<PAGE> 1
As filed with the Securities and Exchange Commission on May 3, 1995
REGISTRATION NO. 33-88796
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
PRE-EFFECTIVE AMENDMENT NO. 2 TO FORM S-3 ON FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------------
CEDAR GROUP, INC.
(Exact name of registrant as specified in its charter)
----------------------
<TABLE>
<S> <C> <C>
Delaware 3448 23-2577796
- -------- ---- ----------
(State or other jurisdiction of (Primary Standard Classification (I.R.S. Employer Identification
incorporation or organization) Code Number) Number)
</TABLE>
500 Rue Notre Dame
Lachine, Quebec CANADA H8S 2B2
(514) 634-3551
----------------------------
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive office and principal
place of business)
-----------------------------------
The Corporation Trust Company
1209 Orange Street
Wilmington, DE 19801
(215) 563-7750
----------------------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
<TABLE>
<CAPTION>
with copy to:
<S> <C>
Joseph P. Galda, Esquire Mr. Michel L. Marengere
Clark, Ladner, Fortenbaugh & Young Chairman and Chief Executive Officer
One Commerce Square Cedar Group, Inc.
2005 Market Street, 22nd Floor 500 Rue Notre Dame
Philadelphia, PA 19103 Lachine, Quebec CANADA H8S 2B2
(215) 241-5043 (514) 634-3551
</TABLE>
----------------------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the date on which this Registration Statement becomes
effective.
----------------------------
Pursuant to Rule 429 under the Securities Act of 1933, this
Registration Statement also amends the Registration Statement of the Company on
Form S-18 (Commission File No. 33-30673-A) filed on August 23, 1989.
<PAGE> 2
CEDAR GROUP, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS OR PAGE
- ---------------------------------------------- ------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus . . . . . . . . . . Forepart of the Registration Statement; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus . . . . . . . . . . . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors . . . . . . . . . . . Prospectus Summary; Selected Financial
Information; Risk Factors
4. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . Use of Proceeds
5. Determination of Offering Price . . . . . . . . . . . . . . Cover Page of Prospectus; Plan of Distribution
6. Dilution . . . . . . . . . . . . . . . . . . . . . . . . . N/A
7. Selling Security Holders . . . . . . . . . . . . . . . . . Selling Security Holders
8. Plan of Distribution . . . . . . . . . . . . . . . . . . . Cover Page of Prospectus; Plan of Distribution
9. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . Legal Proceedings
10. Directors, Executive Officers, Promoters and Control Persons Management; Certain Relationships and Related
Transactions
11. Security Ownership of Certain Beneficial Owners and Management Principal Stockholders
12. Description of Securities . . . . . . . . . . . . . . . . . Description of Securities
13. Interest of Named Experts and Counsel . . . . . . . . . . . N/A
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities . . . . . . . . . . . . . . . . Statement on Indemnification; Part II; Item
24 - Indemnification of Directors and Officers
15. Organization within Last Five Years . . . . . . . . . . . . Description of Business
16. Description of Business . . . . . . . . . . . . . . . . . . Description of Business
17. Management's Discussion and Analysis of Plan of Operation . Management's Discussion and Analysis of Financial
Condition and Results of Operations
18. Description of Property . . . . . . . . . . . . . . . . . . Description of Property
19. Certain Relationships and Related Transactions . . . . . . Certain Relationships and Related Transactions
20. Market for Common Equity and Related Stockholder Matters . . Market for Common Stock
21. Executive Compensation . . . . . . . . . . . . . . . . . . Management
22. Financial Statements . . . . . . . . . . . . . . . . . . . Capitalization; Financial Statements
23. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure . . . . . . . . . . . . . . . . . N/A
</TABLE>
<PAGE> 3
Subject to Completion Dated May 3, 1995
PRELIMINARY PROSPECTUS
CEDAR GROUP, INC.
8,500,859 shares of Common Stock
offered by certain Selling Security Holders
----------------------------
13,880 Shares of Common Stock
Offered by the Company Pursuant to
Certain Outstanding Class A Warrants
This Prospectus relates to the sale of 6,708,692 shares of common
stock, $.001 par value per share (the "Common Stock"), previously issued by
Cedar Group, Inc. (the "Company") in certain private placement transactions,
all of which are offered by the holders thereof identified as "Selling Security
Holders" in this Prospectus,the sale by Ladenburg, Thalmann & Company
and/or permitted assignees, of 200,000 shares of Common Stock which may be
issued pursuant to the exercise of certain outstanding warrants (the "Ladenburg
Warrants") and 13,880 shares of Common Stock issuable upon exercise of
outstanding Class A Common Stock Purchase Warrants (the "Class A Warrants")
issued in the Company's initial public offering. This Prospectus also relates
to the sale by United Dominion Industries Limited or its assignees of
1,592,167 shares of Common Stock which have been or may be issued in the
future upon exercise of certain Class A Preferred Shares of the Company's
subsidiary, Dominion Bridge, Inc. See "SELLING SECURITY HOLDERS."
The Company will not receive any proceeds from the sale of shares of
Common Stock by the Selling Security Holders. However, the Company will
receive proceeds from the exercise of the Ladenburg Warrants and the Class A
Warrants. Sales of shares of Common Stock may be made in negotiated
transactions, or otherwise, at market prices prevailing at the time of sale or
at negotiated prices. All expenses of the registration of such securities will
be borne by the Company. The Selling Security Holders, and not the Company,
will pay or assume all applicable brokerage commissions or other costs of sale
as may be incurred in the sale of such securities. See "SELLING SECURITY
HOLDERS" and "PLAN OF DISTRIBUTION."
----------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS."
----------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------
<PAGE> 4
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Price to Underwriting Discounts and Proceeds to the Proceeds to the Selling
Class of Security Public Commissions Company(1) Security Holders
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common $4.375 --(3) -- $37,191,258(3)
Stock(2)
Shares of Common $6.00 -- $83,280 --
Stock(4)
==========================================================================================================================
</TABLE>
(1) Does not take into account the costs of this offering, including among
others, printing, blue sky and professional fees, estimated at $75,000,
will be borne entirely by the Company.
(2) Represents the anticipated sale by the Selling Security Holders at
$4.375, the closing price on April 27, 1995. There can be no
assurances, however, that the Selling Security Holders will be able to
sell their shares of Common Stock at this price, or that a liquid
market will exist for the Company's Common Stock. The Company will
realize no proceeds upon the sale of shares of Common Stock by the
Selling Security Holders.
(3) Does not give effect to ordinary brokerage commissions or other costs
of sale that will be borne solely by the Selling Security Holders.
(4) Represents shares of Common Stock which may be issued upon exercise of
the Class A Warrants.
The Common Stock is traded on the NASDAQ National Market System under
the symbol "CGMV." On April 27, 1995, the closing price on NASDAQ was $4.375.
---------------------
The date of this Prospectus is May 3, 1995
<PAGE> 5
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
AND AUTHORIZED REPRESENTATIVE IN THE UNITED STATES
All of the Company's directors, officers and certain experts named
herein are residents of Canada. Consequently, it may be difficult for United
States investors to effect service within the United States upon the Company's
directors, officers or certain experts named herein, or to realize in the United
States upon judgments of courts of the United States predicated upon civil
liabilities under the United States Securities Act of 1933, as amended (the
"Securities Act"). A judgment of a court of the United States predicated solely
upon such civil liabilities would probably be enforceable in Canada by a
Canadian court if the United States court in which the judgment was obtained had
jurisdiction, as determined by the Canadian court, in the matter. There is
substantial doubt whether an original action could be brought successfully in
Canada against any of such persons or the Company predicated solely upon such
civil liabilities.
The Authorized Agent to receive service of process in the United States
is The Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware
19801: Telephone (215) 563-7750.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Copies of these reports may be inspected and copied at the
Public Reference Facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, DC 20549, and at the Commission's regional offices at
7 World Trade Center, Suite 1300, New York, New York 10048 and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
materials can be obtained upon written request addressed to the Commission's
Public Reference Section, 450 Fifth Street, N.W., Washington, DC 20549, at
prescribed rates.
The Company has filed with the Commission a registration statement on
Form SB-2 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended. This
Prospectus does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby
made to the Registration Statement.
2
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements (including the notes thereto) appearing
elsewhere in or incorporated by reference into this Prospectus.
THE COMPANY
Cedar Group, Inc. (the "Company"), through its operating subsidiaries,
participates in two principal market segments: infrastructure engineering and
manufacturing services, and industrial specialty fasteners, respectively.
Dominion Bridge, Inc. ("Dominion Bridge") is the Company's principal
operating subsidiary and is involved in the engineering infrastructure segment.
Dominion Bridge was acquired from United Dominion Industries Limited ("UDIL") in
April 1994, though pursuant to the acquisition agreement the transaction was
effective from an accounting point of view on March 9, 1994.
The Company has three operating subsidiaries in the industrial fastener
segment located in the United States, namely, Unimetric Corporation, a 70% owned
subsidiary involved in the manufacturing of specialty fasteners for the
industrial and aerospace markets, and Banyan Fastener Corp. and M.S.W.
International, Inc., both importers and distributors of standard industrial
fasteners.
THE OFFERING
<TABLE>
<S> <C>
Securities Being Offered: This Prospectus relates to the sale of 6,708,692 shares of common stock,
- ------------------------- $.001 par value per share (the "Common Stock"), previously issued by the
Company in certain private placement transactions, all of which are
offered by the holders thereof identified as "Selling Security Holders"
in this Prospectus, 200,000 shares of Common Stock which may be
issued pursuant to the exercise of the Ladenburg Warrants and 13,880
shares of Common Stock which may be issued pursuant to the exercise of
the Class A Warrants. This Prospectus also relates to the sale by
UDIL or its assignees of 1,592,167 shares of Common Stock which have
been or may be issued in the future upon exercise of certain Class A
Preferred Shares of the
</TABLE>
3
<PAGE> 7
<TABLE>
<S> <C>
Company's subsidiary, Dominion Bridge. See "SELLING SECURITY HOLDERS."
The shares of Common Stock offered by the Selling Security Holders may
be offered for sale from time to time by the holders in regular
brokerage transactions, either directly or through brokers or to
dealers, in private sales or negotiated transactions, or otherwise, at
prices related to then prevailing market prices. The Company will not
receive any proceeds from the sale of shares of Common Stock by the
Selling Security Holders. All expenses of the registration of such
securities are, however, being borne by the Company. The Selling
Security Holders, and not the Company, will pay or assume such
brokerage commissions as may be incurred in the sale of their
securities.
The Common Stock is traded on the NASDAQ National Market System under
the symbol "CGMV." On April 27, 1995, the closing bid price on NASDAQ
was $4.375.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
Total number of shares of
Common Stock outstanding . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 14,524,625
Total number of shares
reserved for future issuance . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 2,306,047
Total number of shares of
Common Stock being offered
by Selling Security Holders . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . 8,514,739
Total number of shares
outstanding and subject to
future issuance . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . 16,830,672
</TABLE>
<TABLE>
<S> <C>
Use of Proceeds: The Company will not receive any of the proceeds of the sale of any of
- ---------------- the shares of Common Stock by the Selling Security Holders.
The net proceeds realized by the Company upon the exercise of the
Ladenburg Warrants and the Class A Warrants will be used to offset the
general working capital requirements of the Company. Inasmuch as
the Company has received no firm commitments for the exercise of the
Ladenburg Warrants or the Class A Warrants, however, there can be no
assurances as to the amount of the net proceeds to be realized by the
Company.
Risk Factors: The Common Stock offered hereby involves a high degree of risk See "RISK
- ------------- FACTORS."
Trading Symbol: Common Stock-CGMV
- --------------- Class A Warrants-CDRGW
</TABLE>
5
<PAGE> 9
RISK FACTORS
An investment in the Common Stock involves a high degree of risk. Prior
to making an investment decision with respect to the Common Stock offered by
this Prospectus, prospective investors should carefully consider, along with the
other matters discussed in this Prospectus, the following risk factors:
1. NEED FOR ADDITIONAL FINANCING. On October 21, 1994, the
Company agreed to acquire from UDIL the common and Class A Preferred Shares of
Dominion Bridge owned by UDIL for cash payments of Cdn $18 million, the transfer
of assets having a book value of Cdn $1,368,000 and the waiver of the preferred
dividend requirement for the Company's fourth quarter. As of the date of this
Prospectus, the Company has paid UDIL Cdn $8,299,000, transferred the assets and
received all of the common shares of Dominion Bridge held by UDIL and Cdn
$8,785,000 face value of the Class A Preferred Shares. The remaining balance of
the Class A Preferred Shares of Dominion Bridge held by UDIL are to be purchased
by the Company paying up to Cdn. $3 million to UDIL and issuing up to
1,592,167 of its shares of Common Stock. As the proposed purchase of the
remaining Class A Preferred Shares is in the process of being finalized, if it
is not finalized, the Company may require to undertake additional equity
offerings to raise the funds needed to acquire the securities.
The Company is also attempting to secure a bank line of credit to
provide working capital for its operating subsidiaries. Furthermore, management
may require additional sources of debt or equity financing in order to complete
acquisitions or to finance its current businesses.
There can be no assurances that the Company will successfully secure
financing when necessary. The Company's failure to secure such financing when
required could have a material adverse effect on the Company's financial
condition and its continued viability.
2. RISK OF PRODUCT AND CONSTRUCTION LIABILITY. The Company is
subject to a risk of claims for product and construction liability. If a
liability claim exceeding the Company's insurance coverage or its own available
resources were to be successfully asserted against the Company, it could have a
material adverse effect on the Company's financial condition. The Company has
liability insurance which it believes is customary for the industries in which
it participates. However, there is no assurance that such coverage will be
sufficient to fully insure against claims brought against the Company and its
subsidiaries, or that the Company will be able to maintain such insurance at
6
<PAGE> 10
affordable rates or obtain additional insurance covering its business.
3. CONTRACTUAL LIABILITY FOR LATE PROJECTS AND COST OVERRUNS.
Many of the projects undertaken by Dominion Bridge provide for penalties for
delays in completion. In addition, such projects are usually undertaken on a
fixed price basis. Accordingly, the Company's results of operations may be
adversely affected by delays in completion or cost overruns. Furthermore,
Dominion Bridge obtains contractual assistance from subcontractors on various
projects and is solely responsible for the costs of the subcontractors without
recourse to the owner of the project. Accordingly, the Company may suffer
financial losses if it cannot successfully claim such losses from the owner of
the project.
4. SECURED LIENS -- EXISTENCE OF LIENS ON SIGNIFICANT PORTIONS OF
ASSETS. A significant portion of Dominion Bridge's assets have been pledged as
collateral to secure the Company's obligations under its arrangements with
UDIL. In the event Dominion Bridge fails to comply with its obligations,
Dominion Bridge's assets could be foreclosed upon. Moreover, to the extent
that Dominion Bridge's assets continue to be pledged to secure the obligations,
such assets will be unavailable to secure additional debt financing, which may
adversely affect Dominion Bridge's ability to borrow in the future. UDIL has,
however, agreed to subordinate its security interests to a third party lender
for the Company up to Cdn $10 million.
5. LIMITATIONS ON NET OPERATING LOSS CARRYFORWARDS. The Company
had federal net operating loss carryforwards for financial reporting and income
tax purposes, however, these carryforwards are subject to limitations on the
amount that can utilized by the Company in a fiscal year due to change of
ownership rules as defined by applicable federal tax statutes. Consequently, the
Company may not receive future benefits from existing net operating loss
carryforwards available to offset future taxable income.
6. NEED TO OBTAIN PERFORMANCE BONDS. Many of the projects
undertaken by Dominion Bridge are subject to a requirement that Dominion Bridge
post a performance bond. If the Company is unable to secure bonding it will not
be able to undertake additional projects which would have a significant adverse
effect on the Company's financial condition.
7. POSSIBLE ENVIRONMENTAL LIABILITY. Government regulations in
Canada and the United States prohibit the discharge into the environment of
hazardous substances. Although the Company believes that it complies with these
regulations, there can be no assurance that the Company will not be held
financially responsible for
7
<PAGE> 11
environmental contamination that may have occurred prior to its acquisition of
its operating businesses.
8. ASSUMED LITIGATION. As a result of its acquisition of Dominion
Bridge, the Company has assumed certain pending and threatened litigation. It
is impossible at this time for the Company to predict with any certainty the
outcome of such litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability, to the
extent not provided for through insurance or otherwise, would be material in
relation to the Company's consolidated financial position.
9. GOVERNMENT REGULATION. Historically, other than import duties
and quotas, there have been no material regulations with respect to the import
or manufacture of fasteners in the United States. Recently, however, due to the
discovery of mislabeled and substandard fasteners imported into the United
States, legislation has been enacted known as the "Fastener Quality Act." As a
result of the Fastener Quality Act, and for competitive reasons, the Company has
been required to expend substantial sums in order to obtain accreditation from
the International Standards Organization. Management of the Company believes
that implementation of the Fastener Quality Act will lead to greater
consolidation in the industry and provide the Company with a competitive
advantage over non-accredited entities. However, the regulations implementing
the Fastener Quality Act have not been issued and substantial uncertainty
remains as to how the Act is to apply and what affect it will have on the
Company's results of operations.
10. DEPENDENCE ON KEY PERSONNEL. To a material extent, the
Company's future success is dependent upon the continued efforts of its Chairman
and Chief Executive Officer, Mr. Michel L. Marengere. The loss of his services
would likely have a material adverse effect on the Company's business. As of the
date of this Prospectus, the Company is in the process of obtaining "key-man"
insurance on Mr. Marengere's life.
11. COMPETITION. The markets in which the Company competes are
highly competitive. In particular, a significant portion of the business sought
by its Dominion Bridge subsidiary is awarded on a competitive bid basis. Many
of the companies with which Dominion Bridge competes have substantially greater
financial, managerial and other resources than those of the Company. As a
result, the Company may be at a competitive disadvantage when bidding for new
projects.
12. FOREIGN JOINT VENTURES. The Company's principal operating
subsidiary Dominion Bridge, has formalized or reached
8
<PAGE> 12
agreements in principle with respect to six large scale infrastructure joint
venture projects in China to be undertaken by one of its Subsidiaries. These
joint ventures are subject to significant conditions, including the
negotiation of definitive agreements, third party participation and the
raising of required capital. There can be no assurances that these
arrangements will lead to completed projects, or that the projects, if
completed, will prove to be profitable to the Company. Furthermore, doing
business in China entails significant additional risk factors, including, among
others, the need to comply with Chinese currency restrictions and that country's
federal, state and local laws. The Company believes the present attitude to
foreign investment in the People's Republic of China and to infrastructure
projects, in general, to be favorable, however, investors should assess the
political risks of investing in a foreign country.
13. POSSIBLE VOLATILITY OF STOCK PRICES. Taking into account the
registration under the Securities Act of the securities offered hereby, the
Company may have approximately 16,816,792 shares of Common Stock outstanding,
substantially all of which will be eligible for public trading. Although it is
impossible to predict market influences and prospective values for securities,
it is possible that, in and of itself, the substantial increase in the number of
shares available for sale could have a depressive effect upon the market value
of the Company's Common Stock. Furthermore, the Selling Security Holders have
obtained significant unrealized appreciation in their investment and may desire
to realize all or a portion of these gains. Because of the factors described
above and elsewhere in this Prospectus, the market prices of the Company's
Common Stock following the date of this Prospectus may be highly volatile.
14. ADDITIONAL POSSIBLE DILUTION. The Company is authorized to
issue 20,000,000 shares of Common Stock of which 14,524,625 shares were
outstanding as of March 24, 1995. In addition, the Company has reserved for
issuance an additional 1,592,167 shares of Common Stock in connection with its
acquisition of Dominion Bridge, and 700,000 share purchase warrants and stock
options issued to its directors, executive officers and investment bankers. In
connection with other business matters deemed appropriate by the Company's
management, there can be no assurances that the Company will not, in fact,
undertake the issuance of more shares of Common Stock without notice to then
existing stockholders. This may be done in order to, among other things,
facilitate a business combination, acquire assets or stock of another business,
generate debt or equity financing, reward employees or consultants or for other
valid business reasons in the discretion of the Company's Board of Directors.
9
<PAGE> 13
15. EFFECT OF OUTSTANDING OPTIONS AND WARRANTS. As of March 24,
1995, the Company had outstanding options and warrants to purchase 700,000
shares of Common Stock upon exercise. To the extent that the shares underlying
the options and warrants enter the market, the price of the Common Stock in the
market may be substantially reduced. For the term of the options and warrants
issued by the Company, the holders thereof are given an opportunity to profit
from a rise in the market price of the Company's Common Stock, with a resulting
dilution in the interest of the other stockholders. Further, the terms on which
the Company may obtain additional financing during that period may be adversely
affected by the existence of such options and warrants. The holders of such
options and warrants may exercise them at a time when the Company might be able
to obtain additional capital through a new offering of securities on terms more
favorable than those provided therein.
16. STAGGERED BOARD OF DIRECTORS. The Company's Certificate of
Incorporation provides for a staggered Board of Directors pursuant to which the
Board is divided into three classes of directors and the members of only one
class (or one-third of the Board) are elected each year to serve a three-year
term. A director may be removed only for cause by a vote of the holders of
eighty percent of the voting power of the Company's outstanding securities.
This provision makes it more difficult to change majority control of the Board
which may discourage attempts by third parties to make a tender offer or
otherwise obtain control of the Company, even if such attempt would be
beneficial to the Company and its stockholders.
17. DIVIDENDS NOT LIKELY. The Company does not intend to declare
or pay cash dividends in the foreseeable future. Earnings, if any, are expected
to be retained to finance and develop its businesses. See "DESCRIPTION OF
SECURITIES."
18. AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK.
The Company's Certificate of Incorporation authorizes the issuance of up to an
aggregate of 5,000,000 shares of "blank check" preferred stock with such
designations, rights and preferences as may be determined from time to time by
the Board of Directors. Accordingly, the Board of Directors is empowered,
without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights which would adversely affect the
voting power or other rights of the holders of the Company's Common Stock. In
the event of issuance, the preferred stock could be utilized, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company, which could have the effect of discouraging bids for the
Company and thereby prevent stockholders from receiving the maximum value for
their shares. The Company has no
10
<PAGE> 14
present intention to issue any additional shares of its preferred stock.
However, there can be no assurance that the preferred stock of the Company will
not be issued at some time in the future.
19. EXCHANGE RATE FLUCTUATIONS. Although the Company's financial
results are reported in United States dollars, a substantial portion of its
business is conducted in other currencies, principally the Canadian dollar. The
exchange rate between the Canadian and United States dollars, although
historically less volatile than that of certain other currencies, has varied
significantly over the last five years.
20. DIVESTED BUSINESSES. Effective July 1, 1994, the Company
decided to divest the Canadian comodity fastener distribution businesses
formerly conducted by Edinov Corporation. The transaction was completed on
December 20, 1994 by the receipt of Cdn. $1,000 in cash and Cdn. $5,135,000
preferred shares of the acquirer. These preferred shares are redeemable at
varying amounts annually through the year 2009, commencing at Cdn. $250,000 in
1995 and 1996 and Cdn. $350,000 each year thereafter. The Company's ability to
realize the value of the preferred shares is dependent on future operations of
the divested businesses. There can be no assurance that the future operations
of the divested businesses will be profitable and that the preferred shares
held by the Company will be able to be redeemed.
DESCRIPTION OF BUSINESS
GENERAL
Cedar Group, Inc. (the "Company"), through its operating subsidiaries,
participates in two principal market segments: infrastructure engineering and
manufacturing services, and industrial specialty fasteners, respectively.
Dominion Bridge, Inc. ("Dominion Bridge") is the Company's principal
operating subsidiary and is involved in the engineering infrastructure segment.
Dominion Bridge was acquired from United Dominion Industries Limited ("UDIL") in
April 1994, though pursuant to the acquisition agreement the transaction was
effective from an accounting point of view March 9, 1994.
The Company has three operating subsidiaries in the industrial fastener
segment located in the United States, namely, Unimetric Corporation
("Unimetric"), a 70% owned subsidiary involved in the manufacturing of specialty
fasteners for the industrial and aerospace markets, and Banyan Fastener Corp.
and M.S.W. International, Inc. (collectively, the "Fastener Importers"), both
importers and distributors of standard industrial fasteners.
