As filed with the Securities and Exchange Commission on March 11, 1998
File No. 33-90250
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-8
REGISTRATION STATEMENT
Under The Securities Act of 1933
RENTECH, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-0957421
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1331 17th Street, Suite 720, Denver, Colorado 80202
- - --------------------------------------------- -----------
(Address of Principal Executive Offices) (Zip Code)
1990 Stock Option Plan
1994 Stock Option Plan
------------------------
(Full title of the plan)
Loren L. Mall
Brega & Winters P.C.
1700 Lincoln Street, Suite 2222
Denver, Colorado 80203
--------------------------------------
(Name and address of agent for service)
(303) 866-9400
-------------------------------------------------------------
(Telephone number, including area code, of agent for service)
<PAGE>
PAGE 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents are deemed to be incorporated by reference in
this registration statement and to be a part
hereof.
1. The Company's Annual Report on Form 10-KSB dated December 29, 1997
for the 12-month period ended September 30, 1997, as amended by its Form
10-KSB/A dated January 15, 1998.
2. The Company's Quarterly Report on Form 10-QSB dated February 13, 1998
for the quarter ended December 31, 1997.
3. The Company's Current Report on Form 8-K dated March 2, 1998.
4. The description of the registrant's common stock as contained in the
registrant's registration statement filed pursuant to Section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act"), including any amendment
or report filed for the purpose of updating such description.
All documents subsequently filed by the registrant with the Securities
and Exchange Commission pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference into this registration statement and to be a part hereof from the
date of filing of such documents.
Item 5. Interests of Named Experts and Counsel.
Brega & Winters P.C., general counsel to the Company, has rendered an
opinion in connection with this registration statement that the Shares being
offered, upon issuance and payment therefor, will be duly authorized, validly
issued, fully paid and non-assessable. A lawyer associated with Brega &
Winters P.C. beneficially owns 283,052 Shares of the Company's common stock.
Item 8. Exhibits.
EX-23.1 Consent of Independent Certified Public Accountants.
EX-99.1 Form of prospectus for the reoffer of control securities.
Item 9. Undertakings.
(a) 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:
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PAGE 3
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
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PAGE 4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Denver, State of Colorado on the 6th
day of March, 1998.
RENTECH, INC.
(signature)
By: ----------------------------------------
Dennis L. Yakobson, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- - --------- ----- ----
(signature)
- - -------------------------- President, Chief Executive March 6, 1998
Dennis L. Yakobson Officer and Director
(signature)
- - -------------------------- Vice President, Chief March 6, 1998
Ronald C. Butz Operating Officer,
Secretary and Director
(signature)
- - -------------------------- Director March 6, 1998
Mark S. Bohn
(signature)
- - -------------------------- Director March 6, 1998
Erich W. Tiepel
(signature)
- - -------------------------- Vice President - Finance, March 6, 1998
James P. Samuels Chief Financial Officer
PAGE 5
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Rentech, Inc.
1331 17th St., Suite 720
Denver, CO 80202
We consent to the incorporation by reference in the Post-Effective Amendment
No. 1 to Registration Statement of Rentech, Inc. on Form S-8 of our report
dated November 26, 1997 relating to the consolidated financial statements
(which contained an explanatory paragraph relative to the going concern
uncertainty) appearing in the Annual Report on Form 10-KSB of Rentech, Inc.
for the year ended September 30, 1997 and for the nine months ended September
30, 1996, and to the reference to us under the heading "Experts" in the
Prospectus, which is part of such Registration Statement.
BDO Seidman LLP
March 9, 1998
Denver, Colorado
PAGE 6
Exhibit 99.1
P R O S P E C T U S
RENTECH, INC.
1,032,988 Shares Common Stock ($.01 par value)
THESE SECURITIES ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF RISK.
