding or
determinations as to the fairness of the terms of this offering.
These securities have not been recommended or endorsed by any
federal or state securities commission or regulatory agency nor
have any of the foregoing authorities confirmed the accuracy or
determined the adequacy of the Memorandum.
4. Because the Debentures will not have been registered under
the Securities Act of 1933, as amended (the "Securities Act"), or
applicable state securities laws, the undersigned is aware that any
resale inconsistent with the Securities Act may create liability on
the Subscriber's part and/or the part of the Company, and agrees
not to assign, sell, pledge, transfer or otherwise dispose of or
transfer any Debentures unless registered under the Securities Act
and applicable state securities laws, exempted by an applicable
exemption under the Securities Act, or an opinion is given by
counsel satisfactory to the Company that such registration is not
required.
5. Each certificate representing Debentures will contain legends
substantially as follows:
THE DEBENTURES AND THE SHARES OF COMMON STOCK ISSUABLE UPON
CONVERSION OF THE DEBENTURES HAVE NOT BEEN REGISTERED WITH THE
U.S. SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES COMMISSION OF
ANY STATE UNDER ANY STATE SECURITIES LAW. THE SECURITIES ARE
BEING OFFERED PURSUANT TO REGULATION S ("REGULATION S")
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO OR
FOR THE ACCOUNT OR THE BENEFIT OF U.S. PERSONS (AS SUCH TERM IS
DEFINED IN REGULATIONS), UNLESS THE SECURITIES ARE REGISTERED
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH
OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE
EXEMPTION OR SAFE HARBOR FROM THE REGISTRATION REQUIREMENTS OF
THOSE LAWS. TERMS USED ABOVE HAVE THE MEANING GIVEN TO THEM BY
REGULATION S.
6. The undersigned acknowledges that the Company has made no
representations with respect to registration of the Debentures
under the Securities Act, that no such registration is
contemplated, that there can be no assurance that there will be any
market for the Debentures in the Foreseeable future, and that, as
a result, the undersigned must be prepared to bear the economic
risk of his investment for an indefinite period of time.
7. The following securities law matters are applicable to this
offering:
NOTICE TO PERSONS OUTSIDE THE UNITED STATES: THE SECURITIES
OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES OR TO U.S.
PERSONS UNLESS THE SECURITIES ARE REGISTERED UNDER THE
SECURITIES ACT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT IS AVAILABLE. IT IS THE
RESPONSIBILITY OF ANY INVESTOR PURCHASING THE SECURITIES OFFERED
HEREBY TO SATISFY ITSELF AS TO FULL OBSERVANCE OF THE LAWS OF
ANY RELEVANT TERRITORY OUTSIDE THE UNITED STATES IN CONNECTION
WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY REQUIRED
GOVERNMENTAL OR OTHER CONSENTS AND OBSERVING ANY OTHER
APPLICABLE REQUIREMENTS.
C. Subscriber's Representations and Warranties.
The undersigned hereby represents and warrants as follows:
1. The undersigned's principal address is a location outside of
the United States of America and its territories.
2. The undersigned (
i
) is not a U.S. person (as defined in
Securities Act Rule 902(o)) and is not acquiring the Debentures
purchased hereunder for the account or benefit of any U.S. person,
(ii) will not resell the Debentures purchased hereunder only in
accordance with (A) the provisions of Regulation S promulgated
under the Securities Act ("Regulation S"), (B) pursuant to an
effective registration statement under the Securities Act, or (C)
pursuant to an available exemption from registration under the
Securities Act, and only in compliance with the terms and
provisions of this Agreement, and (iii) will not offer or sell the
Debentures purchased hereunder to a U.S. person or to of for the
account or benefit of a U.S. person (other than a distributor)
prior to the expiration of a restricted period of 40 days after the
date of the Closing at which the undersigned purchased such
Debentures.
3. The undersigned is acquiring the Debentures for the
undersigned's own account or for an account with respect to which
it exercises sole investment discretion and that is a foreign
purchaser outside the United States of America.
4. The undersigned's overall commitment to investments which are
not readily marketable is not disproportionate to the undersigned's
net worth and the undersigned's investment in the Company will not
cause such overall commitment to become excessive. The undersigned
has adequate net worth and means of providing for current needs and
personal contingencies to sustain a complete loss of the
undersigned's investment in the Company, and the undersigned has no
need for liquidity in this investment.
5. The undersigned has substantial knowledge and experience in
making investment decisions of this type and is capable of
evaluating the merits and risks of this investment.
6. The undersigned has received a copy of the Memorandum.
7. The undersigned has carefully read the Memorandum. The
undersigned has had an opportunity to ask questions of and receive
answers from representatives of the Company with respect to this
offering. The Company has made available to the undersigned all
documents requested and has provided answers to all of the
undersigned's questions relating to an investment in the Company.