During 1994, the Company disposed of its Canadian commodity fastener
distribution operations, consisting of Edinov Corporation, George Hegedus
Enterprises Ltd., Specialty Fasteners Ltd. and Atto-Renaud Industries Inc.
BACKGROUND
COMBINATION WITH EDINOV. On August 31, 1992, the Company and its only
two operating subsidiaries at the time, M.S.W. International, Inc. and Banyan
Fastener Corp., filed for protection under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code").
11
<PAGE> 15
On June 25, 1993, the Company filed an amended plan of reorganization
and disclosure statement as required by the Bankruptcy Code. Included as an
integral part of the plan was an agreement, also dated June 25, 1993, between
the Company and Edinov Corporation, a Canadian corporation which was publicly
traded in Canada ("Edinov"). The agreement stipulated that, upon the date of
the reorganization plan becoming effective and pursuant to a Plan of Arrangement
under the Business Corporations Act (Canada), the Company would issue 3,945,064
shares of Common Stock to the Edinov shareholders in exchange for all the
outstanding shares of Edinov. Concurrent with this issuance, the Company would
cancel 2,774,126 (93.04%) of its then-outstanding shares. On September 30, 1993,
the reorganization plan became effective.
1994 ACQUISITIONS. During Fiscal 1994, the Company acquired initially
an 85% equity interest in Dominion Bridge (later increased to 100%) and a 70%
equity interest in Unimetric. In addition, during Fiscal 1994 the Company
entered into an interim closing on July 4, 1994 and maintains it acquired a 75%
equity interest in Stelco Fasteners Ltd. ("Stelco Fasteners"); however, the
Stelco Fasteners acquisition is the subject of litigation in Ontario and there
can be no assurance as to the outcome of the litigation.
DOMINION BRIDGE. On April 8, 1994, the Company completed the
acquisition of majority ownership of Dominion Bridge, which previously operated
as a division of UDIL. The acquisition became effective March 9, 1994, from an
accounting point of view. Pursuant to the agreement with UDIL, UDIL transferred
substantially all of the assets, liabilities and the business of its Dominion
Bridge division into Dominion Bridge in exchange for all of the common shares
and Cdn. $18,338,000 of Dominion Bridge's Class A Preferred Shares. Immediately
after such transfer, UDIL sold the Company 85% of the common shares of Dominion
Bridge in consideration for an aggregate price of Cdn. $5,000,000.
Simultaneously with the purchase of the Dominion Bridge common shares,
the Company contributed Cdn $2,000,000 in cash to Dominion Bridge in exchange
for Class B Preferred Shares of Dominion Bridge.
Both the Class A Preferred Shares and the Class B Preferred Shares pay
dividends at the rate of 7.5% per annum, payable quarterly. Class B Preferred
Shares held by the Company are redeemable only after UDIL no longer owns any
Class A Preferred Shares or common shares of Dominion Bridge.
The Class A Preferred Shares held by UDIL as initially structured were
convertible into the Company's Common Stock at a rate of Cdn. $6.00 per share.
The Company has a call option after
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two years to purchase (or to cause Dominion Bridge to redeem) the Class A
Preferred Shares at the rate of Cdn $2,000,000 per year. UDIL also has a put
option whereby after two years UDIL shall have the right to put the Class A
Preferred Shares to Dominion Bridge at the rate of Cdn. $2,000,000 per year.
The Company also has the right on any day that the market value of the
Company's Common Stock equals or exceeds Cdn. $8.00 to exchange all or any part
of the Class A Preferred Shares held by UDIL for shares of the Company's Common
Stock at a specified exchange rate. The minimum conversion value must equal
the initial face value of the Class A Preferred Shares plus a 15% premium. In
the event that the Company issues shares of Common Stock in a public offering,
the cash proceeds are required to be utilized in the first instance to pay off
one-third of UDIL's remaining Class A Preferred Shares.
On October 21, 1994, the Company agreed to acquire from UDIL the
Dominion Bridge common and Class A Preferred Shares for an aggregate price of
Cdn $18 million (U.S $13 million). As of the date of this Prospectus, the
Company has paid Cdn $8,299,000 (U.S. $6,224,000), transferred the assets and
received all of the common shares of Dominion Bridge held by UDIL and Cdn.
$8,785,000 (U.S. $6,558,000) face value of the Class A Preferred Shares. The
remaining balance of the Class A Preferred Shares of Dominion Bridge held by
UDIL may be purchased by the Company at their face value plus a 15% premium
at any time to March 31, 1995. In December 1994, Cdn. $2,700,000 face value
of the Class A Preferred Shares of Dominion Bridge were sold at the same
price by the Company to Groupe Fidutech International, Inc. ("GFI"). SEE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. This sale enabled the
Company to raise the funds required to complete the acquisition of the Class
A Preferred Shares from UDIL.
Subsequently, the Cdn. $2,700,000 face value of Class A Preferred Shares
acquired by GFI were converted, in accordance with the terms of the Class A
Preferred Shares, into 450,000 shares of Common Stock of the Company.
Further to the understanding reached on October 21, 1994, the Company is
currently structuring an agreement with UDIL pursuant to which UDIL will be
issued up to a maximum of 1,592,167 shares of Common Stock of the Company along
with a cash payment of Cdn. $2 million in exchange for all of the remaining
Class A Preferred Shares of Dominion Bridge. The up to 1,592,167 shares of
Common Stock issuable to UDIL are being qualified under this Prospectus. UDIL,
instead of being issued shares of Common Stock, may elect to only convert a
portion of the Class A Preferred Shares.
UNIMETRIC CORPORATION. On April 26, 1994, the Company acquired 70% of
the issued common stock of Unimetric from Ateliers de la Haute Garonne ("AHG"),
effective January 1, 1994. Unimetric is a manufacturer of specialty fasteners
for the aerospace and industrial markets.
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The purchase price for the Company's equity interest in Unimetric was US
$1,050,000, consisting of a cash payment of $600,000, the issuance of 88,968
shares of Common Stock of the Company and $200,000 for shares of Unimetric 4%
non-cumulative, non-voting preferred shares. In addition, $949,871 of
indebtedness of Unimetric to AHG was converted into Unimetric 4% non-
cumulative, non-voting preferred shares, which were later exchanged for 338,033
shares of Common Stock of the Company, of which 60,000 shares of Common Stock
are to be held in escrow until Unimetric has earned revenues of $350,000 from
the manufacture and sale of aeronautical rivets. In addition, 71,174 shares of
Common Stock were issued on conversion of $200,000 of the remaining preferred
shares of Unimetric.
STELCO FASTENERS LTD. On June 2, 1994, the Company entered into a
letter of intent (the "Letter of Intent") with Stelco Inc. ("Stelco") and Stelco
Fasteners pursuant to which the Company agreed to invest Cdn $2 million into
Stelco Fasteners in exchange for 75% of the issued and outstanding common shares
of Stelco Fasteners. In addition, Stelco agreed to convert its indebtedness
into Series A Preferred Shares of Stelco Fasteners having a value of Cdn.
$15,911,000 representing a reduction of approximately Cdn $5 million of
indebtedness. The Series A Preferred Shares were to be convertible into shares
of Common Stock of the Company at Cdn. $8.50 per share (later changed to Cdn.
$8.00 per share). Stelco further agreed to receive Series B Preferred Shares of
Stelco Fasteners in exchange of the operating loan advanced to Stelco Fasteners
by Stelco to a maximum of Cdn. $4,649,000. The Series B Preferred Shares were
to be redeemed from 25% of the net after tax profits of Stelco Fasteners. The
Letter of Intent provided that the Company and Stelco were to negotiate in good
faith to complete definitive agreements within a sixty day period. This period
was subsequently extended by mutual agreement.
As Stelco had failed to negotiate a collective bargaining agreement with
the union representing Stelco Fasteners' employees and as Stelco advised Stelco
Fasteners' major customers that it could not guarantee their requirements beyond
July 31, 1994, on July 4, 1994, Stelco transferred ownership of 75% of the
common shares of Stelco Fasteners to the Company and handed over management and
control of Stelco Fasteners to the Company's principals. In this connection,
the Company's Chairman, Michel L. Marengere, and its President, Nicolas
Matossian, were elected as two of three directors on Stelco Fasteners' Board of
Directors. In addition, Mr. Marengere and Mr. Matossian were appointed as
Stelco Fasteners' senior officers.
The certificates representing 75% of the common shares of Stelco
Fasteners, the Cdn $2 million cheque by the Company payable
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to Stelco Fasteners and other documents were placed in trust with a law firm
pending completion of the Company's due diligence and its assessment of Stelco
Fasteners as a viable enterprise.
In July, 1994, the Company was successful in negotiating a collective
bargaining agreement with the union representing Stelco Fasteners' approximately
350 employees. By September 30, 1994 the Company also had an opportunity to
assess the loss of business resulting from the notice sent to the customers of
Stelco Fasteners in June, 1994 and in receiving confirmation that Stelco
Fasteners' major customers would continue doing business with Stelco Fasteners.
In the period September 30, 1994 to December 14, 1994, the Company
negotiated in good faith with Stelco to complete its due diligence and to
finalize definitive agreements and in the interim successfully operated Stelco
Fasteners and its business.
On December 15, 1994, Stelco purported to deem the transaction to be
abandoned and proceeded to remove all documents from trust and to assert
management control of Stelco Fasteners.
On December 17, 1994 the Company obtained a temporary court order
requiring both Stelco and the Company to remove themselves from operating
control of Stelco Fasteners pending the determination of a motion for an interim
and interlocutory injunction which would prohibit Stelco from, among other
things, exercising any powers as owner and controlling shareholder of Stelco
Fasteners, pending trial. On January 5, 1995, the motion was not granted,
however, in his oral reasons, Mr. Justice Kent indicated that based on the
evidence before him, it appeared that there were substantial issues to be tried.
The Company also commenced an action against Stelco on December 20,
1994 to obtain a declaration that it is the rightful owner of 75% of the common
shares of Stelco Fasteners and for damages and is presently pursuing this
action. The Company is not presently in any position to predict the conclusion
of this pending litigation.
RECENT DEVELOPMENTS - PROPOSED ACQUISITION OF STEEN CONTRACTORS LTD.
The Company has entered into a letter of intent with respect to a proposed
acquisition of Steen Contractors Ltd. ("Steen"), a company headquartered in
Toronto, Ontario which provides engineering and construction services. This
acquisition is subject to the completion of definitive agreements and to the
Company completing due diligence and being satisfied of the financial condition
of Steen. The proposed acquisition, subject to adjustment, would aggregate
approximately Cdn. $6.39 million for an initial 75% equity interest in Steen.
The remaining 25% would be purchased over a two year period at a price based on
the net book value of Steen as of December 31, 1996 and 1997, respectively.
The Company is currently reviewing the business and operations of Steen and
there can be no assurances as to the completion of this acquisition.
DIVESTITURE OF CANADIAN FASTENER BUSINESSES AND STEEL SERVICE CENTER.
Pursuant to an agreement dated as of July 1, 1994, the Company divested its
Canadian commodity fastener distribution businesses that were formerly carried
on by Edinov and its subsidiaries. The divestiture was completed on December
22, 1994 and the Company sold all of the shares that it held in Edinov and all
of the shares of George Hegedus Enterprises Ltd., Atto-Renaud Industries Inc.
and Specialty Fasteners Ltd. which are owned directly or indirectly by Edinov.
In consideration for the sale of
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these securities, the Company received an aggregate Cdn $1,000,000 in cash and
Cdn $5,135,000 in preferred shares of 3091473 Canada Inc., the company that
acquired Edinov. The preferred shares of 3091473 Canada Inc. bear a cumulative
dividend equal to the bank prime rate at the beginning of each fiscal year and
are secured by a pledge of all of that company's assets. The preferred shares
issued to the Company by the acquiror of its fastener distribution businesses
are redeemable at varying amounts annually through to the year 2009, commencing
at Cdn $250,000 in 1995 and 1996 and Cdn $350,000 each year thereafter.
In December 1994, Dominion Bridge also sold its steel service center
division that was operated in the Province of Nova Scotia for gross proceeds of
Cdn $925,000.
DESCRIPTION OF CONSTRUCTION PRODUCTS AND SERVICES SEGMENT
GENERAL DESCRIPTION OF BUSINESS. Dominion Bridge is a multi-trade
general industrial and infrastructure contractor in Canada with its headquarters
in Lachine, Quebec and facilities throughout Canada. Its capabilities include
project and construction management, infrastructure engineering and turnkey
projects. Dominion Bridge participates in both new construction and
repair/maintenance of industrial and energy plants, large commercial or
industrial structures, and heavy engineered products, such as bridges and sports
stadiums.
Dominion Bridge has been constructing major projects since 1882. It has
designed and constructed bridges, the steel frames for power plants, steel
mills, sports stadiums, high rise office towers, and process plants. Many of
Dominion Bridge's projects are Canadian landmarks.
Dominion Bridge's services include steel erection, heavy rigging,
mechanical and electrical installation, pipefitting, mill-wrighting, and
construction management. Dominion Bridge also manufactures heavy engineered
products such as bridges, pressure vessels, container cranes, conveyor systems,
and hydraulic gates.
Dominion Bridge's facilities are equipped to pre-blast all structural
shapes and plate sizes, to saw, shear, punch, drill, and flame cut all
structural shapes and all sizes of plate material.
Dominion Bridge's plate shops include rolls for cold plate up to 4
inches thick and hot plate up to 6 inches thick and hydraulic presses of up to
400 tons. The machine shops are equipped with medium and heavy lathes, milling
machines, boring machines and planing machines. The assembly shops are equipped
to pre-heat, post-heat and perform several types of welding, including manual
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and semi-automatic, with state of the art welding equipment. Dominion Bridge's
equipment also includes several cranes with capacity up to 165 tons, hoisting
and rigging equipment with capacity up to 150 tons, boom trucks, compressors,
welding equipment and barges.
Dominion Bridge's facilities are equipped to receive and ship material
via road and railroad and the Lachine facilities are accessible via the Lachine
Canal to the St. Lawrence Seaway for shipments by barge.
Dominion Bridge maintains a Quality Verification Program which is
certified to meet applicable quality standards.
BACKLOG. As at the date of this Prospectus, the Company had confirmed
contracts for approximately $85 million to be completed over the next two
years. This figure excludes the joint venture arrangements in the Far East,
which are described in the section "Activities in the Far East", due to project
financings required to be implemented by Dominion Bridge and its prospective
partners.
SUPPLIERS. The principal raw material in most of Dominion Bridge's
projects is steel. Steel utilized by Dominion Bridge is supplied by Canadian
mills as well as imported from Europe and Japan. The Company is not dependent
on any single supplier for its raw materials. Although the price of steel
fluctuates, substantially all of Dominion Bridge's steel requirements are
purchased for specific projects and the cost of steel is reflected in the price
of the project. As a policy, Dominion Bridge does not maintain significant raw
material inventory not allocated to specific projects.
EMPLOYEES. As of the date of this Prospectus, Dominion Bridge employed
approximately 1,500 persons, of which approximately 68% are members of a labor
union. Dominion Bridge (Lachine), with its approximately 300 employees,
recently concluded a new collective bargaining agreement which expires in three
years. Dominion Bridge's Manitoba operations with its approximately 40
employees have a collective agreement in place until March, 1997. Dominion
Bridge has not suffered any work stoppages during the last five years and
believes its labor relations are good.
HEALTH AND SAFETY. Health and safety records of contractors continues
to be an important decision criteria of project promoters and owners in the
awarding of contracts. The primary responsibility for safety is that of the
various project managers. Dominion Bridge also employs Safety and Quality
Assurance Managers.
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MARKETING. Dominion Bridge obtains most of its projects by competitive
bid. Dominion Bridge employs a full-time marketing work force. Dominion Bridge
also engages agents and consultants to enhance its in-house marketing
capabilities.
Dominion Bridge has developed an extensive construction cost database,
which allows Dominion Bridge to calculate construction costs from the limited
engineering details typically available at bid time. Management believes this
database provides an important competitive advantage in that it enables Dominion
Bridge to quickly react in the generally short bid periods that characterize the
current marketplace.
FACILITIES. Dominion Bridge owns and operates manufacturing facilities
in four of the Provinces of Canada. In each of these facilities, Dominion
Bridge is equipped to receive and ship material via road and rail. In the case
of the Lachine (Montreal) facility, the Company can ship by water as it has
access to international waterways via the St. Lawrence Seaway.
The largest of the four manufacturing facilities is the 400,000 square
foot facility, located on 40 acres of land in a heavy industrial park in
Lachine, near downtown Montreal, Quebec.
The second largest is a 29 acre site, also in a heavy industrial park,
in Winnipeg, Manitoba. The main building on this particular site is a 150,000
square foot fabrication shop which houses most of Dominion Bridge's bridge
building activity.
In Regina, Saskatchewan, Dominion Bridge owns a 23 acre site which
includes a 35,000 square foot heavy manufacturing facility. This facility has
general heavy manufacturing capability.
In Amherst, Nova Scotia, Dominion Bridge owns a 30,000 square foot
facility from which it operates its fabrication division and maintains another
office in downtown Amherst.
In Nisku, Alberta, a suburb of Edmonton, Dominion Bridge operates a
30,000 square foot manufacturing facility from leased premises. The major
activity in this particular facility is pipe spooling work for the oil and gas
market.
In addition, Dominion Bridge operates construction offices from leased
premises in the following locations: Richmond, British Columbia; Calgary,
Alberta; Nisku, Alberta; Regina, Saskatchewan; Winnipeg, Manitoba; Oakville,
Ontario and Sudbury, Ontario.
Dominion Bridge has pledged and mortgaged all of its fixed and other
assets as security for a debenture held by UDIL. This
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debenture secures any and all indebtedness that may be due by Dominion Bridge
to UDIL including payments made by UDIL under Letters of Credit and guarantees
to which UDIL is a party. The debenture provides that Dominion Bridge may not
dispose of its land and buildings nor pledge its inventories or receivables
without the consent of UDIL, except in the ordinary course of Dominion Bridge's
business. The security interests in favor of UDIL will be discharged upon
redemption, conversion or purchase of the outstanding preferred shares of
Dominion Bridge owned by UDIL. Reference is made to "Description of Business -
Dominion Bridge" and note 6 to the Company's consolidated financial statements
for the year ended September 30, 1994.
COMPETITION. The markets in which Dominion Bridge participates are
highly competitive. Many of its competitors are substantially larger, with
greater financial, marketing and other resources than those of the Company. In
some instances, Dominion Bridge may be limited in its ability to compete for
large projects by its limited bonding ability. UDIL has agreed to continue its
corporate guaranty of Dominion Bridge's performance bonds which were in
existence as of the date of acquisition but is not obligated to guarantee any
performance bonds with respect to future projects. As has been the past
practice, Dominion Bridge will bid for projects it cannot handle individually as
a part of a consortium.
DESCRIPTION OF FASTENERS SEGMENT
GENERAL. Cedar Group, Inc., through subsidiaries and one of its
recently created divisions, manufactures and distributes specialty fasteners.
PRINCIPAL OPERATIONS. The Company's subsidiary, Unimetric which is
70% owned, manufactures and markets high grade stainless steel custom designed
fastener systems for the aerospace and industrial sectors.
In its fastener distribution operations, which are principally conducted
by two operating subsidiaries, M.S.W. International, Inc. and Banyan Fastener
Corp., the Company acts as an importer and distributor of primarily ferrous
standard industrial fasteners, including nuts, bolts, flat washers, lock
washers, sheet metal screws, machine screws and other standard fasteners, which
are used in a variety of applications in the construction, agricultural,
automotive, appliance, hardware and marine industries, among others.
SUPPLIERS. The Company purchases most of its raw materials, such as
aluminum, steel alloys and other metals, from United States
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sources in an effort to decrease shipping costs. The Company is not dependent
on any single supplier for its raw materials. In addition, to meet its supply
requirements for commodity fasteners, the Company imports fasteners,
principally from the Far East. Most of the Company's suppliers for its
commodity fastener requirements in the United States are located in Taiwan.
Because a substantial portion of the Company's supplies of commodity fasteners
are from non-United States vendors, the Company accordingly has historically
been subject to the risk of doing business abroad, including adverse
fluctuations in currency exchange rates, changes in import duties or quotas,
transportation costs, labor disputes and strikes. The occurrence of any one or
more of the foregoing could adversely affect the distribution of commodity
fasteners by the Company in the United States. The Company has divested itself
of its Canadian commodity fasteners business.
MARKETING. The Company seeks to establish close project-driven
relationships with key customers. It intends to do so by positioning itself to
major energy-sector customers at the project-manager level rather than through
purchasing agents. The Company will continue to pursue this strategy when
soliciting new customers, seeking to establish long-term relationships based on
service and expert advisory support.
INVENTORY PRACTICES. Specialty fasteners are obtained in sufficient
volume to meet customers' anticipated needs. The Company is in the process of
installing electronic data interface with key customers which are anticipated to
improve just in time delivery of inventory to customers as well as provide
greater interaction with customers in general.
COMPETITION. In the specialty fastener product groups, the Company
seeks to distinguish itself by timely delivery and customized products.
In these product groups, the Company faces competition from several major public
companies and a number of privately held companies. In the commodity fastener
segment, competition is principally price driven and the Company competes with a
large number of distributors of commodity fasteners on both a regional and
nationwide basis. Some competitors have greater resources, personnel, expertise
and financial capabilities than those of the Company.
EMPLOYEES. Following the divestiture of the Company's Canadian
commodity fastener operations the Company employed in its remaining fastener
subsidiaries a total of 35 full-time employees, 30 in distribution and
manufacturing and 5 in management and administration.
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The Company has never had a labor-related work stoppage, and the Company
believes that its relations with its employees are satisfactory.
ACTIVITIES IN THE FAR EAST.
Dominion Bridge, the Company's principal operating subsidiary, has
formalized agreements or reached agreements in principle with respect to six
large scale infrastructure projects in the Province of Sichuan in the Peoples
Republic of China. The projects are located in the two largest cities in the
Province, namely Chengdu and Chongqing.
The City of Chengdu is the capital of the Province and is the political,
economic and cultural center of Sichuan with a population of approximately ten
million inhabitants. Chongqing has a population of approximately fifteen
million inhabitants, and in 1992 had a local economy which ranked it as fifth
among major cities in the Peoples Republic of China.
The first project involves the entry into a joint venture, with Dominion
Bridge and prospective partners owning 70% of the venture, which plans to build
and operate a 700,000 ton per year capacity cement plant with an estimated
construction cost of approximately $85 million. The Chongqing Cement Plant, a
State-owned enterprise, will own the remaining 30% of the joint venture.
The second project involves Dominion Bridge and prospective partners
entering into a joint venture with the Golden Summit (Group) Stock Co. Ltd. to
build another 700,000 ton per year capacity cement plant in Emei City, a suburb
of Chengdu. The estimated total cost of this project is approximately $85
million.
The third project involves an arrangement with Chengdu Huaxi Electric
Power (Group) Inc. to build a 200 MW pumped hydro storage facility. The fourth
project involves the financing and construction of a 46.83 kilometer express
toll highway between the cities of Chengdu and Jiangyan, a joint venture
arrangement between the Bureau of Communications of Chengdu Municipality and
Dominion Bridge, with an estimated project cost of $90 million.
In addition to the above, Dominion Bridge has, as its fifth project,
signed an agreement to assemble the consortium to finance and build the first
phase of the Chengdu Metro and Light Rail System, with the first phase
consisting of 25 kilometers of track with eleven station stops. The agreement
in principle grants to Dominion Bridge full rights for the financing, design,
construction, operation and management of the first phase of the Chengdu Metro
and Light Rail System, a multi-year project which is
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estimated to cost approximately $600 million. The metro system will also
involve a joint venture arrangement which will be 30% owned by the City of
Chengdu and 70% by Dominion Bridge and prospective partners.