SEE RISK FACTORS BEGINNING AT PAGE 5
This Prospectus relates to 1,032,988 shares (the "Shares") of common
stock, $.01 par value per share (the "Common Stock"), of RENTECH, INC. (the
"Company"). The Selling Shareholders are identified in this Prospectus under
the heading "Selling Shareholders." The Shares may be offered by Selling
Shareholders from time to time: (i) in transactions in the over-the-counter
market, on the automated inter-dealer system on which shares of Common Stock
of the Company are then listed, in negotiated transactions, or a combination
of such methods of sale, and (ii) at market prices prevailing at the time of
sale, at prices related to such prevailing market prices, or at negotiated
prices. The Selling Shareholders may effect such transactions by selling the
Shares to or through securities broker-dealers. Such broker-dealers may
receive compensation in the form of discounts, concessions, or commissions
from the Selling Shareholders and/or the purchasers of the Shares for whom
such broker-dealers may act as agent or to whom they sell as principal, or
both (which compensation as to a particular broker-dealer might be in excess
of customary commissions). See "Selling Shareholders" and "Plan of
Distribution." Selling Shareholders may also sell such shares pursuant to
Rule 144 or Rule 144A under the Securities Act of 1933 if the requirements for
the availability of such rules have been satisfied.
The Shares were issued to the Selling Shareholders upon exercise of
options granted to them under the Company's employee benefit plans. None of
the proceeds from the sale of the Shares by the Selling Shareholders will be
received by the Company. The Company has, however, received the net proceeds
from the exercise of the stock options described herein under "Use of
Proceeds." The Company has agreed to bear all expenses (other than
underwriting discounts, selling commissions, and underwriter expense
allowance, and fees and expenses of counsel and other advisers to the Selling
Shareholders) in connection with the registration and sale of the Shares being
offered by the Selling Shareholders. The Company has agreed to indemnify the
Selling Shareholders against certain liabilities, including liabilities under
the Securities Act of 1933, as amended (the "Securities Act").
The Common Stock of the Company is listed and traded on NASDAQ on the
Small Cap Market under the symbol "RNTK." On March 6, 1998, the last reported
sale price of the Common Stock was $1.625 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is March 11, 1998
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PAGE 7
AVAILABLE INFORMATION
The Company is subject to the informational 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"). Proxy statements, reports and other
information concerning the Company can be inspected and copied at Room 1024 of
the Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549, and
the Commission's Regional Offices in Denver (Suite 4800, 1801 California
Street, Denver, Colorado 80202), New York (Room 1228, 75 Park Place, New York,
New York 10007), and Chicago (Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60621-2511), and copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. This Prospectus
does not contain all information set forth in the Registration Statement of
which this Prospectus forms a part and exhibits thereto which the Company has
filed with the Commission under the Securities Act and to which reference is
hereby made.
DOCUMENTS INCORPORATED BY REFERENCE
The Company will provide, without charge, to each person to whom a copy
of this Prospectus is delivered, including any beneficial owner, upon the
written or oral request of such person, a copy of any or all of the documents
incorporated by reference herein (other than exhibits to such documents,
unless such exhibits are specifically incorporated by reference into the
information that the Prospectus incorporates). Requests should be directed
to:
Rentech, Inc.
1331 17th Street, Suite 720
Denver, Colorado 80202
Telephone number: (303) 298-8008
Attention: James P. Samuels, Chief Financial Officer
The following documents filed with the Commission by the Company (File
Number 0-19260) are hereby incorporated by reference into this Prospectus:
1. The Company's Annual Report on Form 10-KSB dated December 29, 1997
for the 12-month period ended September 30, 1997, as amended by its Form
10-KSB/A dated January 15, 1998.
2. The Company's Quarterly Report on Form 10-QSB dated February 13, 1998
for the quarter ended December 31, 1997.