In evaluating the suitability of an investment in the Company, the
undersigned has not relied upon any representations or other
information (whether oral or written) other than as set forth in
the Memorandum. In addition, the undersigned has had an
opportunity to discuss this investment with representatives of the
Company an to ask questions of them.
8. The undersigned is acquiring Debentures without being
furnished any offering literature or prospectus other than the
Memorandum.
9. The undersigned understands that an investment in the Company
is speculative and involves a high degree of risk, and the
undersigned has carefully review and is aware of all of the risk
factors related to the purchase of Debentures, including the risks
described in the Memorandum under the heading "Risk Factors".
10. If this Subscription Agreement is executed and delivered on
behalf of a partnership, trust, corporation or other entity, the
undersigned has been duly authorized to execute and deliver this
Subscription Agreement and all other documents and instruments (if
any) executed and delivered on behalf of such entity in connection
with its purchase of the Debentures subscribed for.
11. All information furnished in the Subscription Agreement
completed by the undersigned is true and correct in all respects.
12. That the undersigned will take all steps necessary to insure
compliance with Regulation S, including but not limited to advising
each person involved in a subsequent transaction.
13. The foregoing representation and warranties are true as of
the date of this Subscription Agreement and shall be true as of the
date the Company issues and sells Debentures to the undersigned.
If such representations and warranties shall not be true in any
respect prior to such date, the undersigned will give prompt
written notice of such fact to the Company.
[SIGNATURE PAGES FOLLOW]
<PAGE>
Date:
Principal Amount of
Debentures subscribed for:
Total Purchase Price
($10,000.00 Minimum):
$
[Signature of Subscriber]
Capacity in which signed:
[Title]
Subscriber's name and Subscriber's mailing address
business address (if different from business
(please type/print) address)
Accepted:
BERNSTEIN/LEIBSTONE ASSOCIATES, INC.
By:
Title:
Date:
<PAGE>
<TABLE>
Exhibit 11.1
SAFETECH INDUSTRIES, INC.
FORM 10-K FOR THE YEARS ENDED MA RCH 31, 1997 AND 1996
Calculation of Weighted Average Number of Common Shares Outstanding
<CAPTION>
Common Common Weighted Average
Share Shares Days Weighted Average Number of
Activity Outstanding Outstanding Number of Shares Shares Outstanding
<S> <C> <C> <C> <C> <C>
Balance March 31, 1995 4,220,000 -
Acquisition of interest in
Clearshield 9,071,700 13,291,700 104 3,787,224
Business combination with
Archway 4,100,000 17,391,700 261 12,436,257
Balance March 31, 1996 17,391,700 365 17,391,700 16,223,481
Balance March 31, 1997 17,391,700 17,391,700
</TABLE>
<PAGE>
Exhibit 21
SAFETECH INDUSTRIES, INC.
FORM 10-K FOR THE YEAR ENDED MARCH 31, 1997
Subsidiaries of Registrant
Name State of Incorporation
Archway Capital, Inc. Florida
International Fire Safety Products, Inc. Florida
PC International Trading Corp. Florida
Clearshield Manufacturing Corp. Florida
Clearshield of Palm Beach County, Inc. Florida
Palmco Builders, Inc. Florida
ST Telecom Corp. Florida
Storm Depot of Florida, Inc. Florida
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-END> MAR-31-1997 MAR-31-1996
<CASH> 12,795 14,457
<SECURITIES> 73,661 0
<RECEIVABLES> 470,494 1,443,140
<ALLOWANCES> (80,000) (70,000)
<INVENTORY> 650,989 660,367
<CURRENT-ASSETS> 1,158,041 2,086,434
<PP&E> 1,296,268 786,361
<DEPRECIATION> (385,399) (185,508)
<TOTAL-ASSETS> 2,821,515 3,238,605
<CURRENT-LIABILITIES> 2,633,528 1,497,905
<BONDS> 0 0
0 0
0 0
<COMMON> 173,917 173,917
<OTHER-SE> (517,893) 638,781
<TOTAL-LIABILITY-AND-EQUITY> 2,821,515 3,238,605
<SALES> 5,627,120 3,233,096
<TOTAL-REVENUES> 5,627,120 3,233,096
<CGS> 4,766,014 2,698,251
<TOTAL-COSTS> 4,766,014 2,698,251
<OTHER-EXPENSES> 2,264,369 1,534,471
<LOSS-PROVISION> 197,172 0
<INTEREST-EXPENSE> 18,550 14,804
<INCOME-PRETAX> (1,584,019) (925,999)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,156,674) (567,532)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,156,674) (567,532)
<EPS-PRIMARY> (.07) (.03)
<EPS-DILUTED> (.07) (.03)
</TABLE>