The sixth project entered into by Dominion Bridge involves a joint
venture with the China Real Estate Development Company of Chengdu to build
low-income housing in the City of Chengdu. The land area proposed to be
developed consists of 100 acres and is anticipated to cost approximately $14
million. The China Real Estate Development Company has covenanted to purchase
from the joint venture all deliverable units which remain unsold within ninety
days of their completion at a 16% premium to the per unit construction cost
price.
Dominion Bridge plans to transfer its interest in the joint venture
projects described above into a special purpose company to be formed expressly
to hold its interests in the joint ventures. Dominion Bridge anticipates
managing, operating and overseeing the various joint venture projects. In this
connection, Dominion Bridge has engaged N.M. Rothschild & Sons Limited
(specifically their Singapore, Hong Kong and Toronto offices) and Smith Newcourt
Far East Limited to advise in relation to the structuring, equity and project
financing of the various joint venture projects.
The above arrangements contemplate Dominion Bridge and its prospective
private sector partners holding a minimum 70% joint ownership interest in the
various projects. The arrangements respecting the projects outlined above are at
a preliminary stage and details will have to be worked out between Dominion
Bridge and the partners that it will require for the various projects. In
addition, financing arrangements will have to be finalized respecting the
various projects and there is no assurance that Dominion Bridge will be able to
retain the requisite strategic partners to commence and complete any of the
projects that are the subject of the various arrangements indicated above.
DESCRIPTION OF PROPERTY
Dominion Bridge owns four principal manufacturing facilities in Lachine,
Quebec; Winnipeg, Manitoba; Regina, Saskatchewan and Amherst, Nova Scotia and
leases a manufacturing facility in Nisku, Alberta. In addition, Dominion Bridge
operates construction offices from leased premises in Richmond, British
Columbia; Calgary, Alberta; Oakville, Ontario.
The Lachine plant, located near Montreal, is a 400,000 square foot
manufacturing facility located on 40 acres in a heavy
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industrial park. The Winnipeg facility houses a 150,000 square foot
fabrication shop located on 29 acres where most of Dominion Bridge's bridge
building activities are located.
Unimetric operates from leased premises in East Providence, Rhode
Island. M.S.W. International, Inc. and Banyan Fastener Corp. have leased
distribution facilities in Illinois and Texas.
The only properties which account for 10% of the Company's consolidated
total assets are the Lachine and Winnipeg facilities, which are owned free of
encumbrance except the lien in favor of UDIL. See "Description of
Business--Dominion Bridge" and "Description of Business--Facilities" and Note 6
to the Company's consolidated financial statements. These properties are
valued in accordance with the purchase method of accounting at their fair
market value on the date of acquisition, March 9, 1994, and are depreciated
for accounting purposes on the straight line method over their estimated
useful life of 40 years. Taxes on these properties are approximately Cdn
$433,708 and Cdn $262,512 for the Lachine and Winnipeg plants, respectively.
The Company believes its facilities are adequate for its current use and has
no planned capital improvement plan for the facilities.
It is the opinion of management that the properties are adequately
covered by insurance.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
BACKGROUND
COMBINATION WITH EDINOV. On August 31, 1992, the Company and its only
two operating subsidiaries at the time, M.S.W. International, Inc. and Banyan
Fastener Corp., filed for protection under Chapter 11 of the United States
Bankruptcy Code (the "Bankruptcy Code").
On June 25, 1993, the Company filed an amended plan of reorganization
and disclosure statement as required by the Bankruptcy Code. Included as an
integral part of the plan was an agreement, also dated June 25, 1993, between
the Company and Edinov Corporation, a Canadian corporation which was publicly
traded in Canada ("Edinov"). The agreement stipulated that, upon the date the
reorganization plan became effective and pursuant to a Plan of Arrangement under
the Business Corporations Act (Canada), the Company would issue 3,945,064 shares
of Common Stock to Edinov's shareholders in exchange for all the then issued and
outstanding common shares of Edinov. Concurrent with this issuance, the Company
would cancel 2,774,126 (93.04%) of its then-outstanding shares.
On September 30, 1993, the reorganization plan became effective and the
Plan of Arrangement was approved by the Supreme Court of British Columbia. As a
result, as of that date, Edinov's shareholders obtained control of the Company.
Accordingly, for accounting purposes, Edinov was considered the continuing
entity, and the related transactions under the Bankruptcy Code were accounted
for as a recapitalization of Edinov. The acquisition of the Company by Edinov
was accounted for under the purchase method of accounting.
Since the acquisition of the Company on September 30, 1993, the end of
Edinov's fiscal year, the combination of the two companies only affected the
presentation of the consolidated balance sheet of the Company as of that date.
The results of operations of the Company, as presented for the fiscal
year ended September 30, 1993 ("Fiscal 1993") do not include those of the
historic operations of the Company, prior to the September 30, 1993 Plan of
Arrangement, for those periods in accordance with the purchase method of
accounting which was used to record the combination of the two companies.
1994 ACQUISITIONS. During Fiscal 1994, the Company acquired initially
an 85% equity interest in Dominion Bridge (later increased to 100%) and a 70%
equity interest in Unimetric. In
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addition, during Fiscal 1994 the Company believes that it acquired a 75% equity
interest in Stelco Fasteners, however, the Stelco Fasteners acquisition is the
subject of litigation in Ontario.
DOMINION BRIDGE. On April 8, 1994, the Company completed the
acquisition of majority ownership of Dominion Bridge, which previously operated
as a division of UDIL. The acquisition became effective on March 9, 1994, from
an accounting point of view. Pursuant to the agreement with UDIL, UDIL
transferred substantially all of the assets, liabilities and the business of
its Dominion Bridge division into Dominion Bridge in exchange for all of the
common shares and Cdn $18,338,000 of Dominion Bridge's Class A Preferred
Shares. Immediately after such transfer, UDIL sold the Company 85% of the
common shares of Dominion Bridge in consideration for an aggregate price of
Cdn $5,000,000.
Simultaneously with the purchase of the Dominion Bridge common shares,
the Company contributed Cdn $2,000,000 in cash to Dominion Bridge in exchange
for Class B Preferred Shares of Dominion Bridge.
Both the Class A Preferred Shares and the Class B Preferred Shares pay
dividends at the rate of 7.5% per annum, payable quarterly. Class B Preferred
Shares held by the Company are redeemable only after UDIL no longer owns any
Class A Preferred Shares or common shares of Dominion Bridge.
The Class A Preferred Shares held by UDIL as initially structured were
convertible into the Company's Common Stock at a rate of Cdn $6.00 per share.
The Company has a call option after two years to purchase (or to cause Dominion
Bridge to redeem) the Class A Preferred Shares at the rate of Cdn $2,000,000 per
year. UDIL also has a put option whereby after two years UDIL shall have the
right to put the Class A Preferred Shares to Dominion Bridge at the rate of Cdn
$2,000,000 per year. The Company also has the right on any day that the market
value of the Company's Common Stock equals or exceeds Cdn $8.00 to exchange all
or any part of the Class A Preferred Shares held by UDIL for shares of the
Company's Common Stock at a specified exchange rate. The minimum conversion
value must equal the initial face value of the Class A Preferred Shares plus a
15% premium. In the event that the Company issues shares of Common Stock in a
public offering, the cash proceeds are required to be utilized in the first
instance to pay off one-third of UDIL's remaining Class A Preferred Shares.
On October 21, 1994, the Company agreed to acquire from UDIL the
Dominion Bridge common and Class A Preferred Shares for an aggregate price of
Cdn. $18 million. As of the date of this Prospectus, the Company has paid Cdn.
$8,299,000, transferred the assets and received all of the common shares of
Dominion Bridge held by UDIL and Cdn. $8,785,000 face value of the Class A
25
<PAGE> 29
Preferred Shares. The remaining balance of Class A Preferred Shares of
Dominion Bridge held by UDIL may be purchased by the Company at face value
plus a 15% premium at any time to March 31, 1995. In December, 1994, Cdn.
$2,700,000 face value of the Class A Preferred Shares of Dominion Bridge were
sold at the same price by the Company to Groupe Fidutech International, Inc.
("GFI"). SEE CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. This sale
enabled the Company to raise the funds required to complete the acquisition of
these Class A Preferred Shares from UDIL.
Subsequently, the Cdn. $2,700,000 face value of Class A Preferred
Shares acquired by GFI were converted, in accordance with the terms of the Class
A Preferred Shares, into 450,000 shares of Common Stock of the Company.
Further to the understanding reached on October 21, 1994, the Company is
currently structuring an agreement with UDIL pursuant to which UDIL will be
issued up to a maximum of 1,592,167 shares of Common Stock of the Company along
with a cash payment of Cdn. $2 million in exchange for all of the remaining
Class A Preferred Shares of Dominion Bridge. The up to 1,592,167 shares of
Common Stock issuable to UDIL are being qualified under this Prospectus.
STELCO FASTENERS LTD. On June 2, 1994, the Company entered into a
letter of intent with Stelco Inc. and Stelco Fasteners Ltd. pursuant to which
the Company agreed to invest Cdn. $2 million into Stelco Fasteners in exchange
for 75% of the issued and outstanding common shares of Stelco Fasteners Ltd.
On July 4, 1994, Stelco transferred ownership of 75% of the common shares of
Stelco Fasteners to the Company and handed over management and control of
Stelco Fasteners Ltd. to the Company's principals. The certificates
representing the shares and other documents were placed in trust pending
completion of the Company's due diligence and its assessment of Stelco
Fasteners. On December 15, 1994, Stelco Inc. purported to deem the transaction
to be abandoned and proceeded to remove all documents from trust. The Company
has commenced legal proceedings to obtain a declaration that it is the owner of
75% of the common shares of Stelco Fasteners Ltd. and for damages and is
presently pursuing this action. The Company is not presently in any position to
predict the conclusion of this pending litigation. The Company has made no
investment in Stelco Fasteners Ltd and has no adverse financial risk in the
outcome of the litigation. Reference is made to "Business of the Company -
Stelco Fasteners Ltd."
UNIMETRIC CORPORATION. On April 26, 1994, the Company acquired 70% of
the issued common stock of Unimetric from AHG, effective January 1, 1994.
Unimetric is a manufacturer of specialty fasteners for the aerospace and
industrial sectors.
The purchase price for the Company's equity interest in Unimetric was US
$1,050,000, consisting of a cash payment of $600,000, the issuance of 88,968
shares of Common Stock of the Company and $200,000 for shares of Unimetric 4%
non-cumulative, non-voting preferred shares. In addition, $949,871 of
indebtedness of Unimetric to AHG was converted into Unimetric 4% non-
cumulative, non-voting preferred shares, which were later exchanged for 338,333
shares of Common Stock of the Company, of which 60,000 shares are to be held in
escrow until Unimetric has earned revenues of $350,000 from the manufacture and
sale of aeronautical rivets. In addition, 71,174 shares of Common Stock were
issued on conversion of $200,000 of the remaining Preferred Shares of Unimetric.
ACCOUNTING TREATMENT FOR 1994 ACQUISITIONS. The acquisitions of
Dominion Bridge and Unimetric were accounted for under the purchase method of
accounting. Pursuant to the respective purchase agreements, the Dominion Bridge
and Unimetric transactions have been included in the interim results of the
Company from March 9, 1994 and January 1, 1994, respectively.
26
<PAGE> 30
DIVESTITURE OF CANADIAN FASTENER BUSINESSES AND STEEL SERVICE CENTER.
Pursuant to an agreement dated as of July 1, 1994, the Company divested its
Canadian commodity fastener distribution businesses that were formerly carried
on by Edinov. The divestiture was completed on December 22, 1994 and the
Company sold all of the shares that it held of Edinov and all of the shares of
George Hegedus Enterprises Ltd., Atto-Renaud Industries Inc. and Specialty
Fasteners Ltd. which are owned directly or indirectly by Edinov. In
consideration for the sale of these securities, the Company received an
aggregate Cdn $1,000,000 in cash and Cdn $5,135,000 in preferred shares of
3091473 Canada Inc. The preferred shares of 3091473 Canada Inc. bear a
cumulative dividend equal to the bank prime rate at the beginning of each fiscal
year and are secured by a pledge of all of that company's assets. The preferred
shares issued to the Company by the acquiror are redeemable at varying amounts
annually through to the year 2009, commencing at Cdn $250,000 in 1995 and 1996
and Cdn $350,000 each year thereafter.
In December 1994, Dominion Bridge also sold its steel service center
division that was operated in the Province of Nova Scotia for gross proceeds of
Cdn $925,000.
RESULTS OF OPERATIONS
Net sales for Fiscal 1994 of $67,959,000 were 870% higher than those for
Fiscal 1993 of $7,003,000. This increase is primarily attributable to the
purchase of Dominion Bridge.
The following summary of sales revenues and operating income for the
fiscal years ended September 30, 1993 and 1994 provides an analysis by segment
over the relevant periods as follows:
<TABLE>
<CAPTION>
Construction
1993 Engineering Fasteners Total
- ---- ----------- --------- -----
($US 000's) ($US 000's) ($US 000's)
<S> <C> <C> <C>
Sales - 7,003 7,003
Segment Operating
Income - (240) (240)
====== ======= =======
1994
- ----
Sales 58,181 9,778 67,959
====== ======= =======
Segment Operating
Income 860 (194) 666
====== ======= =======
</TABLE>
27
<PAGE> 31
<TABLE>
<S> <C> <C> <C>
Variance
- --------
Sales 58,181 (2,775) 60,956
====== ======= ======
Segment Operating
Income 860 46 906
====== ======= ======
</TABLE>
In accordance with technical requirements for consolidation under U.S.
GAAP, the Company was obligated to consolidate the results of Dominion Bridge
as of March 9, 1994 and not as at January 1, 1994 as the parties presumed. In
regard to the acquisition of 75% of the common shares of Stelco Fasteners and
in light of the events described in this Report under "Description of Business
- - Stelco Fasteners Ltd.", the Company has adopted a conservative approach
because of the litigation commenced by the Company, and has not consolidated
the financial results of Stelco Fasteners to cover the period July 4, 1994 to
September 30, 1994. On a pro forma basis (as though the Dominion Bridge and
Unimetric acquisitions had occurred as of October 1, 1992), net sales declined
to $118,999,000 from $136,049,000. The decline would be attributable to the
Company streamlining its operations and being more selective in the projects
that it undertakes with a view to increasing its profit margins.
Gross margin as a percentage of sales was 12.7% in Fiscal 1994 versus
32.1% in Fiscal 1993. Gross margin declined due to the change in the Company's
business as a result of the acquisition of Dominion Bridge.
Selling, general and administrative expenses increased 225.8% from
$2,488,000 in Fiscal 1993 to $8,107,000 in Fiscal 1994. The increase was
primarily due to acquisition and financing costs related to Dominion Bridge and
to the overall increase in the size of the Company.
A comparative analysis of Dominion Bridge, the Company's principal
operating subsidiary, is as follows:
In 1993, Dominion Bridge before the Company obtained control, lost
$11,293,000 on sales of $125,994,000, and in 1992, it lost $2,926,000 on sales
of $174,672,000. Dominion Bridge, for the seven months since acquisition by
the Company realized an operating profit of $860,000 on sales of $58,181,000
thus achieving an effective turnaround of over $12,153,000 in operating income.
The main components of this turnaround consist of:
28
<PAGE> 32
a) A reduction in variable costs as a percentage of
sales from 88.4% in 1993 to 76.3% in 1994, reflecting
significant productivity improvements.
b) Significant improvement in gross margin, from a 2.3%
gross margin in 1993 to 10.3% in 1994. In addition,
Dominion Bridge's backlog at September 30, 1994 is
estimated to reflect margins consistent with those
achieved in 1994.
An unaudited pro forma combined Summary of Operations for the year
ended September 30, 1994 and 1993 as though each of the acquisitions had been
made on October 1, 1992 is included as note 3 to the Consolidated Financial
Statements of the Company. The pro forma summary indicates sales of
$118,999,000 and $136,049,000 in 1994 and 1993, respectively, resulting in
losses of $2,450,000 and $12,214,000. The pro forma losses were significantly
reduced in 1994 due to a rationalization in selling, general and administrative
expenses. Dominion Bridge's selling, general and administrative expenses
included in the consolidated results of the Company at September 30, 1994
totalled $5,137,000 covering the seven month consolidated period. Accordingly,
during this period these expenses approximated $734,000 per month. In the
proforma comparative period before the acquisition, these expenses were at the
rate of $888,000 per month. The average reduction of approximately $154,000
per month is directly attributable to the elimination of administrative
personnel, the closure of an administrative office in the Province of Ontario,
and the reduction of travel and related expenses.
The following is a summary of the proforma information for the fiscal
year ended September 30, 1994 with respect to the Company and the acquisitions
of Dominion Bridge and Unimetric.
<TABLE>
<CAPTION>
Dominion
Audited Bridge Unimetric
Results 5 Months 3 Months
Year Ended Oct 1/93 Oct 1/93 Proforma
Sept 30/94 to Mar 8/94 to Dec 31/93 Sep 30/94
---------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Sales 67,959 50,478 562 118,999
--------- -------- --------- ---------
Cost of Sales (59,295) (49,378) (456) (109,129)
S.G.&A. (8,107) (4,439) (155) (12,701)
--------- -------- --------- ---------
(67,402) (53,817) (611) (121,830)
--------- -------- --------- ---------
Profit (Loss) From Operations 557 (3,339) (49) (2,831)
Interest Expenses, Net (341) (735) 0 (1,076)
Other Income 767 1,033 0 1,800
--------- -------- --------- ---------
Net Income (Loss) Before Income Taxes
and Minority Interest 983 (3,041) (49) (2,107)
--------- -------- --------- ---------
INCOME TAXES
Current (70) 0 0 (70)
Deferred (230) 322 (6) 86
--------- -------- --------- ---------
(300) 322 (6) 16
--------- -------- --------- ---------
Net Income (Loss) Before
Minority Interest 683 (2,719) (55) (2,091)
--------- -------- --------- ---------
</TABLE>
29
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C>
Minority Interest-Dividends on Preferred
Shares (248) (496) 0 (744)
Minority Interest-Common Stock (19) 408 (4) 385
--------- -------- --------- ---------
(267) (88) (4) (359)
--------- -------- --------- ---------
Net Income (Loss) 416 (2,807) (59) (2,450)
========= ======== ========= =========
</TABLE>
Exchange rates used in this discussion for the translation of
financial results for the periods 1992, 1993 and 1994 from Canadian to U.S.
dollars were Cdn. $1.00 equals U.S. $.8276, U.S. $.7753 and U.S. $.7387,
respectively.
If the Company is successful in the Stelco litigation, discussed
previously, revenues of the Company will be significantly higher in the future
from those reported in Fiscal 1994 and Fiscal 1993. Reference is made to
"Business of the Company - Stelco Fasteners Ltd."
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of operating capital have been the
private placements of the Company's Common Stock and cash generated by
operations.
In order to complete the transactions for the purchase of Dominion
Bridge and Unimetric, the Company obtained approximately $10.9 million in cash
in March 1994 through a private placement of the Company's securities
consisting of 3,354,346 shares of Common Stock and 3,354,346 two year share
purchase warrants. The purchase warrants were exercisable on a one to one
basis for shares of Common Stock at US $3.75 for the first year and at US $4.00
thereafter.
In July and August 1994, all of the 3,354,346 warrants were exercised
at US $3.75, thereby adding approximately $12.6 million to the Company's
capital resources.
On October 21, 1994, the Company agreed to acquire from UDIL the
Dominion Bridge common and Class A Preferred Shares for an aggregate price of
Cdn. $18 million (U.S. $13 million). As of the date of this Prospectus, the
Company has paid UDIL Cdn $8,299,000 (U.S. $6,224,000), acquiring all of the
common shares and Cdn $8,785,000 (U.S. $6,588,000) of the Class A Preferred
Shares. The remaining balance of the Class A Preferred Shares of Dominion
Bridge held by UDIL may be purchased by the Company at their face value plus a
15% premium at any time to March 31, 1995. In December 1994, Cdn. $2,700,000
face value of the Class A Preferred Shares of Dominion Bridge were sold at the
same price by the Company to GFI. SEE CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS. This sale enabled the Company to raise the funds
30
<PAGE> 34
required to complete the acquisition of the Class A Preferred Shares from UDIL.
All other conditions to the Class A Preferred Shares remain in effect.
Subsequently, the Cdn. $2,700,000 face value of Class A Preferred
Shares acquired by GFI were converted, in accordance with the terms of the
Class A Preferred Shares, into 450,000 shares of Common Stock of the Company.
Further to the understanding reached on October 21, 1994, the Company
is currently structuring an agreement with UDIL pursuant to which UDIL will be
issued up to a maximum of 1,592,167 shares of Common Stock of the Company along
with a cash payment of Cdn. $2 million in exchange for all of the remaining
Class A Preferred Shares of Dominion Bridge. The up to 1,592,167 shares of
Common Stock issuable to UDIL are being qualified under this Prospectus.
The Company's cash at December 31, 1994 was $5,578,000. As a result,
the Company will require additional sources of financing which may include the
issuance of equity or debt securities in private placement transactions and/or
public offerings. There can be no assurance that such financing will be
available or, if available, will be available on acceptable terms.
Furthermore, the Company is in the process of having its Dominion
Bridge subsidiary negotiate and attempt to put in place a $10 million line of
credit for working capital purposes. Although the Company anticipates the line
of credit to be in place in the second quarter of Fiscal 1995, there can be no
assurance that the proposed line of credit by Dominion Bridge will be able to
be obtained.
The Company is subject to a risk of claims for product liability. If
a product liability claim exceeding the Company's insurance coverage or its own
available resources were to be successfully asserted against the Company, it
could have a material adverse effect on the Company's financial condition. The
Company has general liability insurance of approximately $5 million per
occurrence, with a maximum of $5 million of claims payable during any policy
year. There is no assurance that such coverage will be sufficient to fully
insure against claims brought against the Company and its subsidiaries, or that
the Company will be able to maintain such insurance at affordable rates or
obtain additional insurance covering the products.
EFFECT OF INFLATION
The Company's operating costs are subject to general economic and
inflationary pressures. While operating costs have increased
31
<PAGE> 35
during the past years, the Company does not believe that its operations have
been significantly affected by inflation.
THREE MONTHS ENDED DECEMBER 31, 1994 V. 1993 (UNAUDITED)
RESULTS OF OPERATIONS
Consolidated net sales for the three months ended December 31, 1994
increased by $31.4 million over the comparative period for 1993.
Consolidated sales for the three months ended December 31, 1994 were
$34,387,000 vs. $3,011,000 in the comparative prior period resulting in gross
profit of $2,489,000 and $755,000, respectively. The differences are
significant as a result of the acquisitions that took place prior to the fiscal
year ended September 30, 1994. In this connection, sales general and
administration expenses for the three months ended December 31, 1994 of
$1,322,000 compared to $504,000 for the comparative period in 1993 reflect the
increased scale of operations following the acquisitions of Dominion Bridge,
Inc. and Unimetric Corporation.
During the quarter ended December 31, 1994, the Company had interest
income resulting from the net positive cash position throughout the
post-acquisition period.
Minority interests consisted of the remaining balance of Cdn.
$9,553,000 of Class A Preferred shares in Dominion Bridge, Inc. and
AHG-France's ownership of the common stock of Unimetric Corporation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of operating capital have
traditionally been the private placements of its shares of Common Stock and
cash generated from operations. Although no private placements were undertaken
during the quarter, the Company received Cdn. $2,700,000 from the sale of Cdn.
$2,700,000 face value of Class A Preferred Shares of Dominion Bridge, Inc.
The Company's cash position at the end of December 31, 1994 was
$6,281,000. As at March 21, 1995, the Company had $6,000,000 cash in its
treasury.
The $10 million line of credit that the Company previously disclosed
that it was in the process of putting in place for its Dominion Bridge
subsidiary has not as yet been finalized.
32
<PAGE> 36
Although the Company anticipates the line of credit will be put in
place shortly, there can be no assurance that the proposed line of credit by
Dominion Bridge will be able to be obtained.
33
<PAGE> 37
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of
Common Stock by the Selling Security Holders. Other than with respect to
ordinary brokerage commission or other costs of sale, the costs of this
offering, including among others, printing, blue sky and professional fees,
estimated at $75,000, will be borne entirely by the Company. See "SELLING
SECURITY HOLDERS."