3. The Company's Current Report on Form 8-K dated March 2, 1998.
All documents filed with the Commission by the Company pursuant to
Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act subsequent to the date
of this Prospectus and prior to the termination of the offering registered
hereby shall be deemed to be incorporated by reference into this Prospectus
and to be a part hereof from the date of the filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any
subsequently filed document which
<PAGE>
PAGE 8
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
SUMMARY
The Company
Rentech, Inc. ("Rentech" or the "Company") was organized as a
Colorado corporation in 1981 to develop and exploit processes for the
conversion of natural gas and other low-value carbon-bearing gases and
solids into valuable liquid hydrocarbons, including premium diesel
fuel, naphthas and waxes. The gas-to-liquids technology developed by
the Company ("Rentech Process Technology" or "Technology") is protected
by a series of patents issued by the U.S. Patent Office. The ability
of the Technology to convert carbon-bearing gases into valuable liquid
hydrocarbons has been validated in two pilot plants operated
periodically between 1982 and 1989, in a 235 barrel per day commercial
scale facility in 1992 and 1993, and in a third pilot plant presently
being operated in Rentech's test facility at Pueblo, Colorado.
Rentech's gas-to-liquids Technology has been licensed for use in India
in a 360 barrel per day plant that the licensee is now beginning to
construct.
During March 1997, the Company entered into the business of
manufacturing and selling water-based stains, sealers and coatings by
purchasing the assets of Okon, Inc. ("Okon"). The Company is
continuing and expanding the 20-year old business of Okon as a
wholly-owned subsidiary. Okon sells environmentally clean, water
repellant sealers, coatings and stains for wood, concrete and masonry.
The customers are the construction industry and architects. Okon
presently provides Rentech's primary source of revenues.
During July 1997, Rentech and ITN Energy Systems, Inc., a
privately-owned Colorado corporation formed a Colorado limited
liability company called ITN/ES LLC. On February 20, 1998 the Company
contributed capital to ITN/ES LLC, consisting of $200,000 in cash and
1,200,000 shares of the Company's Common Stock for its 10% interest in
ITN/ES LLC. ITN/ES LLC is entering into a new business called ITN
Electronic Substrates LLC. Rentech owns 50% of ITN Electronic
Substrates LLC. ITN Electronic Substrates LLC intends to engage in the
manufacture and sale of several types of flexible thin-film on which it
has electronically deposited metals with unique properties, such as
copper and molybdenum, that provide conductive paths to which computer
chips may be attached. The new business intends to begin its first
activities and begin production in 1998. The customers are expected to
be contract manufacturers in the computer, aerospace and medical
instrument industries, as well as large end-users which use the
substrates to manufacture their own products.
The Company's long-term plan is to diversify into three industry
groups centered around its three present lines of business. Rentech
plans to continue licensing its gas-to-liquids Technology in a
petrochemical group, to establish an environmental and industrial
products group that includes products such as the stains, sealers,
repellants and other coatings produced by Okon, and to develop an
advanced technology group with such technologies as the new business of
ITN Electronic Substrates LLC.
<PAGE>
PAGE 9
The Company is continuing its original business of licensing its
gas-to-liquids Technology, including sale of its proprietary catalyst
used in the conversion process. Licenses are granted in exchange for
license fees and ongoing royalties on the production of liquid
hydrocarbons from conversion plants that use the Technology and are
constructed and owned by licensees. Rentech has licensed its
Technology for use in India for a plant now under construction by its
Indian licensee at Arunachal Pradesh, India. Rentech is providing its
Indian licensee engineering design and technical services under
contract, and will provide such services to subsequent licensees for
their use in constructing their plants, together with engineering
services and startup operational support services on a fee basis for
licensed plants. In addition, Rentech may reserve the right to
contract for the engineering and supply the synthesis gas conversion
reactor modules that are essential to use of its Technology in
conversion plants. Rentech is not now receiving significant revenues
from its gas-to-liquids Technology.