The gross proceeds which may be realized by the Company upon the
exercise of one hundred (100%) percent of the Ladenburg Warrants will be
$725,000 and $83,280 if one hundred (100%) percent of the Class A Warrants are
exercised. Inasmuch as the Company has received no firm commitments for their
exercise, there can be no assurance that any or a substantial portion of the
Ladenburg Warrants or the Class A Warrants will be exercised.
Management cannot predict with any certainty the amount of proceeds,
if any, which may be generated from the exercise of the warrants. The net
proceeds which may be realized by the Company, if any, upon the exercise of the
Ladenburg Warrants will not be utilized for any specific purpose other than to
contribute to the Company's working capital and be used to continue the
operations of the Company in accordance with the business strategy identified
by management.
34
<PAGE> 38
SELLING SECURITY HOLDERS
The shares of Common Stock of the Company offered by this Prospectus
are being sold for the account of the selling security holders identified in
the following table (the "Selling Security Holders").
The Selling Security Holders are offering for sale an aggregate of
6,708,692 shares of Common Stock previously issued by the Company in certain
private placement transactions, 200,000 shares of Common Stock which may be
issued pursuant to the Ladenburg Warrants and 1,592,167 shares of Common Stock
which have been or may be issued in the future upon exercise of certain Class A
Preferred Shares of the Company's subsidiary, Dominion Bridge.
The following table sets forth the number of shares of Common Stock
being held of record or beneficially (to the extent known by the Company) by
such Selling Security Holders and provides (by footnote reference) any material
relationship between the Company and such Selling Security Holder, all of which
is based upon information currently available to the Company.
The shares of Common Stock offered by the Selling Security Holders may
be offered for sale from time to time at market prices prevailing at the time
of sale or at negotiated prices, and without payment of any underwriting
discounts or commissions except for usual and customary selling commissions
paid to brokers or dealers.
<TABLE>
<CAPTION>
Number of
Number of Shares of Number of
Shares of Common Shares of
Common Stock Common
Stock to be Stock Percentage Percentage
Before Sold In After Before After
Name Offering Offering Offering Offering Offering
- ---- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Porter Bibb 61,540 61,540 -0- * -0-
Herbert M. Pearlman 20,000 20,000 -0- * -0-
Polaris Partners, L.P. 160,000 160,000 -0- 1.1 -0-
Kenneth Modell 136,000 62,000 74,000 * *
USA Small Cap Company 360,000 360,000 -0- 2.5 -0-
Kevin C. Griffin 32,000 32,000 -0- * -0-
Edward P. Flynn 32,000 32,000 -0- * -0-
Debbie F. Jelinek 20,000 20,000 -0- * -0-
Elizabeth Cummins 20,000 20,000 -0- * -0-
Bonnie Jasinsky Trust 20,000 20,000 -0- * -0-
Betsky Finkle Trust 20,000 20,000 -0- * -0-
S. Marcus Finkle 100,000 100,000 -0- * -0-
Jerome J. Giuliano 30,770 30,770 -0- * -0-
John Miller 52,000 32,000 20,000 * *
Yakil Polak 138,460 138,460 -0- * -0-
Theodore Allocca 32,270 30,770 1,500 * *
Weiss, Peck & Greer
Trustee 140,000 140,000 -0- * -0-
</TABLE>
35
<PAGE> 39
<TABLE>
<S> <C> <C> <C> <C> <C>
Nicholas J. Miller
Trust 15,400 15,400 -0- * -0-
Charles W. Miller 15,400 15,400 -0- * -0-
Kate L. Miller Trust 15,400 15,400 -0- * -0-
Helen E. Miller Trust 15,400 15,400 -0- * -0-
Pierre LaFleur 20,000 20,000 -0- * -0-
Gary Albert 30,000 30,000 -0- * -0-
Oak Hall Investors, L.P. 62,000 62,000 -0- * -0-
Oak Hall Equity 399,540 399,540 -0- 2.7 -0-
Sylvia Goldberg 50,000 32,000 18,000 * *
Alfred Partners, L.P. 144,600 144,600 -0- 1 -0-
Gotham Capital III, L.P. 470,784 470,784 -0- 3.2 -0-
Edward B. Grier, III 92,306 92,306 -0- * -0-
Miriam Gold 53,500 50,000 3,500 * *
Baninsa International,
Ltd. 320,000 320,000 -0- * -0-
Ultra Cerberus 245,400 245,400 -0- 1.7 -0-
Cerberus International 370,000 370,000 -0- 2.5 -0-
SBT-BATIF 860,460 860,460 -0- 5.9 -0-
Hilltop Partners, L.P. 400,000 400,000 -0- 2.7 -0-
Hilltop Offshore Limited 40,000 40,000 -0- * -0-
Wolfson Equities 160,000 160,000 -0- 1.1 -0-
Yakil Polak 123,078 123,078 -0- * -0-
Ilene G. Rosenthal 2,000 2,000 -0- * -0-
Harvey A. Brode 4,000 4,000 -0- * -0-
Michael Rosenthal 6,000 6,000 -0- * -0-
James T. Stevens 20,000 20,000 -0- * -0-
Steve Dougherty 28,000 28,000 -0- * -0-
Kevah Konner 32,000 32,000 -0- * -0-
Leonard Barshack 32,000 32,000 -0- * -0-
Michael A. Dritz 64,000 64,000 -0- * -0-
Douglas Hirsch 64,000 64,000 -0- * -0-
Daniel Nir 64,000 64,000 -0- * -0-
Smith New Court,
Carl Marks, Inc. 616,000 616,000 -0- 4.2 -0-
Ethos Partners, L.P. 351,384 351,384 -0- 2.4 -0-
Zelus International Ltd. 264,000 264,000 -0- 1.8 -0-
Ladenburg, Thalmann 200,000 200,000 -0- 1.4 -0-
United Dominion
Industries Limited 1,592,167 1,592,167 -0- 10.9 -0-
</TABLE>
*Less than 1%.
36
<PAGE> 40
PLAN OF DISTRIBUTION
The Selling Security Holders are offering shares of Common Stock for
their own account, and not for the account of the Company. The Company will
not receive any proceeds from the sale of the shares of Common Stock by the
Selling Security Holders.
Each Selling Security Holder will, prior to any sales, agree (a) not
to effect any offers or sales of the Common Stock in any manner other than as
specified in this Prospectus, (b) to inform the Company of any sale of Common
Stock at least one business day prior to such sale and (c) not to purchase or
induce others to purchase Common Stock in violation of Rule 10b-6 under the
Exchange Act.
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Security Holders acting as principals for their
own accounts in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Security Holders or the purchasers of the Common Stock.
Under the Exchange Act, and the regulations thereunder, any person
engaged in a distribution of the shares of Common Stock of the Company offered
by this Prospectus may not simultaneously engage in market making activities
with respect to the Common Stock of the Company during the applicable "cooling
off" periods prior to the commencement of such distribution. In addition, and
without limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Rule 15g-9, and Rules 10b-6 and
10b-7, which provisions may limit the timing of purchases and sales of Common
Stock by the Selling Security Holder.
The Company will use its best efforts to file, during any period in
which offers or sales are being made, one or more post-effective amendments to
the Registration Statement of which this Prospectus is a part to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
37
<PAGE> 41
LEGAL PROCEEDINGS
From time to time disagreements with individual employees and
disagreements as to the interpretation, effect or nature of individual
agreements arise in the ordinary course of business and may result in legal
proceedings being commenced against the Company.
Other than as set out below, the Company is not currently involved in
any litigation or proceedings which are material, either individually or in the
aggregate, and, to the Company's knowledge, no other legal proceedings of a
material nature involving the Company are currently contemplated by any
individuals, entities or governmental authorities.
The Company is currently pursuing legal recourse against Stelco for
actions taken by Stelco in 1994. See "DESCRIPTION OF BUSINESS - 1994
ACQUISITIONS - STELCO FASTENERS LTD."
38
<PAGE> 42
DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Michel L. Marengere 48 Chairman, Chief Executive
Officer and Director
Nicolas Matossian 53 President and Chief Operating
Officer
Rene Amyot 68 Director
Micheline Prud'homme 49 Secretary and Director
J. Arthur Gelinas 54 Vice President, Corporate
Services
Robert Chartier 50 Vice President, Corporate
Comptroller
Jacques R. Delorme 51 Vice President, Marketing
Reynald Lemieux 67 Director
Rt. Hon. Marc Lalonde 65 Director
</TABLE>
Family Relationships
Michel L. Marengere, Chairman, Chief Executive Officer and
a Director of the Company, is related by marriage to Micheline Prud'homme, a
director of the Company.
Business Experience
The following is a summary of the business experience of the Company's
directors and executive officers during the past five years and their
directorships, if any, with companies with a class of securities registered
with the Securities and Exchange Commission:
Michel L. Marengere was elected Chairman and Chief Executive Officer
of the Company effective as of October 7, 1993. Mr. Marengere graduated from
the University of Ottawa in business administration. During the previous five
years Mr. Marengere was President and Chief Executive Officer of Edinov. Prior
thereto, he has served as Assistant to the President of several large
39
<PAGE> 43
international companies in strategic planning and development, mergers and
acquisitions and corporate reorganization.
Nicolas Matossian was elected President and Chief Operating Officer of
the Company in April, 1994. Mr. Matossian graduated from Harvard University
with an MBA and acquired his PhD in finance and economics from McGill
University. Prior to joining the Company, Mr. Matossian was the founding
partner of ERA, an economic and management consulting firm which executed
Canadian and international projects for the public and private sector since
1973 for clients such as First National City Bank, Standard Oil, Gulf Oil,
Union Carbide, Royal Trust, Government of Canada, the U.S. Government and the
Auditor General of Canada. He was one of the main architects behind the
Alberta Heritage Development Corporation and was the Managing Director of the
Manitoba Development Corporation. He has been involved in the formulation and
the marketing of public issues, private placements, limited partnerships and
mergers and acquisitions for a number of emerging high growth enterprises in
the resource and technology fields.
Rene Amyot was elected Director of the Company in January, 1994. Mr.
Amyot graduated in law from Laval University in Quebec City and in
international law from Harvard University. Mr. Amyot is a Queen's Counsel in
Canada, a member of the Order of Leopold in Belgium, a former Attache
d'Affaires to the King of Belgium and to the Vatican. Mr. Amyot was formerly
Chairman of Air Canada, and has served on the Board of Directors of the Bank of
Nova Scotia, Rothman's International and several other large international
companies.
Micheline Prud'homme was elected Director and Secretary in January,
1994. Ms. Prud'homme is President and Director of Services Multimodes MPH
Inc., a firm specializing in the design of customized uniforms.
J. Arthur Gelinas was elected Vice President of the Company effective
October 7, 1993. Mr. Gelinas graduated from Laval University with a Masters
Degree in Commercial Sciences. Prior to his election as Vice President, Mr.
Gelinas was the founding President of Administratique Inc., a management
consulting company involved in the financial and administrative services for
large corporations such as Industrial Life, Systems Development Corporation,
Datacrown and the Industrial Acceptance Corporation.
Robert Chartier was elected Vice President, Corporate Comptroller of
the Company on October 1, 1994. Mr. Chartier graduated in accounting from
Ecole des Hautes Etudes Commerciales de Montreal. He holds a C.A. and prior to
joining the Company practiced as a Chartered Accountant in his own firm since
1971.
40
<PAGE> 44
Through a public accounting firm, acting as Partner and then Senior Partner, he
has provided clients with advisory services in financial management, budgeting
and cash control.
Jacques R. Delorme was elected Vice President, Marketing of the
Company on October 1, 1994. Mr. Delorme graduated from Ryerson Institute in
Toronto in computers, attended Concordia University in Montreal taking courses
in economics and marketing and also attended Babson Institute in Chicago
majoring in corporate planning and marketing strategies. He was the founder of
Burotal 2000 Inc., a consulting company involved in the development of computer
projects, both in Canada and internationally. He was also the founding
President of Servidel Inc. a firm that specialized in the development of
strategic alliances and transfer of technologies on an international scale in
countries such as Hungary, France, Zaire, the Philippines, the United States
and Canada.
Reynald Lemieux was elected Director of the Company in February, 1995.
He graduated in commerce from Laval University and has been involved in real
estate as an owner and developer for the past forty years. He is currently a
director of a number of corporations in the real estate sector and is also the
President and majority shareholder of Placement R.N.S. Inc., a firm
specializing in real estate and other investments. Mr. Lemieux is a member of
the Audit Committee of the Board of Directors.
The Honourable Marc Lalonde was elected as a director of the Company
on March 3, 1995. Mr. Lalonde graduated in law from the University of Ottawa
and received a Masters degree in law from the University of Montreal. He also
attended Oxford University and received a Masters degree in political and
economic sciences. During 1968-1972, Mr. Lalonde served as a director in the
office of the then Canadian Prime Minister, the Honourable Pierre E. Trudeau.
He was elected a member of the Canadian Parliament in 1972 for the District of
Outremont and was also appointed Minister of Health and Welfare. Mr. Lalonde
was then appointed Minister responsible for the Status of Women in Canada
during 1974 to 1979, and in 1977 and 1978 he also served as Minister
responsible for Federal Provincial Relations. In 1978 he was appointed
Minister of Justice and Attorney General of Canada, and in 1980 Mr. Lalonde was
appointed Minister of Energy, Mines and Resources. Mr. Lalonde served as
Canada's Finance Minister in the period 1982-1984, and in December 1989 he
received from the Governor General of Canada the Order of Canada.
In 1984 Mr. Lalonde joined the law firm of Stikeman, Elliott, an
international law firm having offices in Montreal, Ottawa, Toronto, Vancouver,
Calgary, New York, London, Hong Kong, Taipei,
41
<PAGE> 45
Paris, Washington and Budapest. In addition to his law practice, Mr. Lalonde
is a member of the Board of Directors of Citibank Canada, Camdev Inc.,
North-South Institute, Ressource Orleans Inc., the Hotel Dieu Hospital in
Montreal, and is also a member of the International Advisory Counsel and the
Presidium of Ukraine. In 1992, he received an honourary doctorate degree from
the University of Limbourg in Maastricht for his innovative contributions to
the health sector.
Compliance with Section 16(a) of the Exchange Act
To the knowledge of the Company, each of the Company's directors,
executive officers and 10% beneficial owners has complied with the requirements
of Section 16(a) of the Securities Exchange Act of 1934, except that each of
the directors and executive officers of the Company inadvertently failed to
timely file a Form 3, Initial Statement of Beneficial Ownership, except for
Messrs. Lemieux and Lalonde, Mr. Marengere failed to timely file Forms 4 with
respect to grants of shares or options in November 1993, April 1994, July 1994
and September 1994, Ms. Prud'homme failed to timely file a Form 4 with respect
to grants of shares and options in November 1993 and Mr. Matossian failed to
timely file a Form 4 with respect to a grant of shares in April 1994.
42
<PAGE> 46
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1995, certain
information concerning the stock ownership of all persons known by the Company
to own beneficially more than 5% of the Company's outstanding Common Stock,
based upon filings with the Securities and Exchange Commission, as well as the
beneficial ownership of such Common Stock, as of such date, of all officers and
directors, individually and as a group.
<TABLE>
<CAPTION>
Name and Address of Shares Owned Beneficially Percentage of
Beneficial Owner and of Record Outstanding Shares(1)
- ------------- ------------------------- ---------------------
<S> <C> <C>
Michel Marengere 1,580,383(2) 10.8%
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
Rene Amyot 85,000(3) (4)
2960 Blvd. Laurier
Suite 500
Sante-Foy
Quebec, Canada GIY451
Micheline Prud'homme 80,300(5) (4)
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
Nicolas Matossian 115,000 (4)
500 Rue Notre Dame
Lachine
Quebec, Canada H8S 2B2
Reynald Lemieux 0 0
1340 Duquet
Sillery
(Quebec), Canada G1S 1A9
Rt. Hon. Marc Lalonde 0 0
1155 Rene-Levesque Blvd. West
36th Floor
Montreal, Quebec, Canada H8S 2B2
Ethos Capital 1,475,844 10.21%
95 Wall Street
New York, NY 10005
All Directors and Officers 1,860,383(6) 12.8%
as a group (6 persons)
</TABLE>
- ---------------------------
(1) Except as otherwise indicated, percentages are presented after
rounding to the nearest tenth, and include the total number of shares
outstanding and the number of shares which each person has the right
to acquire, within 60 days through the exercise of options, pursuant
to Item 403 of Regulation
43
<PAGE> 47
S-B and Rule 13d-3(d)(1), promulgated under the Securities Exchange
Act of 1934. Percentages for the total of all persons and the total
of all officers and directors include all outstanding shares and all
shares which such persons have the right to acquire within 60 days.
(2) Includes 1,631,766 shares held of record by Fidutech Technologies,
Inc. as to which Mr. Marengere has shared voting and investment power.
Mr. Marengere is the sole shareholder of Gestion Edinov Inc. and
Services M.L. Marengere, Inc. which own, in the aggregate, 75% of
Fidutech. Also includes 175,000 immediately exercisable stock options
to purchase shares of the Company's Common Stock held of record by Mr.
Marengere. Does not include shares which may be deemed beneficially
owned by Mr. Marengere by virtue of his relationship to Ms.
Prud'homme.
(3) 50,000 of which represent immediately exercisable options to purchase
shares of the Company's Common Stock.
(4) Less than 1%
(5) 75,000 of which represent immediately exercisable options to purchase
shares of the Company's Common Stock. Does not include shares which
may be deemed beneficially owned by Ms. Prud'homme by virtue of her
relationship to Mr. Marengere.
(6) The shareholders of the Company have authorized the issuance of
800,000 shares of Common Stock to the two executive officers of the
Company and 535,000 shares of Common Stock to the non-executive
officers and key employees of the Company exercisable over a three
year period at a price of $4.125 per share pursuant to the 1995 Stock
Option Plan. The securities issuable upon exercise of the options
are not included herein as the options are not effective unless they
are evaluated and approved by a Compensation Committee of the Board of
Directors.
44
<PAGE> 48
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue twenty million shares of Common
Stock, of which 14,524,625 were outstanding as of March 24, 1995.
Holders of Common Stock have equal rights to receive dividends when,
as and if declared by the Board of Directors, out of funds legally available
therefor. Holders of Common Stock have one vote for each share held of record
and do not have cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of the Company
to share ratably in the net assets available for distribution, subject to the
rights, if any, of holders of any preferred stock then outstanding. Shares of
Common Stock are not redeemable and have no pre-emptive or similar rights. All
outstanding shares of Common Stock are fully paid and non-assessable.
PREFERRED STOCK
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 5,000,000 shares of Preferred Stock, $.001
par value per share (the "Preferred Stock"), in one or more series, and to fix,
as to any such series, the dividend rate, redemption prices, preferences on
liquidation or dissolution, sinking fund terms, if any, conversion rights,
voting rights, and any other preference or special rights and qualifications.
Shares of Preferred Stock issued by the Board of Directors could be
utilized, under certain circumstances, to make an attempt to gain control of
the Company more difficult or time consuming. For example, shares of Preferred
Stock could be issued with certain rights which might have the effect of
diluting the percentage of Common Stock owned by a significant stockholder or
issued to purchasers who might side with management in opposing a takeover bid
which the Board of Directors determines is not in the best interest of the
Company and its stockholders. This provision may be viewed as having possible
anti-takeover effects. A takeover transaction frequently affords stockholders
the opportunity to sell their shares at a premium over current market prices.
The Board of Directors has not authorized any series of Preferred Stock, and
45
<PAGE> 49
there are no agreements, understandings or plans for the issuance of any
Preferred Stock.
CLASS A WARRANTS
Each Class A Warrant entitles the holder to purchase one (1) share of
Common Stock at $6.00 per share. All, but not less than all of the Class A
Warrants are subject to redemption at the option of the Company at $.001 per
Class A Warrant. Upon thirty (30) days' written notice, if the average of the
closing bid price of the Common Stock, as reported on NASDAQ (or the last sale
price if the Common Stock is listed or a national securities exchange, or
included in the NASDAQ National Market System), should have equaled or exceeded
$7.50 per share for a period of ten (10) consecutive trading days ending within
twenty (20) days prior to the call for redemption. The exercise price of the
Class A Warrants is subject to adjustement under certain circumstances.
The Class A Warrants may be exercised by filling out and signing the
appropriate form attached to the Warrant and mailing or delivering the Class A
Warrant to the Warrant Agent in time to reach the Warrant Agent on or before
its expiration date of September 30, 1995 (the "Termination Date") accompanied
by payment of the full warrant price thereof. Payment of the warrant price
must be made in United States currency (by check, cash or bank draft) payable
to the order of the Company. Common Stock certificates will be issued as soon
as practicable after exercise and payment of the warrant price.
The Class A Warrants are subject to a Warrant Agreement between the
Company and Continental Stock Transfer & Trust Company, who serves as the
Warrant Agent hereunder. Copies of the Warrant Agreement are available for
inspection upon request. As long as any Class A Warrants remain outstanding,
the Class A Warrants shall provide for adjustment of the exercise price and for
a change in the number of shares issuable upon exercise of the Class A Warrants
so the Common Stock to be issued upon the exercise of the Class A Warrants will
be protected against dilution in the event of stock splits, readjustments or
reclassifications.
The Company has reserved a sufficient number of shares of Common Stock
for issuance upon exercise of the Class A Warrants and such shares, when
issued, will be fully paid and non-assessable. The shares so reserved are
included in the Registration Statement of which this Prospectus is a part, and
the Company will use its best efforts to maintain an effective Registration
Statement (by filing any ncecessary post-effective amendments or supplements to
the Registration Statement) throughout the term of the Class A Warrants with
respect to the Class A Warrants and the shares of Common Stock issuable upon
exercise thereof.
The holders of Class A Warrants are not entitled to vote, to receive
dividends or to exercise any of the rights of the holders of shares of Common
Stock for any purpose until such Class A Warrants have been duly exercised and
payment of the warrant price has been made.
For the life of the Class A Warrants, the holders thereof are given
the opportunity to profit from the rise, if any, in the market value of the
Common Stock at the expense of the remaining holders of the Common Stock.
During the outstanding period of the Class A Warrants, the Company might be
deprived of favorable opportunities to secure additional equity capital, if
needed, for its business. A holder of a Class A Warrant may be expected to
exercise the Class A Warrant at a time when the Company, in all likelihood,
would be able to obtain equity capital, if needed, by a public sale of new
securities on terms more favorable than those provided in the Class A Warrants.
The Class A Warrants were issued prior to the Company's filing for
bankruptcy protection under Chapter 11 of the Bankruptcy Code.
Pursuant to the Plan of Reorganization, 93.04% of the Class A Warrants
outstanding on its effective date were cancelled and the remaining 13,880 Class
A Warrants are included in the Registration Statement of which this Prospectus
is a part.
LIMITED GRANT OF REGISTRATION RIGHTS.
The Company has granted registration rights to the Selling Security
Holders.
In connection with any such registration, the Company shall have no
obligation: (i) to assist or cooperate in the offering or disposition of such
shares; (ii) to indemnify or hold harmless the holders of any such shares or
any underwriter designated by such holders; (iii) to obtain a commitment from
an underwriter relative to the sale of any such shares; or (iv) to include such
shares within an underwritten offering of the Company. Accordingly, the
Company's only obligation is to include any such shares in a Registration
Statement to be filed by the Company. The Company will assume no obligation or
responsibility whatsoever to determine a method of disposition for such shares
or to otherwise include such shares within the confines of the registered
offering.
TRANSFER AGENT
Pacific Corporate Trust of Vancouver, British Columbia, serves as
transfer agent for the Common Stock. Continental Stock Transfer & Trust
Company, located in New York, serves as a co-transfer agent for the Common
Stock.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION, THE BY-LAWS AND
DELAWARE LAW.
The Company has a classified Board of Directors pursuant to which the
Board is divided into three classes, and the term of office of one class
expires in each year.
The Company is governed by the provisions of Section 203 of the
General Corporation Law of the State of Delaware (the "GCL"), an anti-takeover
law. In general, the law prohibits a public Delaware corporation from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. "Business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with its affiliates and
associates, owns (or within three years, did own) fifteen percent or more of
the corporation's voting stock.
46
<PAGE> 50
The classified Board of Directors, the super majority voting
provisions, the provisions authorizing the Board to issue Preferred Stock
without stockholder approval, and the provisions regarding certain business
combinations in the Certificate of Incorporation and under the GCL could have
the effect of delaying, deferring or preventing a change in control of the
Company or the removal of existing management. A takeover transaction
frequently affords stockholders the opportunity to sell their shares at a
premium over current market prices.
The Company has adopted the provisions of Section 102(b)(7) of the GCL
which eliminate or limit the personal liability of a director to the Company or
its stockholders for monetary damages for breach of fiduciary duty under
certain circumstances. Furthermore, under Section 145 of the GCL, the Company
may indemnify each of its directors and officers against his expenses
(including reasonable costs, disbursements and counsel fees) in connection with
any proceeding involving such person by reason of his having been an officer or
director to the extent he acted in good faith and in a manner reasonably
believed to be in, or not opposed to the best interest of the Company, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The determination of whether indemnification
is proper under the circumstances, unless made by a court, shall be determined
by the Board of Directors.
47
<PAGE> 51
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A former subsidiary of the Company leased land and buildings in Pointe
Claire, Quebec from Fidutech Technologies Inc. a principal stockholder of the
Company. During Fiscal 1994, the Company paid Fidutech $41,000 with respect to
the lease. Management believes that the terms of the lease were no more or
less favorable than those that could have been negotiated with an unrelated
party.
At September 30, 1994, Mr. Marengere was indebted to the Company in
the amount of $565,000. This outstanding debt has been satisfied in full.
During the year the Company advanced $1,734,000 to a shareholder,
Fidutech Technologies, Inc. and its affiliates. Of this amount, $1,155,000 was
assumed by the acquirer of Edinov as of July 1, 1994. The balance of $781,000
is non-interest bearing and has no fixed repayment terms.
In December, 1994, the Company sold to Groupe Fidutech International,
Inc. ("GFI") Cdn. $2,700,000 of Class A Preferred Shares of Dominion Bridge
which it held. Subsequently, pursuant to the terms of the Class A Preferred
Shares, GFI converted the Cdn. $2,700,000 of Class A Preferred Shares into
450,000 shares of common stock of the Company. Mr. Marengere who is the
Chairman and Chief Executive Officer of the Company, is also the Chairman of
GFI and through his share ownership, beneficially owns 75% of GFI.
Additionally, Mr. Amyot who is a director of the Company, is also a director of
GFI and beneficially owns 25% of GFI.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the over-the-counter market
and is included for quotation on the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ").
Since November 4, 1993, the Company's Common Stock has also traded on the
Vancouver Stock Exchange.
The following table sets forth certain information with respect to the
high and low market prices of Cedar Group, Inc.'s Common Stock during Fiscal
1993 (February 1, 1992 to January 31, 1993), the transition period from January
31, 1993 to September 30, 1993, Fiscal 1994 (October 1, 1993 to September
30, 1994), the first quarter of Fiscal 1995 and January 1, 1995 to February 28,
1995.
48
<PAGE> 52
<TABLE>
<CAPTION>
FISCAL 1993
- -----------
<S> <C> <C>
First Quarter 1 7/16 11/16
Second Quarter 1 5/8
Third Quarter 5/16 1/8
Fourth Quarter 7/32 3/16
January 31 - September 30, 1993
- -------------------------------
First Quarter 3/16 1/16
Second Quarter 11/32 3/16
Third Quarter* 3 1/8 2 1/2
FISCAL 1994
- -----------
First Quarter 3 2 1/2
Second Quarter 4 5/8 2
Third Quarter 5 7/8 3 1/2
Fourth Quarter 7 3/4 5 1/8
FISCAL 1995
- -----------
First Quarter 8 5/32 5 3/4
Second Quarter 6 3/8 3 5/8
April, 1995 5 5/8 4 3/8
</TABLE>
*As of September 30, 1993, the Company's Plan of Reorganization became
effective and the Company changed its fiscal year-end to September 30. As of
such date, each share of Common Stock then outstanding was reduced to
approximately 1/20th of a new share of Common Stock. The trading prices prior
to September 3, 1993 do not take into account the reduction effective on
September 30, 1993 pursuant to the plan of arrangement.
During Fiscal 1992 and the first two quarters of Fiscal 1993, the
Company's Common Stock was traded on the NASDAQ National Market System. On
August 2, 1993, as a result of the Company's bankruptcy, the Company was
delisted from NASDAQ. Subsequently, the Company's Common Stock was traded
through the OTC electronic bulletin board until March 14, 1994, when the Common
Stock began trading on NASDAQ's Small-Cap Market. On September 1, 1994, the
Company's Common Stock was once again listed on NASDAQ's National Market
System.
The high and low prices for the Company's Common Stock are rounded to
the nearest 1/32. Such prices are inter-dealer prices without retail mark-ups
or commissions and may not represent actual transactions.
49
<PAGE> 53
Holders
As of February 22, 1995, the number of holders of record of the
Company's Common Stock was 515. The Company believes the number of beneficial
owners of the Common Stock exceeds 1,050.
Dividends
The Company has not paid any cash dividends to date and does not
anticipate or contemplate paying cash dividends in the foreseeable future. It
is the present intention of management to utilize all available funds for
working capital.
EXECUTIVE COMPENSATION
The following table discloses, for the fiscal year ended September 30,
1994, individual compensation information relating to the Chief Executive
Officer and the President and Chief Operating Officer of the Company. Neither
of the named individuals were employed by the Company prior to October 1, 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
====================================================================================================================================
Long Term Compensation
Annual Compensation --------------------------------------
Awards Payouts
- ------------------------------------------------------------------------------------------------------------------------------------
Other Restricted
Annual Stock Options/S LTIP All Other
Name and Compen- Award(s) ARS Payouts Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) ($) (#) ($) sation ($)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michel L. Marengere, 1994 0(1) 0 0 0 175,000 0 228,883(2)
Chairman of the
Board of Directors,
Chief Executive
Officer and Director
- ------------------------------------------------------------------------------------------------------------------------------------
Nicolas Matossian, 1994 0(1) 0 0 0 0 0 130,000(3)
President and Chief
Operating Officer
====================================================================================================================================
</TABLE>
- -------------------------
(1) Although Mr. Marengere and Mr. Matossian did not receive a Salary for
the fiscal year ended September 30, 1994, effective February 1, 1995
under the terms of employment agreements, Messrs. Marengere and
Matossian are entitled to receive a base salary of $360,000 and
$240,000, respectively.
(2) In consideration of guaranteeing the obligations of Edinov and its
affiliates prior to the September 1993 plan of arrangement, and the
50
<PAGE> 54
raising of private placement funds and reorganization with the
Company, for the acquisition of Dominion Bridge and for arranging
funding for the Company and for Edinov, Mr. Marengere received 175,866
shares of Common Stock of the Company at a price of Cdn $1.25 per
share, which at the time of issuance were valued at approximately US
$153,883. He was issued an additional 25,000 shares of Common Stock
at a price of US $3.00 per share in connection with a private
placement of the Company's shares.
(3) In consideration of Mr. Matossian assisting with the acquisition of
Dominion Bridge and Unimetric and the raising of private placement
funds, Mr. Matossian received an aggregate 40,000 shares of Common
Stock of the Company, which at the time of issuance were valued at
approximately US $130,000. In August, 1994 Mr. Matossian was issued
10,000 shares of Common Stock pursuant to the exercise of previously
held share purchase warrants.
The following table discloses individual grants of stock options and
freestanding SARs made to the named executive officers.
<TABLE>
<CAPTION>
GRANT OF STOCK OPTIONS
=============================================================================================================================
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
=============================================================================================================================
PERCENT OF
NUMBER OF TOTAL OPTIONS/
SECURITIES SARS GRANTED
UNDERLYING FOR EMPLOYEES EXERCISE OR
OPTIONS/SARS IN FISCAL BASE PRICE
GRANTED (#) YEAR ($/SH) EXPIRATION DATE
NAME (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michel L. Marengere 175,000 100% $2.68 November 19, 1995
- -----------------------------------------------------------------------------------------------------------------------------
Nicolas Matossian 0 0 0 0
=============================================================================================================================
</TABLE>
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES TABLE
The following table shows information regarding the exercise of stock
options during Fiscal 1994 by the named executives and the
51
<PAGE> 55
number and value of any unexercised stock options held by them as of September
30, 1994:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN 1994 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES TABLE
- ---------------------------------------------------------------------------------------------------------------
Number of
Unexercised
Shares Options/SARs Value of Unexercised
Acquired on Value at FY-end (#) in-the-money Options/
Exercise Realized Exercisable/ SARs at FY-end ($)
Name (#) ($) Unexercisable Exercisable/Unexercisable(1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Michel L. Marengere 0 $0 175,000/0 $843,500/$0
Nicolas Matossian 0 $0 0/0 $0/$0
===============================================================================================================
</TABLE>
- -----------------------
(1) The value of the options is calculated based upon the market price of
the Company's Common Stock as of September 30, 1994, $7.50 per share
as reported on NASDAQ.
The Company has no retirement, pension or profit-sharing plans
covering its officers and directors and does not contemplate implementing any
such plans at this time. Although the Company has no formal bonus
arrangements, bonuses may be granted at the discretion of the Board of
Directors.
EMPLOYMENT ARRANGEMENTS
Effective February 1, 1995, the Company agreed in principle to enter
into agreements with the following individuals to serve as executive officers,
officers or as key employees of the Company: Michel L. Marengere as Chairman
and Chief Executive Officer; Nicolas Matossian as President and Chief Operating
Officer; J. Arthur Gelinas as Vice-President, Corporate Services; Robert
Chartier as Vice-President, Corporate Controller, Jacques Delorme as
Vice-President, Marketing, Michael Tinmouth as Vice-President, Project
Financing and Chris Theodoropoulos as Vice-President and General Counsel.
All of the employment agreements will contain "change in control"
language which provides the executive with certain benefits if the executive is
terminated for "good reason", as that term is defined in the employment
agreements, following a change in control of the Company. The employment
agreements will provide that a "change in control" shall mean a change in
control of a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A, as in effect on the date hereof,
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); provided, however that, without limitation, such a change in
control shall be deemed to have
52
<PAGE> 56
occurred if (A) any "Person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), except for Michel L. Marengere, or a company controlled
by him, is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 10% or more of the combined voting power
of the Company's then outstanding securities; (B) there occurs a contested
proxy solicitation of the Company's stockholders that results in the contesting
party obtaining the ability to vote securities representing 20% or more of the
combined voting power of the Company's then outstanding securities; (C) there
occurs a sale, exchange, transfer or other disposition of substantially all of
the assets of the Company to another entity, except to an entity controlled
directly or indirectly by the Company, or a merger, consolidation or other
reorganization of the Company in which the Company is not the surviving entity,
or a plan of liquidation or dissolution of the Company other than pursuant to
bankruptcy or insolvency laws is adopted; or (D) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the Company's
stockholders, of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were directors at the
beginning of the period. Notwithstanding the foregoing, a "change in control"
shall not be deemed to have occurred for purposes of the employment agreements
(i) in the event of a sale, exchange, transfer or other disposition of
substantially all of the assets of the Company to, or a merger, consolidation
or other reorganization involving the Company and an executive, alone or with
other officers of the Company, or any entity in which an executive (alone or
with other officers) has, directly or indirectly, at least a 25% equity or
ownership interest or (ii) in a transaction otherwise commonly referred to as a
"management leveraged buyout".
The employment agreements will be for a term of three years, ending
January 31, 1998. Under the terms of the employment agreements, Mr. Marengere
and Mr. Matossian will receive a base salary per year of $360,000 and $240,000,
respectively.
DIRECTORS' FEES
Directors of the Company who are not employees of the Company are paid
an annual stipend of $5,000, plus a fee of $500 for each Board meeting
attended.
53
<PAGE> 57
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon
for the Company by Clark, Ladner, Fortenbaugh & Young, One Commerce Square,
2005 Market Street, 22nd Floor, Philadelphia, Pennsylvania, 19103.
EXPERTS
The financial statements of the Company for the fiscal year ended
September 30, 1994 included in this Prospectus have been audited by Ernst &
Young, independent auditors, and the financial statements of the Company for
the fiscal year ended September 30, 1993 included in this Prospectus have been
audited by BDO Seidman, independent auditors, to the extent and for the periods
set forth in their reports and are incorporated herein in reliance upon such
reports given upon the authority of said firms as experts in accounting and
auditing. The financial statements of Dominion Bridge as at December 31, 1993
and for each of the years in the two year period ended December 31, 1993,
included in this Prospectus have been audited by KPMG Peat Marwick Thorne,
independent auditors and are included in this Prospectus in reliance upon the
authority of said firm as experts in accounting and auditing.
54
<PAGE> 58
[ERNST & YOUNG LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
CEDAR GROUP, INC.
We have audited the accompanying consolidated balance sheet of CEDAR GROUP,
INC. as of September 30, 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the 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 1994 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Cedar Group,
Inc. as at September 30, 1994, and the consolidated results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States.
/s/ Ernst & Young
January 11, 1995
F-1
<PAGE> 59
[BDO LETTERHEAD]
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Cedar Group, Inc.
We have audited the consolidated balance sheet of Cedar Group, Inc. (formerly
Edinov Corporation) and subsidiaries as of September 30, 1993 and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cedar Group, Inc.
and subsidiaries as of September 30, 1993 and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ BDO Seidman
December 15, 1993
F-2
<PAGE> 60
CEDAR GROUP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
As at September 30
[In thousands of U.S. dollars]
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash 5,578 1,135
Investments, at market 1,039 --
Accounts receivable, net of allowances
of $43 in 1993 and $477 in 1994 21,872 2,589
Advances to a shareholder -- 202
Current portion of assets transferred under
contractual arrangements 739 --
Due from an officer 565 --
Inventories 8,293 4,567
Prepaid expenses and other assets 2,509 193
- ------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 40,595 8,686
- ------------------------------------------------------------------------------------------------
Property, plant and equipment, net 24,957 891
Advances to a shareholder 781 --
Assets of business transferred under contractual
arrangements [preferred shares] 3,792 --
Pension assets 2,053 --
Goodwill, net of accumulated amortization
of $164 in 1993. -- 196
- ------------------------------------------------------------------------------------------------
72,178 9,773
================================================================================================
</TABLE>
F-3
<PAGE> 61
CEDAR GROUP, INC.
CONSOLIDATED BALANCE SHEET
[CONTINUED]
<TABLE>
<CAPTION>
As at September 30
[In thousands of U.S. dollars]
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable -- bank -- 4,083
Accounts payable 15,764 1,828
Accrued expenses 2,034 --
Customer advances 5,561 --
Current portion of long-term debt -- 153
- ------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 23,359 6,064
- ------------------------------------------------------------------------------------------------
Long-term debt -- 454
Deferred income taxes 4,984 --
Accrued post-retirement benefits other than pensions 518 --
Minority interest 15,464 212
- ------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value; 5,000,000 shares
authorized, none issued
Common stock, $0.001 par value; 20,000,000 shares
authorized; issued and outstanding: 13,507,918 shares
in 1994 and 5,544,532 shares in 1993 13 5
Additional paid-in capital 31,927 7,220
Deficit (1,860) (2,276)
Cumulative translation adjustment (342) (21)
- ------------------------------------------------------------------------------------------------
29,738 4,928
Subscription receivable (1,885) (1,885)
- ------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 27,853 3,043
- ------------------------------------------------------------------------------------------------
72,178 9,773
================================================================================================
</TABLE>
Commitments and contingencies [note 12]
See accompanying notes
F-4
<PAGE> 62
CEDAR GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year ended September 30
[In thousands of U.S. dollars, except per share data]
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
SALES 67,959 7,003
- ------------------------------------------------------------------------------------------------
Cost of sales 59,295 4,755
Selling, general and administrative expenses 8,107 2,488
- ------------------------------------------------------------------------------------------------
67,402 7,243
- ------------------------------------------------------------------------------------------------
Profit (loss) from operations 557 (240)
Interest expense, net (341) (230)
Other income 767 --
- ------------------------------------------------------------------------------------------------
Net income (loss) before income taxes and minority interest 983 (470)
- ------------------------------------------------------------------------------------------------
Income taxes
Current 70 --
Deferred 230 --
- ------------------------------------------------------------------------------------------------
300 --
- ------------------------------------------------------------------------------------------------
Net income (loss) before minority interest 683 (470)
Minority interest -- dividends on preferred shares (248) --
Minority interest -- common stock (19) --
- ------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 416 (470)
================================================================================================
NET INCOME (LOSS) PER COMMON SHARE
AND COMMON SHARE EQUIVALENT
Primary 0.05 (0.14)
Fully diluted 0.03 (0.14)
- ------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
AND COMMON SHARE EQUIVALENTS OUTSTANDING
Primary 8,912,000 3,457,000
Fully diluted 12,064,000 3,457,000
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-5
<PAGE> 63
CEDAR GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
<TABLE>
<CAPTION>
YEARS ENDED SEMPTEMBER 30, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON ADDITIONAL CUMULATIVE
STOCK PAID-IN TRANSLATION SUBSCRIPTION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1992 14,190,318 2,404 -- (1,806) 76 --
Issuance of common stock upon exercise of options 1,005,000 119 -- -- -- --
Issuance of common stock upon exercise of warrants 3,333,334 524 -- -- -- --
Issuance of common stock for cash 333,333 99 -- -- --
Adjustment arising from 1 for 5 share reverse
stock split and change from no par value
to $.001 par value (15,089,588) (3,143) 3,143 -- -- --
Issuance of common stock upon exercise of options 236,000 -- 398 -- -- --
Issuance of common stock upon exercise of warrants 66,667 -- 112 -- -- --
Issuance of common stock through private placement 1,204,445 2 2,349 -- -- (1,885)
Issuance of common stock for the net assets of
Cedar Group, Inc. 207,523 -- 1,089 -- -- --
Issuance of common stock for services 57,500 -- 129 -- -- --
Translation adjustments, net of income taxes
of $-0- -- -- -- -- (97) --
Net loss for the year -- -- -- (470) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1993 5,544,532 5 7,220 (2,276) (21) (1,885)
====================================================================================================================================
</TABLE>
F-6
<PAGE> 64
CEDAR GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
[DOLLAR AMOUNTS IN THOUSANDS OF U.S. DOLLARS]
[CONT'D]
<TABLE>
<CAPTION>
YEARS ENDED SEMPTEMBER 30, 1994 AND 1993
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON ADDITIONAL CUMULATIVE
STOCK PAID-IN TRANSLATION SUBSCRIPTION
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENT RECEIVABLE
$ $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 5,544,532 5 7,220 (2,276) (21) (1,885)
Issuance of common stock upon exercise of options 162,500 1 302
Issuance of common stock upon exercise of warrants 3,591,706 4 13,191
Issuance of common stock for Unimetric Corp. 88,968 -- 250
Issuance of common stock for stock issue expenses 295,000 -- --
Issuance of common stock through private placement 3,684,346 3 10,898
Issuance of common stock in repayment debt 140,866 -- 66
Translation adjustments, net of income taxes
of $-0- (321)
Net income for the year 416
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1994 13,507,918 13 31,927 (1,860) (342) (1,885)
====================================================================================================================================
</TABLE>
F-7
<PAGE> 65
CEDAR GROUP, INC.
CONSOLIDATED STATEMENT OF
CASH FLOWS
Year ended September 30
[In thousands of U.S. dollars]
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income (loss) 416 (470)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities
Depreciation and amortization 2,224 168
Common stock issued for services -- 129
Deferred income tax 230 --
Gain on sale of assets (210) (47)
Others -- net (263) --
(Increase) decrease in accounts receivable (6,594) (97)
(Increase) decrease in accounts receivable -- shareholder -- (202)
(Increase) decrease in prepaid expenses and other assets 629 50
(Increase) decrease in inventories 2,390 (414)
(Decrease) increase in accounts payable (1,529) 120
(Decrease) increase in customer advances (5,132) --
- ------------------------------------------------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (7,839) (763)
- ------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
Investment in marketable securities (1,169) --
Cash consideration paid for acquired businesses (4,550) --
Cash of acquired businesses -- 97
Advance to divested businesses (902) --
Advance to a shareholder (1,734) --
Advance to an officer (565) --
Cash payment for purchase of equipment (94) (292)
Proceeds from sale of property and equipment 604 751
- ------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (8,410) 556
- ------------------------------------------------------------------------------------------------
</TABLE>
F-8
<PAGE> 66
CEDAR GROUP, INC.
CONSOLIDATED STATEMENT OF
CASH FLOWS
[CONTINUED]
<TABLE>
<CAPTION>
Year ended September 30
[In thousands of U.S. dollars]
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 10,901 564
Proceeds from exercise of warrants 13,195 637
Proceeds from exercise of options 303 516
Net repayments on line of credit (3,408) (227)
Issue of preferred shares of subsidiary to minority interest 200 --
Payment of other obligations (592) (50)
- ------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,599 1,440
- ------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 93 (98)
- ------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 4,443 1,135
Cash, at beginning of year 1,135 --
- ------------------------------------------------------------------------------------------------
CASH, AT END OF YEAR 5,578 1,135
================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the year for:
Interest 341 229
Taxes -- --
- ------------------------------------------------------------------------------------------------
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of common stock for acquisition of businesses
Fair value of assets acquired [net of cash acquired] 2,771 4,020
Liabilities assumed and minority interest 1,721 3,028
- ------------------------------------------------------------------------------------------------
Net assets acquired 1,050 992
Cash outlays 800 --
- ------------------------------------------------------------------------------------------------
Issuance of common stock for acquisitions 250 992
================================================================================================
Preferred shares received on transfer of assets of divested businesses
Fair value of net assets divested 4,531 --
Cash received 739 --
- ------------------------------------------------------------------------------------------------
Preferred shares of the acquirer of divested businesses 3,792 --
================================================================================================
Issuance of common stock for services -- 129
- ------------------------------------------------------------------------------------------------
Issuance of common stock in repayment of debt 66 --
- ------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes
F-9
<PAGE> 67
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
1. REORGANIZATION
On September 30, 1993, the reorganization plan described below became
effective. As a result, Edinov Corporation's ["Edinov"] stockholders obtained
control of Cedar Group, Inc. and certain subsidiaries ["Cedar"]. Accordingly,
for accounting purposes, Edinov is considered the continuing entity, and the
related transactions are accounted for as a recapitalization of Edinov followed
by the issuance of new Edinov shares of common stock for the net assets of
Cedar. The acquisition of Cedar has been accounted for as a purchase.
As Cedar is the legal parent and Edinov the legal subsidiary, these
consolidated financial statements are described as Cedar Group, Inc. [the
"Company"].
On August 31, 1992, Cedar filed petitions for relief under Chapter 11 of the
federal bankruptcy laws in the United States Bankruptcy Court for the Eastern
District of Pennsylvania. Under Chapter 11, certain claims against Cedar in
existence prior to the filing date of the petitions for relief under the
bankruptcy laws are stayed while Cedar continued operations as
Debtor-in-possession.
On June 25, 1993, Cedar filed its amended plan of reorganization and disclosure
statement as required by the Bankruptcy Code. Included as an integral part of
the plan was an agreement also dated June 25, 1993 between Cedar and Edinov.
The agreement stipulated that, upon the date the reorganization plan became
effective, Cedar would issue 3,945,064 shares of common stock to the Edinov
stockholders in exchange for all outstanding shares of Edinov. Concurrent with
this issue, Cedar would cancel 2,774,126 [93.04%] of the existing outstanding
shares of Cedar. Upon completion of this transaction, Edinov stockholders
would own 95% of the outstanding shares of Cedar, and Edinov would become a
wholly owned subsidiary of Cedar.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements have been prepared by management in
accordance with accounting principles generally accepted in the United States,
the most significant of which are outlined below:
PRINCIPLES OF CONSOLIDATION
The financial statements include the accounts of the Company and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in the consolidation.
F-10
<PAGE> 68
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
CONSTRUCTION CONTRACTS
Income on construction contracts is recognized on the percentage of completion
basis. Provisions for anticipated losses on uncompleted contracts are made in
the period in which losses are first determinable. Included in accounts
receivable are unbilled receivables related to these contracts of $2,694 at
September 30, 1994.