The Rentech Technology uses as feedstock natural gas from gas
wells that are not producing or that flare gas, or synthesis gas, a
mixture of hydrogen and carbon monoxide gases, produced by gasification
of coal and other carbonaceous materials. These sources of fuel are in
abundant supply worldwide. A potential feedstock of growing importance
is the heavy, high sulphur fuels at refineries commonly known as
refinery bottoms. Other sources of feedstock include methane, a gas
collected from coal beds, as well as industrial off gases. The
Technology can provide a means of utilizing gas resources that are
currently unmarketable due to their remote locations or because of the
presence of diluents such as carbon dioxide or nitrogen.
The diesel fuel produced by using the Technology has been tested
to have a sulphur content below detectable limits and to have improved
combustion characteristics when compared to commercial No. 2 diesel
fuel. These qualities make it less polluting than presently available
diesel fuel, and, unlike alternative fuels such as methanol or
compressed natural gas, does not require any engine or vehicle
modifications for use. Based upon prices of crude oil at about $16 per
barrel, and commercial No. 2 diesel fuel at approximately $.50 per
gallon, management believes the diesel fuel can be produced and sold at
competitive prices and, particularly in view of the requirements of the
federal Clean Air Act, may be saleable at premium prices. The
Technology has the potential of reducing, in this and other countries,
dependency upon imports of crude oil and petroleum products by
converting the large fields of shut-in natural gas reserves in this
country into liquids that can be inexpensively trucked to users.
The executive offices of the Company are located at 1331 17th
Street, Suite 720, Denver, Colorado 80202, telephone (303) 298-8008,
fax (303) 298-8010.
Recent Developments
On January 26, and on February 9, 1998, the Company sold a total
of 200,000 shares of its Series 1998-A Preferred Stock at $10 per share
in a private placement to certain persons included among the Selling
Shareholders. The Series 1998-A Preferred Stock may be converted by
the holders into Common Stock at $1.00 per share of Common Stock as to
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PAGE 10
120,000 shares of the preferred stock and at $1.03125 per share of
Common Stock as to 80,000 shares of the preferred stock, or, if lower,
82.5% of the average closing bid of the Common Stock over the five
consecutive trading days following the date of conversion. 120,000
shares of the Series 1998-A Preferred Stock is convertible starting May
26, and the remaining 80,000 shares are convertible starting June 9,
1998.
The holders of the Series 1998-A Preferred Stock acquired, without
additional cost, warrants for the purchase of the Company's Series
1998-B Preferred Stock at $10 per share. The warrants provide for the
warrant holders, during the 18 months after the purchase of the Series
1998-A Preferred Stock, to purchase and the Company to sell 200,000
shares of the Series 1998-B Preferred Stock, and at the Company's
option, up to a maximum of 800,000 shares of the Series
1998-B Preferred Stock at $10 per share. The obligations of the
Company to sell and the warrant holders to purchase are subject to
certain objective criteria, primarily the trading volume and market
price of the Common Stock. Shares of the Series 1998-B Preferred Stock
are convertible into shares of Common Stock at 82.5% of the average
closing bid of the Common Stock for the five trading days preceding
conversion of the preferred stock into Common Stock.
Both the Series 1998-A Preferred Shares and the 1998-B Preferred
Shares accrue dividends at 9% per annum. The dividends may, at the
election of the Company, be paid in cash or shares of Common Stock at
its market price at the time of payment. The holders of the preferred
shares are entitled, in the event of liquidation, dissolution or
winding up of the Company, to receive the $10 par value plus
accumulated but unpaid dividends on the preferred shares before
distributions are made to holders of Common Stock.
The Shares offered hereby by the Selling Shareholders include a
maximum of 13,333,334 Shares of Common Stock issuable upon conversion
of the Series 1998-A Preferred Stock and the Series 1998-B Preferred
Stock. For purposes of determining the number of Shares to be offered
by the Selling Shareholders who hold the preferred shares, the number
of Shares calculated to be issuable upon conversion of the preferred
stock is based on a low conversion price. That conversion price, which
is used merely for the purposes of setting forth a number for this
Prospectus, is 75% of the average closing bid price of the Common Stock
over the five consecutive trading days preceding the first sale of
preferred stock on January 26, 1998. That average price was $1.00.