INVENTORIES
Work in process related to construction contracts is stated at accumulated
costs less amounts charged to income based on the percentage of completion of
individual contracts. Raw materials are stated at the lower of cost [first-in,
first-out] or replacement cost. Finished goods comprise steel and steel
hardware products held for sale and are stated at the lower of cost [first-in,
first-out] or net realizable value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including assets that were acquired under
capital leases, are stated at cost. Maintenance and repairs are charged to
expense as incurred. When assets are sold or otherwise disposed of, the cost
and related accumulated depreciation are removed from their respective accounts
and the resulting gain or loss is reflected in current operations.
Depreciation is computed on the straight-line method over the estimated useful
lives of the assets, generally five to seven years for machinery and equipment
and forty years for buildings.
PENSION COSTS
The Company maintains defined benefit pension plans which cover substantially
all of its Canadian employees. Pension plan obligations are valued using the
projected benefit actuarial method and best estimate assumptions. Pension plan
assets are valued at market-related values.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company accrues for benefits such as health care and life insurance
coverage that retired employees are entitled to. The obligation is adjusted on
an annual basis to reflect the expected cost of providing post-retirement
benefits during the years an employee renders service.
F-11
<PAGE> 69
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT'D]
TRANSLATION OF FOREIGN CURRENCIES AND FOREIGN EXCHANGE CONTRACTS
All assets and liabilities of the Company's subsidiaries operating outside the
United States are translated into U.S. dollars using current exchange rates and
income statement items are translated using weighted average exchange rates for
the year. The resulting translation adjustment is included as a component of
stockholders' equity. Other foreign currency transaction gains and losses are
included in determining net income.
The Company uses forward foreign exchange contracts primarily to offset the
effects of foreign currency fluctuations related to expected
foreign-denominated receivables and payables transactions and also to hedge
firm sale and purchase commitments. Gains or losses on forward foreign
exchange contracts which hedge an identifiable foreign currency commitment are
deferred and recognized as the related transactions are settled. Gains or
losses on all other forward foreign exchange contracts, both realized and
unrealized, are recognized in determining net income as incurred.
INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" which requires that income taxes be accounted for
under the liability method. Deferred taxes reflect the tax consequences on
future years of differences between the tax bases of assets and liabilities and
their financial reporting amounts.
NET INCOME PER SHARE
Net income (loss) per common share is computed by dividing the income (loss)
applicable to common shares and common share equivalents by the weighted
average number of common shares outstanding and common stock equivalents
including the dilutive effect of options and warrants exercised during the year
between the date of issuance or opening balance sheet date and the exercise
date.
Net income per common share on a fully diluted basis assumes that dilutive
options, warrants and convertible preferred shares were converted to common
stock at either the beginning of each year or the date of issuance.
F-12
<PAGE> 70
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES
[i] ACQUISITION OF DOMINION BRIDGE INC.
Effective March 9, 1994, the Company acquired from United Dominion Industries
Limited ["UDIL"] 85% of the common stock of Dominion Bridge Inc. ["DB"], a
Canadian company engaged in construction and engineering services provided in
Canada and Asia. The acquisition has been accounted for by the purchase method
and earnings have been included in the results of operations from the date of
the acquisition.
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Current assets 23,381
Fixed assets 25,632
Other assets 3,525
- ------------------------------------------------------------------------------------------------
Total assets 52,538
- ------------------------------------------------------------------------------------------------
Current liabilities 23,765
Other liabilities 10,604
- ------------------------------------------------------------------------------------------------
Total liabilities 34,369
- ------------------------------------------------------------------------------------------------
Net assets 18,169
Preferred and common shares held by a minority shareholder 14,419
- ------------------------------------------------------------------------------------------------
NET CASH CONSIDERATION PAID 3,750
================================================================================================
</TABLE>
The acquisition was financed from existing cash holdings.
F-13
<PAGE> 71
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
The Cdn. $18,338 Class "A" Preferred Shares bearing a cumulative dividend of
7.5%, to be held by UDIL in DB are convertible into the Company's common stock
at a rate of Cdn. $6.00 per share. UDIL shall have registration rights with
respect to such shares after 12 months from the date of issuance. The Company
has a call option after two years to purchase [or to cause DB to redeem] the
Class "A" Preferred Shares at the rate of Cdn. $2,000 per year. UDIL will also
have a put option whereby after two years UDIL shall have the right to put the
Class "A" Preferred Shares to DB at a rate of Cdn. $2,000 per year. The
Company also shall have the right on any day that the market value of the
Company's common stock equals or exceeds Cdn. $8.00 to exchange all or any part
of the Class "A" Preferred Shares held by UDIL for shares of the Company's
stock at a specified exchange rate. The minimum conversion value must equal
the initial face value of the Class "A" Preferred Shares plus a 15% premium.
In the event that the Company issues common equity into the public markets
[registered public equity offerings], the cash proceeds are required to be
utilized in the first instance to pay off one-third of UDIL's remaining Class
"A" Preferred Shares.
On October 21, 1994 the Company agreed to acquire the minority holdings of
common and preferred shares of DB held by UDIL. The agreement provides that
these interests would be acquired for cash payments of Cdn. $18,000, the
transfer of assets having a book value of Cdn. $1,368 and the waiver of the
preferred dividend requirement for the Company's fourth quarter. As of January
11, 1995 the Company has paid Cdn. $8,204, transferred the assets and received
all of the common shares of DB held by UDIL and Cdn. $8,690 face value of
preferred shares. The remaining balance of preferred shares of DB held by UDIL
may be purchased by the Company at face value plus a 15% premium at any time to
March 31, 1995.
All other conditions applicable to the Class A Preferred Shares remain in
effect.
[ii] ACQUISITION OF UNIMETRIC CORPORATION
Effective January 1, 1994, the Company acquired from Ateliers de la
Haute-Garonne ["AHG"] 70% of the common stock of Unimetric Corporation
["Unimetric"], a United States manufacturer of specialty fasteners for the
aerospace and industrial market. The acquisition has been accounted for by the
purchase method and earnings have been included in the results of operations
from the date of the acquisition.
F-14
<PAGE> 72
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Current assets 1,136
Fixed assets 1,613
Other assets 22
- ------------------------------------------------------------------------------------------------
Total assets 2,771
- ------------------------------------------------------------------------------------------------
Current liabilities 539
Long-term debt 356
- ------------------------------------------------------------------------------------------------
Total liabilities 895
- ------------------------------------------------------------------------------------------------
Net assets 1,876
Preferred and common shares held by minority shareholder 826
- ------------------------------------------------------------------------------------------------
NET CONSIDERATION PAID 1,050
================================================================================================
</TABLE>
The acquisition was financed by:
<TABLE>
<CAPTION>
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Issuance of common shares 250
Cash payment 800
- ------------------------------------------------------------------------------------------------
1,050
================================================================================================
</TABLE>
The cash payment includes $200 which was invested by the minority interest in
preferred shares of Unimetric Corporation.
The 409,207 preferred shares of Unimetric which have a total face value of
$1,150 and a non-cumulative dividend of 4% to be held by AHG are convertible in
whole, but not in part into the Company's common stock on a one-for-one basis
until March 12, 1995.
F-15
<PAGE> 73
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
[iii] ACQUISITION OF CEDAR GROUP SUBSIDIARIES IN 1993
As explained in note 1, the Company is considered to have acquired the net
assets of Cedar Group, Inc. effective September 30, 1993.
These net assets include Cedar Group, Inc.'s 100% owned subsidiaries Banyan
Fastener Corp., and MSW International Inc., as well as 100% of the stock of
Cedar Warehouse Inc. and Evergreen Fastening Systems Inc., which are dormant
companies. The acquisition has been accounted for by the purchase method and
earnings have been included in the results of operations from the date of the
acquisition.
The total cost of the acquisition was allocated to the net assets acquired on
the basis of their fair value as follows:
<TABLE>
<CAPTION>
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Current assets 3,933
Fixed assets 184
- ------------------------------------------------------------------------------------------------
Total assets 4,117
- ------------------------------------------------------------------------------------------------
Current liabilities 2,976
Long-term debt 52
- ------------------------------------------------------------------------------------------------
Total liabilities 3,028
- ------------------------------------------------------------------------------------------------
NET CONSIDERATION PAID, BEING COMMON STOCK ISSUED 1,089
================================================================================================
</TABLE>
F-16
<PAGE> 74
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
Set forth below is the Company's unaudited pro forma combined summary of
operations for the years ended September 30, 1994 and 1993 as though each of
the acquisitions had been made on October 1, 1992.
<TABLE>
<CAPTION>
[In thousands except per share data] 1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales 118,999 136,049
Net loss (2,450) (12,214)
Per common share
Primary (0.27) (3.44)
Fully diluted (0.27) (3.44)
Average number of common shares and common
share equivalents outstanding
Primary 8,951,000 3,546,000
Fully diluted 8,951,000 3,546,000
- ------------------------------------------------------------------------------------------------
</TABLE>
The unaudited pro forma combined summary of operations has been prepared
utilizing the historical financial statements of the Company and the acquired
businesses. The unaudited pro forma combined summary of operations does not
purport to be indicative of the results which actually would have been obtained
if the acquisitions had been made at the beginning of the Company's 1993 year
or of future results of operations.
The unaudited pro forma combined summary of operations includes the effects of
the purchase price allocation adjustments. The purchase price allocation
adjustments include the adjustment of the net assets acquired to fair market
value and the estimated costs associated with the integration of the
businesses.
F-17
<PAGE> 75
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
3. ACQUISITIONS AND DIVESTED BUSINESSES [CONT'D]
[iv] DIVESTED BUSINESSES
Effective July 1, 1994, the Company decided to divest the Canadian commodity
fastener distribution businesses, formerly conducted by Edinov. The results of
operations to June 30, 1994 are included in the consolidated statements of
operations and cash flows.
The transaction was completed on December 22, 1994 by the receipt of Cdn.
$1,000 cash and Cdn. $5,135 preferred shares of the acquirer. No gain or loss
was recognized on the transaction. The preferred shares bear a cumulative
dividend equal to the bank prime rate at the beginning of every fiscal year
where a dividend is declared and are collateralized by a pledge of Edinov's
assets. These preferred shares are redeemable at varying amounts annually
through 2009, commencing at Cdn. $250 in 1995 and 1996 and Cdn. $350
thereafter. The Company's ability to realize the value of the preferred shares
is dependent on future operations of the divested businesses.
At September 30, 1994 the cash portion of the consideration received of $739 is
presented in current assets. The consideration applicable to the preferred
shares is presented as "Assets of business transferred under contractual
arrangements [preferred shares]".
4. INVENTORIES
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials 4,252 30
Work in process 2,311 8
Finished goods 1,730 4,529
- ------------------------------------------------------------------------------------------------
8,293 4,567
================================================================================================
</TABLE>
F-18
<PAGE> 76
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
5. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1994
---------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Land 7,093 -- 7,093
Building 3,589 144 3,445
Machinery and equipment 18,705 4,286 14,419
- --------------------------------------------------------------------------------------------
29,387 4,430 24,957
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
1993
---------------------------------------
ACCUMULATED NET BOOK
COST DEPRECIATION VALUE
$ $ $
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Machinery and equipment 1,727 836 891
- --------------------------------------------------------------------------------------------
1,727 836 891
============================================================================================
</TABLE>
6. FINANCING ARRANGEMENTS
DB has pledged and mortgaged all of its fixed and other assets as security for
a debenture of Cdn. $100,000 held by UDIL. This debenture secures any and all
indebtedness due by DB to UDIL including payments made by UDIL under letters of
credit and guarantees to which UDIL is a party. The debenture provides that DB
may not dispose of its land and buildings nor pledge its inventories or
receivables without the consent of UDIL.
The security interest in favour of UDIL will be discharged upon redemption,
conversion or purchase of the outstanding preferred shares of DB [see note 3i].
As at September 30, 1994, the Company had no credit arrangements with financial
institutions.
In 1993, the Company had a credit agreement with a U.S. bank which permitted
borrowings up to a maximum of $4,400. As at September 30, 1993, outstanding
borrowings included in "Notes payable -- bank" on the consolidated balance
sheet amounted to $2,240. Outstanding borrowings were collateralized by the
Company's qualified accounts receivable and inventories, bearing interest at
the U.S. bank's prime rate plus 3%. This line of credit was repaid in 1994.
F-19
<PAGE> 77
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
6. FINANCING ARRANGEMENTS [CONT'D]
In 1993, the Company's Canadian divested subsidiary [Edinov -- see note 3iv]
had credit agreements with a Canadian bank, which provided for demand debt and
certain long-term debt. The demand debt portion provided for combined
borrowings of up to $1,874 and bore interest at prime rate plus 2%. All
borrowings from the Canadian bank, i.e. $1,843 included in "notes payable --
bank on the consolidated balance sheet, were collateralized by a first lien on
accounts receivable, inventory and equipment, and common stock of the
subsidiaries. This line of credit was repaid in 1994.
LONG-TERM DEBT CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Notes payable maturing between November 1995
and February 2000, bearing interest at prime rate plus 2% -- 607
Less current portion -- 153
- ------------------------------------------------------------------------------------------------
-- 454
================================================================================================
</TABLE>
7. INCOME TAXES
The provision for income taxes on income from operations comprises the
following elements:
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CURRENT
United States -- Federal -- --
United States -- State -- --
Canada 70 --
- ------------------------------------------------------------------------------------------------
70 --
- ------------------------------------------------------------------------------------------------
DEFERRED
United States -- Federal -- --
United States -- State -- --
Canada 230 --
- ------------------------------------------------------------------------------------------------
230 --
- ------------------------------------------------------------------------------------------------
300 --
================================================================================================
</TABLE>
F-20
<PAGE> 78
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
7. INCOME TAXES [CONT'D]
The related income (loss) from operations before income taxes is as follows:
<TABLE>
<CAPTION>
1994 1993
$ $
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
United States (381) --
Canada 1,364 (470)
- -----------------------------------------------------------------------------------------------
983 (470)
===============================================================================================
</TABLE>
Deferred tax liabilities and assets comprise the following elements at
September 30:
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax liabilities
Book over tax value of property and equipment 5,674 --
Pension asset 788 --
- ------------------------------------------------------------------------------------------------
6,462 --
- ------------------------------------------------------------------------------------------------
Deferred tax assets
OPEB obligation 199 --
Rationalization reserves 781 --
Net operating loss carryforward 1,194 --
Valuation allowance for operating loss carryforward (831) --
Other -- net 135 --
- ------------------------------------------------------------------------------------------------
1,478 --
- ------------------------------------------------------------------------------------------------
NET DEFERRED TAX LIABILITIES 4,984 --
================================================================================================
</TABLE>
The difference between the Company's effective income tax rate and the
statutory rate on income from operations is reconciled below:
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Income tax expense at U.S. statutory rate [35%] 344 (165)
State tax, net of federal tax benefits [6%] 59 --
Foreign income taxes at less than statutory rate [2.6%] (35) (16)
Operating losses without tax benefit -- 181
Difference in book-tax asset basis (15) --
Other (53) --
- ------------------------------------------------------------------------------------------------
300 --
================================================================================================
</TABLE>
F-21
<PAGE> 79
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
7. INCOME TAXES [CONT'D]
As at September 30, 1994, the Company had unused net operating loss
carryforwards for income tax purposes which expire as follows:
<TABLE>
<CAPTION>
UNITED STATES
CANADIAN FEDERAL
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
September 30,
2001 539 --
2007 -- 842
2008 -- 1,184
2009 -- 381
- ------------------------------------------------------------------------------------------------
539 2,407
================================================================================================
</TABLE>
The benefit of these losses has been recognized in the Company's books. For
financial reporting purposes, a valuation allowance of $831 has been recognized
to offset the deferred tax assets related to the United States losses since the
use of these losses may be severely limited by the separate return limitation
year rules and change of ownership rules.
8. BENEFIT PLANS
PENSION PLANS
The Company maintains defined benefit pension plans covering employees at most
Canadian operations. The benefits are based on an average of the employee's
earnings in the years preceding retirement and on credited service. Certain
supplemental unfunded plan arrangements also provide retirement benefits to
specified groups of participants.
The Company's funding policy for these plans is to contribute amounts
sufficient to meet the minimum funding requirements of the regulatory
authorities, plus any additional amounts which the Company may determine to be
appropriate.
F-22
<PAGE> 80
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
8. BENEFIT PLANS [CONT'D]
The net pension expense for Company-sponsored pension plans consists of the
following components:
<TABLE>
<CAPTION>
1994
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Service cost -- benefits earned during the year 881
Interest cost on projected benefit obligation 1,178
Return on plan assets (1,354)
- ------------------------------------------------------------------------------------------------
NET PENSION EXPENSE 705
- ------------------------------------------------------------------------------------------------
</TABLE>
The reconciliation of the funded status of pension plans is as follows:
<TABLE>
<CAPTION>
1994
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Plan assets at fair value 18,568
Actuarial present value of projected benefit
obligations 15,997
- ------------------------------------------------------------------------------------------------
Plan assets in excess of
projected benefit obligation 2,571
Unrecognized net experience gain 518
- ------------------------------------------------------------------------------------------------
NET PENSION ASSET RECOGNIZED IN THE
CONSOLIDATED BALANCE SHEET 2,053
================================================================================================
</TABLE>
The weighted average of assumptions used in the determination of the projected
benefit obligation is:
<TABLE>
<CAPTION>
1994
%
- --------------------------------------------------------------------------------------------------
<S> <C>
Discount rate 8.0
Rate of increases in compensation level 6.0
Expected long-term rate of return on assets 8.0
- --------------------------------------------------------------------------------------------------
</TABLE>
The assets of the Company-sponsored plans are invested primarily in equities
and bonds.
F-23
<PAGE> 81
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
8. BENEFIT PLANS [CONT'D]
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company currently provides post-retirement health care and life insurance
benefits to most Canadian retirees. In general, employees who retire after
attaining age 60 with five years of service are eligible for continued health
care and life insurance coverage. Dependant health care and life insurance
coverage are also available. Most retirees contribute toward the cost of
health care coverage, with the contributions generally varying based on
service. The Company accrues the expected cost of providing post-retirement
benefits during the years an employee renders service.
Net periodic post-retirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1994
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Service cost -- benefits earned during the year 1
Interest cost on accumulated post-retirement benefit obligation 41
- ------------------------------------------------------------------------------------------------
NET PERIODIC POST-RETIREMENT BENEFIT COST 42
================================================================================================
</TABLE>
At present, there is no prefunding of the post-retirement benefits recognized
under FASB Statement No. 106. The following table presents the status of the
plans reconciled with amounts recognized in the consolidated balance sheet for
the Company's post-retirement benefits:
<TABLE>
<CAPTION>
1994
$
- ------------------------------------------------------------------------------------------------
<S> <C>
Accumulated post-retirement benefit obligation
Active plan participants 518
- ------------------------------------------------------------------------------------------------
Post-retirement benefit liability recognized in the consolidated balance sheet 518
================================================================================================
</TABLE>
For measurement purposes, the assumed weighted average annual rate of increase
per capita cost of health care benefits is 12 percent for 1995 and assumed to
decrease one percent per year to 7 percent in the year 2000 and remain constant
thereafter. The weighted average discount rate used in determining the
accumulated post-retirement benefit obligation was 8 percent at September 30,
1994. The rate of increase on compensation levels assumed was 6 percent.
F-24
<PAGE> 82
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
9. RELATED PARTY TRANSACTIONS
During the year the Company advanced $1,734 to a shareholder, Fidutech
Technologies Ltd and its affiliates. Of this amount, $1,155 was assumed by the
acquirer of Edinov as of July 1, 1994, [note 3iv]. The balance of $781 is
non-interest-bearing and has no fixed repayment terms.
The amount due from an officer of $565, outstanding as at September 30, 1994
has been repaid subsequently.
10. MINORITY INTEREST
<TABLE>
<CAPTION>
1994 1993
$ $
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
18,338,000 Preferred shares of Dominion Bridge Inc. 13,756 --
409,207 Preferred shares of Unimetric Corporation 1,150 --
Preferred shares of divested subsidiary -- 212
- ------------------------------------------------------------------------------------------------
14,906 212
Common shares of consolidated subsidiaries held by others 558 --
- ------------------------------------------------------------------------------------------------
TOTAL 15,464 212
================================================================================================
</TABLE>
The preferred shares of Dominion Bridge Inc. are convertible into the Company's
common stock [see note 3i].
The preferred shares of Unimetric Corporation are convertible into the
Company's common stock [see note 3ii].
11. STOCKHOLDERS' EQUITY
On March 31, 1994, the Company issued 3,354,346 shares of its common stock at a
price of $3.25 per share, aggregating $10,901 and warrants to purchase
3,354,346 common shares at a price of $3.75 per share; these warrants were
exercised in July 1994, for proceeds aggregating $12,579. The Company also
issued 330,000 shares of its common stock and 200,000 warrants to purchase
100,000 common shares at a price of $3.25 per share until March 31, 1995 and
100,000 common shares at a price of $3.75 and $4.00 per share if exercised
before March 31, 1995 and March 31, 1996 respectively, to two individuals for
services rendered in connection with the private placement.
F-25
<PAGE> 83
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
11. STOCKHOLDERS' EQUITY [CONT'D]
On March 31, 1994, the Company issued 88,968 shares of its common stock at a
price of $2.81 per share, aggregating $250, as part of the consideration for
the purchase of 70% of the outstanding shares of Unimetric Corporation common
stock.
On March 1, 1994, the Company issued 140,866 shares of its common stock at a
price of $0.47 per share pursuant to a convertible debenture issued to an
officer for aggregate proceeds of $66.
During the year, the Company issued 295,000 shares of its common stock for
services rendered by underwriters and directors in connection with stock
issuance for funds raised in 1993.
During the year, the Company issued 42,500 of its common stock upon exercise of
options granted to underwriters and advisers for aggregate proceeds of $102.
During the year, the Company issued 237,360 shares of its common stock at a
price of $2.60 per share upon exercise of warrants granted in connection with
the September 30, 1993 private placement for aggregate proceeds of $616.
On September 30, 1993, the Company issued to Fidutech Technologies, Inc.
1,044,445 shares of its common stock at a price of $2.25 per share, aggregating
$2,350, and warrants to purchase 522,222 common shares at a price of $2.60 per
share; these warrants expire on September 30, 1994. The Company received $464
in cash and the balance has been reflected in stockholders' equity in the
accompanying consolidated balance sheet as a subscription receivable amounting
to $1,885. The Company also issued 160,000 shares of common stock to two
individuals for services rendered in connection with the private placement.
In 1993, the Company issued 57,500 shares of its common stock at a price of
$2.25 per share, aggregating $129 for services rendered. The amount has been
included in selling, general and administrative expenses for the year ended
September 30, 1993.
The Company does not have a formal stock option plan. At various times during
the year, the Company will grant options to purchase common stock to various
key executive and managerial employees. Transactions involving options are
summarized as follows:
F-26
<PAGE> 84
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
11. STOCKHOLDERS' EQUITY [CONT'D]
<TABLE>
<CAPTION>
OPTION PRICE
SHARES PER SHARE AGGREGATE
- ---------------------------------------------------------------------------------------------------------------------------
# $ $
<S> <C> <C> <C>
OUTSTANDING
SEPTEMBER 30, 1992 201,125 .59 118
Granted 366,000 1.68 614
Cancelled -- -- --
Exercised 437,000 .59 to 1.68 516
- ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING
SEPTEMBER 30, 1993 130,125 .59 to 1.68 216
Granted 300,000 2.68 804
Exercised 120,000 .59 to 1.68 201
Cancelled 10,125 .59 to 1.68 15
- ---------------------------------------------------------------------------------------------------------------------------
OUTSTANDING
SEPTEMBER 30, 1994 300,000 2.68 804
===========================================================================================================================
</TABLE>
As at September 30, 1994, all options outstanding are exercisable. The options
are due to expire on November 19, 1995.
12. COMMITMENTS AND CONTINGENCIES
The Company's Canadian subsidiary, DB, periodically enters into forward
exchange contracts to hedge specific anticipated foreign currency inflows. It
does not engage in speculation. The foreign exchange contracts do not subject
the Company to operating risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the transactions being
hedged. As at September 30, 1994, the Company had approximately $5,040 of
foreign exchange contracts outstanding, hedging specific transactions. The
forward exchange contracts generally have maturities which do not exceed one
year and exchange rates are agreed to at the inception of the contracts. No
significant gains or losses are deferred in the consolidated balance sheet.
The Company leases office and warehouse space under noncancellable operating
leases. The terms of the various leases run between one and five years, the
last of which expires in November 1997. Future minimum lease payments under
all noncancellable leases for the years subsequent to September 30, 1994
consist of the following:
F-27
<PAGE> 85
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
12. COMMITMENTS AND CONTINGENCIES [CONT'D]
<TABLE>
<CAPTION>
$
- --------------------------------------------------------------------------------
<S> <C>
1995 968
1996 730
1997 343
1998 214
1999 207
Subsequent to 1999 306
- --------------------------------------------------------------------------------
</TABLE>
Total rent expense for all operating leases amounted to $834 and $138 for the
years ended September 30, 1994 and 1993, respectively.
A number of claims and lawsuits seeking unspecified damages and other relief
are pending against the Company. It is impossible at this time for the Company
to predict with any certainty the outcome of such litigation. However,
management is of the opinion, based upon information presently available, that
it is unlikely that any liability, to the extent not provided for through
insurance or otherwise, would be material in relation to the Company's
consolidated financial position.
13. CONCENTRATION OF CREDIT RISK
Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base and
their dispersion across many different industries. The Company does not
require collateral from its customers. As at September 30, 1994, the Company
had no significant concentrations of credit risk.
F-28
<PAGE> 86
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
14. BUSINESS SEGMENTS
The Company operates in the following industry segments:
Construction Products and Services -- Design, engineering and construction of
large industrial and commercial structures and construction services.
Fasteners - Design and manufacturing of specialty fasteners targeted at the
aerospace industry and distribution of imported fasteners for industry.
INDUSTRY SEGMENTS
<TABLE>
<CAPTION>
CONSTRUCTION
PRODUCTS DIVESTED
AND SERVICES FASTENERS BUSINESSES TOTAL
$ $ $ $
- ----------------------------------------------------------------------------------------
1994
<S> <C> <C> <C> <C>
Assets(1) 52,990 5,150 -- 58,140
========================================================================================
Sales 58,181 4,842 4,936 67,959
========================================================================================
Segment operating income 860 (574) 380 666
Corporate expenses (109)
Interest net (341)
Other income 767
Income tax provision (300)
Minority interest -- common stock (19)
Minority interest -- dividends (248)
- ----------------------------------------------------------------------------------------
Net income 416
========================================================================================
Capital expenditures -- 94 -- 94
========================================================================================
Depreciation and amortization 1,695 333 96 2,224
========================================================================================
</TABLE>
- --------------
(1) Assets exclude $14,038 of corporate amounts in 1994.
F-29
<PAGE> 87
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
14. BUSINESS SEGMENTS [CONT'D]
<TABLE>
<CAPTION>
1993
<S> <C> <C> <C> <C>
Assets -- 9,773 -- 9,773
=========================================================================================
Sales -- 7,003 -- 7,003
=========================================================================================
Segment operating income -- (240) -- (240)
Interest-net -- -- -- (230)
- -----------------------------------------------------------------------------------------
Net Income (470)
=========================================================================================
Capital expenditures -- 292 -- 292
=========================================================================================
Depreciation and
amortization -- 13 155 168
=========================================================================================
</TABLE>
GEOGRAPHIC SEGMENTS
<TABLE>
<CAPTION>
UNITED DIVESTED
STATES CANADA BUSINESS TOTAL
$ $ $ $
- -----------------------------------------------------------------------------------------
1994
<S> <C> <C> <C> <C>
Assets 5,150 52,990 -- 58,140
=========================================================================================
Sales 4,842 58,181 4,936 67,959
=========================================================================================
Segment operating income (574) 860 380 666
=========================================================================================
1993
Assets 4,117 5,656 -- 9,773
=========================================================================================
Sales -- 7,003 -- 7,003
=========================================================================================
Segment operating income -- (240) -- (240)
=========================================================================================
</TABLE>
F-30
<PAGE> 88
CEDAR GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
[All dollar figures are in thousands of U.S. dollars unless otherwise
indicated]
15. SUBSEQUENT EVENTS
[i] On October 21, 1994 the Company agreed to acquire the minority holdings
of common and preferred shares of Dominion Bridge Inc. held by United
Dominion Industries Limited [see note 3i].
[ii] Effective July 4, 1994 the Company acquired 75% of the common shares of
Stelco Fasteners Limited ["Fasteners"], a manufacturer of fasteners for
the automotive industry from Stelco Inc. ["Stelco"] for a purchase
consideration of Cdn. $2,000 in cash. Officers of the Company obtained
operating and management control of Fasteners on that date. The shares
and consideration were lodged with a trustee.
The acquisition agreement provided that the Company could propose
certain adjustments to the interest retained by Stelco while Cedar
completed its reorganization of the affairs of Fasteners. Negotiations
on these adjustments, which were agreed to by representatives of Stelco,
continued to December 14, 1994.
On December 15, 1994, the Company agreed to all outstanding issues and
tendered the signed ancillary documents, a payment of Cdn. $2,000 and a
Cdn. $1,000 loan to Fasteners. Stelco refused to accept the tender.
On December 17, 1994 the Company obtained a Court Order requiring both
Stelco and the Company to remove themselves from operating control of
Fasteners. The Order expired January 5, 1995 at which time Stelco
asserted operating control of Fasteners. The Company maintains that it
is the rightful owner of 75% of the common shares of Fasteners. On
December 30, 1994, the Company commenced legal proceedings against
Stelco for a declaration of ownership and for damages.
In light of these events, the Company has adopted a conservative
approach and has not consolidated financial results of Fasteners.
Sales and net income of Fasteners for the period from July 4, 1994 to
September 30, 1994 were $10,753 and $638 respectively based on
Fasteners' historical financial statements without reflecting any
purchase allocation adjustments.
F-31
<PAGE> 89
[KPMG LETTERHEAD]
AUDITORS' REPORT
To the Board of Directors of Dominion Bridge
(formerly a division of United Dominion Industries Limited)
We have audited the accompanying balance sheet of Dominion Bridge (formerly a
division of United Dominion Industries Limited) as at December 31, 1993, and
the related statements of operations and equity and cash flows for each of the
years in the two-year period ended December 31, 1993. These financial
statements are the responsibility of the Division's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Division as at December
31, 1993, and the results of its operations and the changes in its financial
position for each of the years in the two-year period ended December 31, 1993,
in accordance with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK THORNE
- ----------------------------------
Chartered Accountants
Toronto, Canada
MAY 31, 1994
F-32
<PAGE> 90
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
<TABLE>
<CAPTION>
Balance Sheet
December 31, 1993
(In thousands of Canadian dollars)
=================================================================================
<S> <C>
Assets
Current assets:
Accounts and notes receivable, net of allowance for
doubtful accounts of $702 $ 26,355
Inventories (note 2) 8,092
Other current assets 926
----------------------------------------------------------------------------
35,373
Fixed assets, net (note 3) 12,934
Investment in joint venture (note 4) 1,260
Other assets 1,531
- ---------------------------------------------------------------------------------
$ 51,098
=================================================================================
Liabilities and Equity
Current liabilities:
Outstanding cheques $ 244
Accounts payable 13,039
Customer advances 13,713
Other accrued liabilities (note 5) 6,998
----------------------------------------------------------------------------
33,994
Divisional equity 17,104
Commitments and contingencies (notes 7 and 8)
- ---------------------------------------------------------------------------------
$ 51,098
=================================================================================
</TABLE>
See accompanying notes to financial statements.
F-33
<PAGE> 91
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
<TABLE>
<CAPTION>
Statements of Operations and Equity
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
======================================================================================================
1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 162,511 $ 211,059
Cost of sales:
Variable expenses 143,669 179,286
Fixed expenses 13,055 13,977
-------------------------------------------------------------------------------------------------
156,724 193,263
- ------------------------------------------------------------------------------------------------------
5,787 17,796
Other expenses:
Selling, general and administrative expenses 18,281 19,059
Depreciation and amortization 2,071 2,273
Restructuring costs (note 5) 2,226 --
-------------------------------------------------------------------------------------------------
22,578 21,332
Joint venture loss (note 4) 108 --
- ------------------------------------------------------------------------------------------------------
Loss for the year (16,899) (3,536
Divisional equity, beginning of year 26,814 32,417
Transfers from (to) United Dominion Industries
Limited during the year, net 7,189 (2,067
- ------------------------------------------------------------------------------------------------------
Divisional equity, end of year $ 17,104 $ 26,814
======================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-34
<PAGE> 92
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
<TABLE>
<CAPTION>
Statements of Cash Flows
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
=======================================================================================================
1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used for):
Operating activities:
Loss for the year $ (16,899) $ (3,536)
Add (deduct) items not affecting cash:
Depreciation and amortization 2,071 2,273
Other 44 113
Net decrease (increase) in working capital balances:
Accounts receivable 7,853 18,940
Inventories 7,452 (8,623)
Accounts payable and accrued liabilities (5,254) 24
Customer advances 1,661 (7,249)
Other current assets (319) 247
---------------------------------------------------------------------------------------------------
(3,391) 2,189
Investing activities:
Net additions to fixed assets (58) (582)
Investment in joint venture (1,368) --
---------------------------------------------------------------------------------------------------
(1,426) (582)
Financing activities:
Transfers from (to) United Dominion
Industries Limited during the year, net 7,189 (2,067)
- -------------------------------------------------------------------------------------------------------
Increase (decrease) in cash during the year 2,372 (460)
Outstanding cheques, beginning of year (2,616) (2,156)
- -------------------------------------------------------------------------------------------------------
Outstanding cheques, end of year $ (244) $ (2,616)
=======================================================================================================
</TABLE>
See accompanying notes to financial statements.
F-35
<PAGE> 93
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General:
Pursuant to an agreement dated April 8, 1994, Cedar Group Inc. acquired a
controlling interest in the business of Dominion Bridge (the "Division").
Formerly, Dominion Bridge was a division of United Dominion Industries
Limited ("UDIL"). Prior to the acquisition, no material relationship
existed between the Cedar Group Inc. and UDIL.
The Division, with operations across Canada, provides custom steel
fabrication, erection and construction services for large- scale
industrial projects such as railway bridges, roads and public sports
arenas. The division was dependent on UDIL for working capital and
financing needs.
The financial statements of the Division have been prepared by management
in accordance with accounting principles generally accepted in Canada
which conform in all material respects with accounting principles
generally accepted in the United States.
The principal accounting policies followed by the Division, which have
been consistently applied, are summarized as follows:
(a) Basis of presentation:
The accompanying financial statements reflect the financial
position, results of operations and cash flows of Dominion Bridge,
formerly a division of UDIL, as if it had operated as a separate
corporate entity unaffiliated with UDIL. The accompanying
statements of operations include certain expenses incurred by UDIL
that directly relate to the Division such as insurance, professional
fees and pension costs. However, these statements exclude interest
expense or other financing costs, which had not been allocated to
the Division by UDIL. These financial statements also exclude
amounts relating to the terminated Canadian retirement income plans
which were not transferred as part of the Cedar Group Inc.
acquisition (note 6).
The results of the Division had been included in the Canadian income
tax returns of UDIL. Income tax provisions or benefits were not
calculated on a separate income tax return basis and no income tax
was allocated to the Division by UDIL. If income taxes were
calculated for the Division on a stand-alone basis, no income tax
benefit would be recorded on the losses for the periods presented
due to net operating losses in the carryback period.
F-36
<PAGE> 94
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements, page 2
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The Division's cash was managed by UDIL utilizing the divisional
equity account. It was UDIL's policy not to allocate a fee for this
service or to record interest expenses or income on the divisional
equity balance. The net change in the divisional equity account is
reflected on the cash flow statement as net cash transferred to or
from UDIL during the year.
(b) Revenue recognition:
Income on construction contracts is recognized on the
percentage-of-completion basis. Provisions for anticipated losses
on uncompleted contracts are made in the period in which losses are
first determinable. Included in accounts receivable are unbilled
receivables related to these contracts of $2,930 at December 31,
1993.
(c) Inventories:
Work-in-process related to contracts is stated at accumulated costs
less amounts charged to income based on the percentage-of-completion
of individual contracts. Raw materials are stated at the lower of
cost (first-in, first-out) or replacement cost. Finished goods are
comprised of steel and steel hardware products held for resale and
are stated at the lower of cost (first-in, first-out) or net
realizable value.
(d) Fixed assets:
Property, plant and equipment are carried at cost. Major renewals
and betterments are capitalized; maintenance and repairs are
expensed as incurred. Cost of property sold or otherwise disposed
of and related accumulated depreciation are removed from the
accounts at the time of disposal and any resulting gain or loss is
included in income. Depreciation of plant and equipment is
determined principally on a straight-line basis over estimated
useful lives of the assets which range from 40 years for buildings
to 3 years for certain types of equipment.
2. INVENTORIES:
Inventories at December 31, 1993, are summarized as follows:
<TABLE>
<S> <C>
===========================================================================
Raw materials $ 1,110
Contract work in process 3,226
Finished goods 3,756
---------------------------------------------------------------------------
$ 8,092
===========================================================================
</TABLE>
F-37
<PAGE> 95
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements, page 3
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
3. FIXED ASSETS:
Fixed assets at December 31, 1993, are summarized as follows:
<TABLE>
<CAPTION>
================================================================================================
Accumulated Net book
Cost depreciation value
================================================================================================
<S> <C> <C> <C>
Land $ 2,765 $ -- $ 2,765
Buildings 10,326 5,820 4,506
Machinery and equipment 30,230 24,567 5,663
------------------------------------------------------------------------------------------------
$ 43,321 $ 30,387 $ 12,934
------------------------------------------------------------------------------------------------
</TABLE>
4. JOINT VENTURE:
During 1993, the Division entered into an agreement to establish a joint
venture. The joint venture became effective July 30, 1993, with
contributions of cash, fixed assets and inventories by the venturers.
The Division accounts for its participation in the joint venture using
the equity method. Shown below is unaudited summarized financial
information relative to the joint venture as at and for the five months
ended December 31, 1993.
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEET
==============================================================================================
(Unaudited)
<S> <C>
Current assets $ 3,401
Plant and equipment 248
----------------------------------------------------------------------------------------------
Total assets $ 3,649
==============================================================================================
Current liabilities $ 1,129
Partners' equity 2,520
----------------------------------------------------------------------------------------------
Total liabilities and partners' equity $ 3,649
==============================================================================================
</TABLE>
F-38
<PAGE> 96
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements, page 4
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
4. JOINT VENTURE (CONTINUED):
<TABLE>
<CAPTION>
CONDENSED STATEMENT OF OPERATIONS
==================================================================================================
(Unaudited)
<S> <C>
Revenues $ 4,093
Loss from operations 139
Loss for the period 216
==================================================================================================
</TABLE>
5. RESTRUCTURING COSTS:
During 1993, the Division adopted a restructuring plan designed to
refocus and downsize the Division's operations. At December 31, 1993,
the Division was committed to or had incurred $2,226 in costs related to
this plan, primarily relating to severance and other termination
benefits, of which $1,936 remain in other accrued liabilities as at
December 31, 1993. Such costs have been included in expenses in the
accompanying statement of operations for the year ended December 31,
1993.
6. PENSION PLANS:
The Division's salaried and hourly employees participate in a combination
of defined contribution plans and defined benefit plans maintained by
UDIL. The defined benefit plans call for benefits to be paid at
retirement based primarily upon the years of service and employee
compensation rates near retirement. While any contributions required to
be made into the defined benefit plans have been made by UDIL on behalf
of the Division, the accompanying statements of operations reflect the
pension expense related to the ongoing pension plans for the Division's
employees. The assets of the plans consist primarily of cash and cash
equivalents, common and preferred stocks and investment-grade corporate
bonds.
F-39
<PAGE> 97
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements, page 5
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
6. PENSION PLANS (CONTINUED):
The components of pension expense for the Division's continuing pension
plans for 1993 and 1992 are as follows:
<TABLE>
<CAPTION>
================================================================================================
1993 1992
------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost $ 1,075 $ 1,172
Interest on the projected benefit obligation 1,556 1,414
Return on assets held in the plans (1,772) (1,636)
Net amortization and deferral (324) (316)
------------------------------------------------------------------------------------------------
$ 535 $ 634
================================================================================================
</TABLE>
The funded status of the Division's continuing pension plans at December
31, 1993 is as follows:
<TABLE>
<S> <C>
================================================================================================
Vested benefits $ 17,720
Non-vested benefits 1,316
------------------------------------------------------------------------------------------------
Accumulated benefit obligation 19,036
Effect of anticipated future compensation levels and other events 1,519
------------------------------------------------------------------------------------------------
Projected benefit obligations 20,555
Fair value of assets held in the plans 23,471
------------------------------------------------------------------------------------------------
Excess of assets held in the plans over projected benefit obligations $ 2,916
================================================================================================
</TABLE>
The excess consists of the following:
<TABLE>
<S> <C>
================================================================================================
Unamortized past service cost $ (757)
Net unrecognized gain from past experience different than assumed 212
Remaining unrecognized net transition asset 2,230
Prepaid pension costs included in Other assets
on the accompanying balance sheet 1,231
------------------------------------------------------------------------------------------------
$ 2,916
================================================================================================
</TABLE>
F-40
<PAGE> 98
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements, page 6
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
6. PENSION PLANS (CONTINUED):
The weighted-average discount rate used to measure the projected benefit
obligation is 8.0%, the average rate of increase in future compensation
levels is 6%, and the expected long-term rate of return on assets is 8%.
The Division uses the straight- line method of amortization for prior
service cost and unrecognized gains and losses.
During 1993, UDIL terminated a Canadian retirement income plan which
covered a substantial number of the Division's salaried employees. This
termination resulted in approximately $24 million in surplus funds being
distributed to UDIL and approximately $19.6 million in improved benefits
and cash being distributed from the plan to eligible plan participants.
Due to the termination, the Division has not recorded any pension expense
or income related to this plan in the accompanying statements of
operations.
7. COMMITMENTS:
The Division sometimes enters into forward exchange contracts to hedge
specific foreign currency transactions. It does not engage in
speculation. The Division's foreign exchange contracts do not subject
the Division to risk due to exchange rate movements because gains and
losses on these contracts offset losses and gains on the transactions
being hedged. As of December 31, 1993, the Division had approximately
$25,000 of foreign exchange contracts outstanding, hedging specific
transactions. The forward exchange contracts generally have maturities
which do not exceed one year and exchange rates are agreed to at the
inception of the contracts.
The Division has operating leases primarily relating to office and
warehouse facilities. Future minimum lease payments under all operating
leases at December 31, 1993, are as follows:
<TABLE>
<S> <C>
=====================================================================
1994 $ 658
1995 612
1996 482
1997 385
1998 414
Subsequent to 1998 1,292
---------------------------------------------------------------------
$ 3,843
=====================================================================
</TABLE>
F-41
<PAGE> 99
DOMINION BRIDGE
(FORMERLY A DIVISION OF UNITED DOMINION INDUSTRIES LIMITED)
Notes to Financial Statements, page 7
Years ended December 31, 1993 and 1992
(In thousands of Canadian dollars)
================================================================================
8. CONTINGENCIES:
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the Division. It is impossible at this time
for the Division to predict with any certainty the outcome of such
litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability,
to the extent not provided for through insurance or otherwise, would be
material in relation to the Division's financial position.
9. RELATED PARTY TRANSACTIONS:
In the ordinary course of business, UDIL charges the Division for
corporate costs incurred on behalf of the Division. The cost of these
transactions aggregating $2,142 (1992 - $2,259) was charged during the
year and are included in selling, general and administrative expenses.
10. BUSINESS SEGMENT INFORMATION:
Export sales for 1993 totalled approximately $20,000 or 12% of total
sales; export sales in 1992 were not significant.
During 1993, sales to a major customer totalled approximately $20,000 or
12% of total sales. In 1992, sales to a major customer totalled
approximately $21,000 or 10% of total sales.
F-42
<PAGE> 100
CEDAR GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
DECEMBER 31,1994 AND 1993
-------------------------------------
($US THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
------
12/31/94 09/30/94
-------- --------
<S> <C> <C>
Cash $ 6,281 $ 5,578
Investment, at market - 1,039
Accounts receivable, net of allowance for doubtful
accounts of $863 in 1994 and $43 in 1993 19,258 21,872
Accounts receivable - affiliated company 781 781
Current portion of assets transferred under
contractual arrangements - 739
Due from an officer - 565
Inventory (Note 3) 4,656 6,064
Contract work-in-process (Note 4) 1,561 2,229
Prepaid expenses 1,554 2,509
------- -------
Total Current Assets 34,091 41,376
Property, plant & equipment, net 24,298 24,957
Other assets 5,847 5,845
------- -------
Total Assets $64,236 $72,178
======= =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Accounts payable and accrued expenses 14,736 17,798
Customer advances 5,120 5,561
------- -------
Total Current Liabilities $19,856 $23,359
======= =======
Deferred income taxes 4,984 4,984
Accrued post-retirement benefits
other than pensions 518 518
------- -------
Total Liabilities 25,358 28,861
------- -------
Minority Interest 6,753 15,464
------- -------
Stockholders' Equity
Common stock (Note 5) 14 13
Additional paid in capital 35,129 31,927
Deficit (877) (1,860)
Cumulative foreign currency adjustment (Note 6) (256) (342)
------- -------
34,010 29,738
Subscriptions receivable (1,885) (1,885)
------- -------
Total Stockholders' Equity 32,125 27,853
------- -------
Total Liabilities, Minority Interest &
Stockholders' Equity $64,236 $72,178
======= =======
</TABLE>
F-43
<PAGE> 101
CEDAR GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
-------------------------------------
($US THOUSANDS)
<TABLE>
<CAPTION>
3 Months 3 Months Year to Year to
ended ended date date
12/31/94 12/31/93 12/31/94 12/31/93
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Sales $ 34,387 $ 3,011 $ 34,387 $ 3,011
Cost of sales 31,898 2,256 31,898 2,214
------------ ---------- ------------ -----------
Gross Profit 2,489 755 2,489 797
Selling, general & (1,322) (504) (1,322) (504)
administrative expenses
Other Income 256 -- 256 --
------------ ---------- ------------ -----------
Income from operations 1,423 251 1,423 293
Interest income (expenses), net 16 (125) 16 (125)
------------ ---------- ------------ -----------
Income before income taxes and minority interest 1,439 126 1,439 126
Income tax provision (500) -- (500) --
------------ ---------- ------------ -----------
Net income 939 126 939 126
Minority interest 44 -- 44 --
------------ ---------- ------------ -----------
Net income applicable to common shares 983 126 983 126
------------ ---------- ------------ -----------
Deficit, beginning of period (1,860) (2,276) (1,860) (2,276)
------------ ---------- ------------ -----------
Deficit, end of period $ (877) $ (2,150) $ (877) $ (2,150)
============ ========== ============ ===========
Net income applicable to common shares 983 126 983 126
============ ========== ============ ===========
Weighted average number
of shares outstanding 13,754,241 5,650,000 13,754,241 5,650,000
============ ========== ============ ===========
Income per common share & $ .07 $ .02 $ .07 $ .02
common share equivalent ============ ========== ============ ===========
</TABLE>
F-44
<PAGE> 102
CEDAR GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 30, 1994 AND 1993
-------------------------------------
($US THOUSANDS)
<TABLE>
<CAPTION>
12/31/94 12/31/93
-------- --------
<S> <C> <C>
Cash provided from operating activities $ 939 $ 126
Net income
Adjustments to reconcile net income to net cash
provided from operating activities:
Depreciation and amortization 1,122 43
(Increase) decrease in accounts receivable 2,614 (726)
(Increase) decrease in accounts receivable -
affiliated company - (818)
(Increase) decrease in contractual arrangements 739 -
(Increase) decrease in inventory 1,408 421
(Increase) decrease in due from an officer 565 -
(Increase) decrease in contract - work in process 668 -
(Increase) decrease in prepaid expenses 955 (97)
Increase (decrease) in accounts payable and accrued
expenses (3,062) (52)
Increase (decrease) in customer advances (441) -
------- -------
Net cash provided from (used in) operating activities 5,507 (1,103)
------- -------
Cash used in investing activities:
Investment in property, plant and equipment (463) (35)
Proceeds from sale of investment 1,039 -
Investment in other assets (2) -
Redemption of minority interest (8,667) -
------- -------
8,093 (35)
------- -------
Cash provided by financing activities:
Net borrowings (repayments) of bank indebtedness - (205)
Repayment of long-term debt - (33)
Issuance of common stock 3,203 176
------- -------
3,203 (62)
------- -------
Effect of foreign exchange rate changes on cash 86 88
------- -------
Net increase (decrease) in cash 703 (1,112)
------- -------
Cash, Beginning of period 5,578 1,135
------- -------
Cash, End of period $ 6,281 $ 23
======= =======
</TABLE>
F-45
<PAGE> 103
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements include the
consolidated accounts of CEDAR GROUP, INC. and its subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in the consolidation.
2. Business
The Company is an importer, manufacturer and distributor of industrial,
custom and specialty fasteners for sale throughout Canada and the
United States and through its DOMINION BRIDGE, INC. subsidiary
operates as a manufacturing, engineering and infrastructure Company.
3. Inventories
Work-in-process related to construction contracts is stated at
accumulated costs less amounts charged to income based on the
percentage-of-completion of individual contracts. Raw materials are
stated at the lower of cost (first-in, first-out) or net replacement
cost. Finished goods comprise steel and steel hardware products held
for sale and are stated at the lower (first-in, first-out) or net
realizable value.
4. Construction Contracts
Income on construction contracts is recognized on the percentage-
of-completion basis. Provisions for anticipated losses on uncompleted
contracts are made in the period in which such losses are first
determined.
5. Capital Stock
Preferred stock: $.001 par value; 5,000,000 shares authorized, none
issued. Common Stock: $.001 par value, 20,000,000 shares authorized;
as of December 31, 1994; 14,447,593 shares were issued and
outstanding and 5,650,232 shares were issued and outstanding as of
December 31, 1993.
6. Foreign Currency Translation
Gains and losses on foreign currency transactions are recognized
currently in the Consolidated Statements of Operations, and are not
significant. Gains and losses on translation of the Company's
subsidiaries operating outside the United States are reported
separately and accumulated in the "Cumulative Foreign Currency
Translation Adjustment" in the Consolidated Balance Sheets.
F-46
<PAGE> 104
7. Commitments and Contingencies
The Company's wholly-owned Canadian subsidiary, Dominion Bridge, Inc.,
periodically enters into forward exchange contracts to hedge specific
anticipated currency inflows. It does not engage in speculation. The
foreign exchange contracts do not subject the Company to operating risk
due to exchange rate movements because gains and losses on these
contracts offset losses and gains on the transactions being hedged. The
forward exchange contracts generally have maturities which do not exceed
one year and are agreed to at the inception of the contracts. No
significant gains or losses are deferred in the consolidated balance
sheets.
The Company leases office and warehouse space under non-cancellable
operating leases. The terms of the various leases run between one and
five years, the last of which expires in November, 1997. Future minimum
lease payments under all non-cancellable leases for the years subsequent
to September 30, 1994 consist of the following:
1995 $968,000
1996 $730,000
1997 $343,000
A number of claims and lawsuits seeking unspecified damages and other
relief are pending against the Company. It is impossible at this time
for the Company to predict with any certainty the outcome of such
litigation. However, management is of the opinion, based upon
information presently available, that it is unlikely that any liability,
to the extent not provided for through insurance or otherwise, would be
material in relation to the Company's consolidated financial position.
F-47
<PAGE> 105
<TABLE>
<S> <C>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN
AUTHORIZED IN CONNECTION WITH THIS OFFERING TO
GIVE ANY INFORMATION OR TO MAKE ANY ========================
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE 8,500,859 SHARES OF COMMON STOCK
AN OFFER OR A SOLICITATION IN ANY JURISDICTION TO OFFERED BY CERTAIN
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN SELLING SECURITY HOLDERS
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION ========================
THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES
OF THE COMPANY OR THE FACTS HEREIN SET FORTH SINCE 13,880 SHARES OF COMMON STOCK
THE DATE HEREOF. OFFERED BY THE COMPANY PURSUANT
TO CERTAIN OUTSTANDING CLASS A
WARRANTS
---------------------- ------------------------
</TABLE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE CEDAR GROUP, INC.
----
<S> <C>
Prospectus Summary . . . . . . . . . . . . . . .
The Company . . . . . . . . . . . . . . . . . . .
The Offering . . . . . . . . . . . . . . . . . . -------------------
Risk Factors . . . . . . . . . . . . . . . . . .
Use of Proceeds . . . . . . . . . . . . . . . . . P R O S P E C T U S
Description of Securities
Selling Security Holders . . . . . . . . . . . . -------------------
Plan of Distribution . . . . . . . . . . . . . .
Legal Matters . . . . . . . . . . . . . . . . . .
Experts . . . . . . . . . . . . . . . . . . . . .
Additional Information . . . . . . . . . . . . .
______________ __, 1995
UNTIL __________ __, 1995 (45 DAYS AFTER
THE DATE OF THE PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER
OR NOT PARTICIPATING IN DISTRIBUTION, MAY BE -------------------
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
</TABLE>
<PAGE> 106
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has adopted the provisions of Section 102(b)(7) of the
Delaware General Corporation Law (the "Delaware Act") which eliminate or limit
the personal liability of a director to the Company or its stockholders for
monetary damages for breach of fiduciary duty under certain circumstances.
Furthermore, under Section 145 of the Delaware Act, the Company may indemnify
each of its directors and officers against his expenses (including reasonable
costs, disbursements and counsel fees) in connection with any proceeding
involving such person by reason of his having been an officer or director to
the extent he acted in good faith and in a manner reasonably believed to be in,
or not opposed to the best interest of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The determination of whether indemnification is proper under the
circumstances, unless made by a court, shall be determined by the Board of
Directors.
Reference is made to Item 28 for the undertakings of the Registrant
with respect to indemnification for liabilities arising under the Securities
Act of 1933, as amended.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a list of the estimated expenses to be incurred by
the Registrant in connection with the preparation and filing of this
Registration Statement.
<TABLE>
<S> <C>
S.E.C. Registration Fee . . . . . . . . . . . . . . . . . 14,289.09
Printing and Engraving . . . . . . . . . . . . . . . . . . 10,710.91
Accountants' Fees and Expenses . . . . . . . . . . . . . . 10,000
Blue Sky Filing Fees and Expenses . . . . . . . . . . . . 2,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . 38,000
TOTAL: . . . . . . . . . 75,000
=========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Edinov Corporation ("Edinov") had issued and outstanding 10,856,984
common shares as at September 30, 1991. Subsequently, 3,333,334 common shares
were issued on a private placement basis at a price of $0.125 per share
aggregating 14,190,318 common shares as at the fiscal year ended September 30,
1992. The 3,333,334 common shares also granted the holders thereof share
purchase warrants to purchase an additional 3,333,334 common shares of Edinov at
the same price of $0.125 per share. All of the share purchase warrants were
exercised in February, 1993 and a further 3,333,334 common shares were issued by
Edinov.
During February and March, 1993 Edinov issued a further 1,050,000 of
its common shares at a price of $0.12 per share pursuant to the exercise of
options and a further 333,333 common shares at a price of $0.30 per share.
All of the issuances above do not reflect the 1 for 5 share reverse
stock split that was effected on April 27, 1993 and the change from no par value
to $0.001 par value common shares. Following this reverse stock split, there
were 3,772,397 common shares of Edinov issued and outstanding.
In the period April 27, 1993 to September 30, 1993 (being the effective
date of the reorganization plan with Cedar Group, Inc.) the following issuances
were made:
<TABLE>
<CAPTION>
No. of Price
Issuance Shares per share
- -------- ------ ---------
<S> <C> <C>
Upon exercise
of Options 236,000 $1.69
Upon exercise
of Warrants 66,667 $1.68
Private Placements 1,204,445 $1.95
For Assets of
Cedar Group, Inc. 207,523 $5.25
For Services 57,500 $2.24
</TABLE>
During the fiscal year ended September 30, 1994 the following issuances
were made:
II-1
<PAGE> 107
<TABLE>
<CAPTION>
No. of Price
Issuance Shares per share
- -------- ------ ---------
<S> <C> <C>
Upon exercise
of Options 162,500(1) $1.86
Upon exercise
of Warrants 3,591,706(2) $3.67
For Unimetric
Corp. 88,968 $2.81
For Stock
Issue Expenses 295,000 --
Private Placements 3,684,346(3) $2.96
In Repayment
of Debt 140,866 $ .47
</TABLE>
(1) Includes 130,000 shares at Cdn. $2.; 10,000 shares at $1.64 and 22,500
shares at $2.60.
(2) Includes 3,354,346 shares at $3.75 and 237,360 shares at $2.60.
(3) Includes 3,354,346 shares at $3.25.
During the period October 1, 1994 to date, the following shares of
Common Stock were issued by the Company:
<TABLE>
<CAPTION>
No. of Price
Issuance Shares per share
- -------- ------ ---------
<S> <C> <C>
Upon conversion of
Class A Preferred Shares
of Dominion Bridge, Inc. 450,000 Cdn. $6.00
Upon exchange of
Unimetric Corporation
Preferred Shares 409,207 $2.80
For fees 25,000 $3.25(1)
Pursuant to Employment
Agreements 100,000 $3.25(1)
Upon exercise of warrants 22,500 $2.60
Upon exercise of warrants 10,000 $1.64
</TABLE>
(1) These securities were issued by the Company for bonuses or fees required
pursuant to employment obligations by the Company or its subsidiary,
Dominion Bridge, Inc. No actual proceeds were received by the Company
for these issuances.
All of the above transactions were exempt from registration pursuant to Section
4(2) of the Securities Act of 1933 and/or Regulation D thereunder.
II-2
<PAGE> 108
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
A. Financial Statements filed as part of this Report:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Auditors' Report of Ernst & Young, Independent
Auditors, on Company's Financial Statements for
the fiscal year ending September 30, 1994 F-1
Auditors' Report of BDO Seidman, Independent
Certified Public Accountants, on the Company's
Financial Statements for the fiscal year ending
September 30, 1993 F-2
Consolidated Balance Sheet of Cedar Group, Inc.
as at September 30, 1994 and 1993 F-3
Consolidated Statement of Operations of Cedar
Group, Inc. for the fiscal years ended
September 30, 1994 and 1993 F-5
Consolidated Statements of Stockholders' Equity
of Cedar Group, Inc. for the fiscal years ended
September 30, 1994 and 1993 F-6
Consolidated Statement of Cash Flows of Cedar
Group, Inc. for the fiscal years
ended September 30, 1994 and 1993 F-8
Notes to Consolidated Financial Statements of
Cedar Group, Inc. F-10
Auditors' Report of KPMG Peat Marwick Thorne,
Chartered Accountants, on the balance sheet of
Dominion Bridge as at December 31, 1993 and the
related statements of operations and equity and
cash flows for each of the years in the two year
period ended December 31, 1993 and 1992 F-32
Balance Sheet of Dominion Bridge as of December 31,
1993 F-33
Statements of Operations and Equity of Dominion Bridge
for the fiscal years ended December 31, 1993 and 1992 F-34
Statements of Cash Flows for the years ended
December 31, 1993 and 1992 F-35
</TABLE>
II-3
<PAGE> 109
<TABLE>
<S> <C>
Notes to Financial Statements of Dominion Bridge F-36
Consolidated Balance Sheets at December 31, 1994
and 1993 (Unaudited) F-43
Consolidated Statements of Operations for the three
months ended December 31, 1994 and 1993 (Unaudited) F-44
Consolidated Statements of Cash Flows for the three
months ended December 31, 1994 and 1993 F-45
Notes to Consolidated Financial Statements (Unaudited) F-46
</TABLE>
B. Financial Statement Schedule
C. The following Exhibits are filed as part of this Report:
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.1 Reorganization and Amalgamation Agreement dated June 25, 1993
among the Company, Edinov and Fidutech Technologies Inc.
(Incorporated by reference to Exhibit 3 of the Current Report
on Form 8-K filed on July 2, 1993).
3.1 (a) Certificate of Incorporation of the Company, filed
February 16, 1989 (Incorporated by reference to Exhibit 3.1
(a) of the Registration Statement on Form S-18 filed on
August 23, 1989, Registration Number 33-30673-A (the "Form S-18")).
3.1 (b) Amended Certificate of Incorporation of the Company, filed
July 25, 1989 (Incorporated by reference to Exhibit 3.1 (b)
of the Form S-18).
3.2 Bylaws of the Company (Incorporated by reference to Exhibit 3.2 of the
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1994
filed on January 13, 1995)
4.1 Copy of Specimen Stock Certificate (Incorporated by reference
to Exhibit 4.0 of the Registration Statement on Form S-3 filed on
January 26, 1995).
4.2 Form of Class A Warrant (Incorporated by reference to Exhibit 4.2
of the Form S-18).
4.3 Registrant's Second Amended Joint Plan of Reorganization (Incorporated
by reference to Exhibit 1 of the Current Report on Form 8-K filed
on July 2, 1993).
4.4 Form of Underwriter's Warrant Purchase Agreement (including Form
of Warrant) (Incorporated by reference to Exhibit 4.4 of the Form S-18).
4.5 Form of Warrant Agreement between Company and Continental Stock
Transfer and Trust Company (Incorporated by reference to Exhibit 4.5
of the Form S-18).
</TABLE>
II-4
<PAGE> 110
<TABLE>
<S> <C>
4.6 Registrant's Second Amended Joint Disclosure Statement (Incorporated
by reference to Exhibit 2 of the Current Report on Form 8-K filed
on July 2, 1993).
4.7 Order Confirming Second Amended Joint Plan of Reorganization of the
Debtor dated August 25, 1993 (Incorporated by reference to Exhibit 6
of the Current Report on Form 8-K filed on July 2, 1993).
5 Opinion of Clark, Ladner, Fortenbaugh & Young
10.1 Subscription Agreement dated July 26, 1993 between Edinov and Fidutech
relating to the purchase of Fidutech of 777,778 Units (Incorporated by
reference to Exhibit 10.1 to the Annual Report on Form 10-KSB for the
transition period from January 31, 1993 to September 30, 1993).
10.2 Subscription Agreement dated September 15, 1993 between Edinov and
Fidutech relating to the purchase of Fidutech of 266,667 Units
(Incorporated by reference to Exhibit 10.2 to the Annual Report on
Form 10-KSB for the transition period from January 31, 1993 to
September 30, 1993).
10.3 Agreement by and among the Company and Michael Savini dated August 18,
1993 (Incorporated by reference to Exhibit 10.8 to the Annual Report on
Form 10-KSB for the transition period from January 31, 1993 to
September 30, 1993).
10.4 Master Agreement Between United Dominion Industries Limited, Cedar Group,
Inc., Edinov Corporation, and Dominion Bridge Inc. dated March 9, 1994
(incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.5 Rollover Agreement Between United Dominion Industries Limited and 3010864
Canada Inc., effective December 31, 1993 (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994).
10.6 Share Purchase Agreement Between United Dominion Industries Limited and Cedar
Group, Inc., dated March 10, 1994 (incorporated by reference to the Company's
Form 8-K, dated April 8, 1994).
10.7 Shareholders' Agreement Between United Dominion Industries Limited, Cedar
Group, Inc., Edinov
</TABLE>
II-5
<PAGE> 111
<TABLE>
<S> <C>
Corporation, and 3010864 Canada, Inc., dated April 8, 1994 (incorporated by
reference to the Company's Form 8-K, dated April 8, 1994).
10.8 Guarantee and Indemnity Agreements Between United Dominion Industries Limited,
Cedar Group, Inc., and Edinov Corporation (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994).
10.9 Registration Rights Agreement Between United Dominion Industries Limited and
Cedar Group, Inc., dated April 8, 1994 (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994).
10.10 Hypothecation and Pledge of Securities Agreement between United Dominion
Industries Limited and Cedar Group, Inc. (incorporated by reference to the
Company's Form 8-K, dated April 8, 1994).
10.11 United Dominion Industries Limited Security Agreement with 3010864 Canada
(incorporated by reference to the Company's Form 8-K, dated April 8, 1994).
10.12 Debenture Between 3010864 Canada and United Dominion Industries Limited,
dated April 8, 1994 (incorporated by reference to the Company's Form 8-K,
dated April 8, 1994).
11.0 Statement regarding computation of earnings per share (Incorporated within
the Financial Statements).
21 Subsidiaries (Incorporated by reference to Exhibit 21 of the Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1994 filed on January 13, 1995).
23.1 Consent of Ernst & Young
23.2 Consent of BDO Seidman
23.3 Consent of KPMG Peat Marwick Thorne
24.0 Power of Attorney (Included as part of the signature page)
</TABLE>
II-6
<PAGE> 112
ITEM 28. UNDERTAKINGS
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to: (i)
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933; (ii) reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement,
and (iii) include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
2. That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in a successful defense of any action, suit or
proceeding) is asserted by a director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issuer.
II-7
<PAGE> 113
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of their requirements for filing on Form SB-2 and authorize this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Lachine, Province of Quebec, on
May 3, 1995.
<TABLE>
<S> <C>
CEDAR GROUP, INC.
By: /s/ Michel L. Marengere By: /s/ Nicolas Matossian
--------------------------- ---------------------------
Michel L. Marengere Nicolas Matossian
Chairman of the Board of President and Chief
Directors, Chief Executive Operating Officer
Officer and Director (Principal Financial Officer)
By: /s/ Robert Chartier
---------------------------
Robert Chartier
Vice President, Corporate
Comptroller
(Principal Accounting
Officer)
</TABLE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below under the heading "Signatures" constitutes and appoints Michel L.
Marengere and Chris Theodoropoulos, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities to sign any or all amendments
to this Registration Statement, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or their substitute or substitutes, may
all that said attorneys-in-fact and agents or their substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
II-8
<PAGE> 114
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities
and on the dates stated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
* Chairman of the May 3, 1995
- ------------------- Board of Directors,
Michel L. Marengere Chief Executive
Officer and Director
* Secretary and May 3, 1995
- ------------------- Director
Micheline Prud'homme
* President and Chief May 3, 1995
- ------------------- Operating Officer
Nicolas Matossian
* Vice President, May 3, 1995
- ------------------- Corporate Comptroller
Robert Chartier
* Director May 3, 1995
- -------------------
Rene Amyot
* Director May 3, 1995
- -------------------
Reynald Lemieux
* Director May 3, 1995
- --------------------------
Rt. Hon. Marc Lalonde
* By: /s/ Michel L. Marengere
------------------------
Michel L. Marengere (attorney-in-fact)
</TABLE>
*Power of Attorney previously filed under the Registration Statement
on Form S-3, filed January 26, 1995 and as amended on Form SB-2 filed on April
7, 1995.
II-9
<PAGE> 115
EXHIBIT INDEX
<TABLE>
<S> <C>
EXHIBIT NO. DESCRIPTION
----------- -----------
5 Opinion of Clark, Ladner, Fortenbaugh & Young
23.1 Consent of Ernst & Young
23.2 Consent of BDO Seidman
23.3 Consent of KPMG Peat Marwick Thorne
</TABLE>
<PAGE> 1
[CLARK, LADNER LETTERHEAD]
May 3, 1995
RE: CEDAR GROUP, INC.
REGISTRATION STATEMENT ON FORM SB-2
FILE NO.: 33-88796
Gentlemen:
We have acted as securities counsel to Cedar Group, Inc., a Delaware
corporation (the "Company"), in connection with the registration of certain
securities of the Company under the Securities Act of 1993, as amended (the
"Act"). In that regard, we have reviewed Pre-Effective Amendment No. 2 to the
Company's Registration Statement on Form SB-2 as filed under the Act by the
Company with the Securities and Exchange Commission (the "Commission") on May
3, 1995 (the "Registration Statement"). The Registration Statement has been
filed for the purposes of registering the resale of 8,500,859 shares of common
stock which consist of the following: (i) 6,708,692 shares of common stock
perviously issued by the Company in certain private placement transactions;
(ii) 200,000 shares of common stock which may be resold (following issuance)
pursuant to the exercise of the Ladenburg Warrants; and (iii) 1,592,167 shares
of common stock which have been or may be issued in the future upon exercise of
certain Class A Preferred Shares of Dominion Bridge, Inc. The Registration
Statement also covers the issuance of 13,880 shares of common stock offered by
the Company upon the exercise of certain outstanding Class A Warrants.
In rendering this opinion, we have examined originals or copies
certified or otherwise identified to our satisfaction as
<PAGE> 2
Cedar Group, Inc.
May 3, 1995
Page 2
being true copies of the Registration Statement, the Certificate of
Incorporation, as amended, of the Company, the By-Laws of the Company, minutes
of meetings of the Board of Directors of the Company, minutes of meetings of
the Board of Directors of the Company, and such other documents as we have
deemed relevant and necessary as a basis for this opinion. In our examination,
we have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us, the conformity to original documents of all
documents submitted to us as certified or photostatic copies, and the
authenticity of the originals of such latter documents. As to our opinion
expressed in paragraph 1 below, we have relied upon a Certificate from the
Secretary of State of Delaware as to the good standing of the Company.
Furthermore, capitalized terms used in the context of this opinion shall have
the same meaning ascribed thereto within the Registration Statement.
We are admitted to the Bar of the Commonwealth of Pennsylvania and
express no opinion as to the laws of any other jurisdiction, except Delaware
corporate law.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
and in good standing under the laws of the State of Delaware, with corporate
power to conduct the business which it conducts as described in the
Registration Statement.
2. The Company has an authorized capitalization of 20,000,000 shares
of Common Stock, $.001 par value, and 5,000,000 shares of Preferred Stock,
$.001 par value (the terms of which Preferred Stock may be established by the
Company's Board of Directors) (collectively, the "Shares").
3. The Shares to be sold by the Selling Security Holders have been
duly authorized by the Company and are validly issued, fully paid and
non-assessable.
4. The Share to be issued upon the exercise of the Class A Warrants
have been duly authorized by the Company and, when issued and paid for as
described in the Registration Statement, will be validly issued, fully paid and
non-assessable.
This firm consents to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
/s CLARK, LADNER, FORTENBAUGH & YOUNG
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 2 to Form S-3 on Form SB-2 Registration Statement and related
Prospectus of Cedar Group, Inc. for the registration of 8,500,859 shares of its
common stock and 13,880 shares of its Common Stock pursuant to certain
outstanding Class A Warrants and to the inclusion therein of our report dated
January 11, 1995, with respect to the consolidated financial statements of
Cedar Group, Inc. for the fiscal year ended September 30, 1994.
/s/ Ernst & Young
Montreal Canada
May 3, 1995
<PAGE> 1
[BDO SEIDMAN LETTERHEAD]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors
Cedar Group, Inc.
We hereby consent to the inclusion in this Amendment No. 2 to Form S-3 on
Form SB-2 Registration Statement of our report dated December 15, 1993,
relating to the consolidated financial statements of Cedar Group, Inc.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN
---------------
BDO SEIDMAN
Philadelphia, Pennsylvania
May 2, 1995
<PAGE> 1
[KPMG LETTERHEAD]
The Board of Directors
Cedar Group Inc.
We consent to the inclusion of our report dated May 31, 1994 in the
registration statement (No. 33-88796) on Form SB-2 of Cedar Group Inc.,
relating to the balance sheet of Dominion Bridge (formerly a division of United
Dominion Industries Limited) as of December 31, 1993 and the related statements
of operations and cash flows for each of the years in the two year period ended
December 31, 1993, which report appears in the September 30, 1994 annual report
on Form 10-KSB of Cedar Group Inc.
/s/ KPMG PEAT MARWICK THORNE
- -----------------------------
Toronto, Canada
May 3, 1995