The conversion price used for this Prospectus is therefore $.75. The
number of Shares of Common Stock issuable upon conversion of the
preferred stock is subject to adjustment depending on the market price
on the date of conversion and could be materially less or more than the
number estimated in this Prospectus. The exact number depends on
future events that cannot be predicted by the Company. The unknown
factors include the amount of the preferred stock that is converted and
the future market price of the Common Stock, and whether dividends on
the preferred stock are paid in Shares of Common Stock or cash.
RISK FACTORS
This Prospectus contains statements that constitute
"forward-looking statements" within the meaning of Section 21E of the
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PAGE 11
Exchange Act and Section 27A of the Securities Act. The words
"expect," estimate," "anticipate," "predict," "believe," and similar
expressions and variations thereof are intended to identify
forward-looking statements. Such statements appear in a number of
places in this filing and include statements regarding the intent,
belief or current expectations of the Company, its directors or
officers with respect to, among other things (a) trends affecting the
financial condition or results of operations of the Company, and (b)
the business and growth strategies of the Company. Readers are
cautioned that any such forward-looking statements are not guarantees
of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in this
Prospectus, for the reasons, among others, set forth in the following:
1. Lack of Profitable Operations. From inception on December 18,
1981, through September 30, 1997, the Company has sustained losses
aggregating $9,735,824. For the year ended September 30, 1997 and the
nine month period ended September 30, 1996, the Company had net losses
of $1,375,686 and $392,478, respectively. For the three months ended
December 31, 1997 and 1996, the Company recorded losses of $503,020 and
$257,540, respectively. The increase of approximately 350% in loss for
the twelve month period in 1997 compared to the nine month period in
1996 is due to a decrease in contract revenues and license fees of
$295,176, increase in interest expense of approximately $289,000 from
the addition of $1,250,500 in debt and extraordinary gain in 1996 of
$200,434. Increases in 1997 costs over 1996 are attributable in
general to the longer fiscal period in 1997 and in particular to public
relations costs and approximately $100,000 in hiring costs of a chief
financial officer. Profit contributed by Okon from its acquisition in
March 1997 partially offset the increases in costs due to the longer
fiscal period. The losses since inception raise substantial doubt
about the ability of the Company to continue as a going concern, as
stated in the report of independent certified public accountants
contained in the September 30, 1997 audited financial statements.
There are no assurances that the Company will complete acquisitions of
revenue producing businesses or that the Company's licensees will
complete construction of plants using the Technology, or that any
gas-to-liquids conversion plants that are completed will be operated
profitably or provide engineering design fees, license fees or
royalties for the Company.
2. Economic Feasibility of Gas-to-Liquids Technology Not Assured.
Whether any full-scale conversion plant using the Technology can be
profitably operated depends upon the availability of low-cost feedstock
and the economic feasibility or efficiency of the Technology, as well
as a ready market for the end products (primarily premium diesel fuel,
naphthas and waxes) at reasonable prices. The diesel fuel produced by
the Technology has not been subjected to long-term engine tests to
determine if there are any adverse effects. No in-depth cost or price
studies have been prepared by independent third parties for the
Company. Any significant decrease in prices of crude oil below
approximately $16 or of commercial No. 2 diesel fuel below
approximately $.50 per gallon could have a material adverse effect upon
the economic potential of the Technology.
3. Dependence upon Management. At this stage of the Company's
development, economic success of the gas-to-liquids Technology depends
upon design of gas conversion plants and their startup to achieve
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PAGE 12
optimal process plant operations, and establishment of the Company's
advanced technology business. Both require knowledge, skills, and
relationships unique to the Company's technical personnel. Moreover,
to successfully compete with its gas conversion Technology and advanced
technology, the Company will be required to engage in continuous
research and development regarding processes, products, markets and
costs. Loss of the services of the executive officers of the Company,
particularly Drs. Charles B. Benham or Mark S. Bohn due to their
technical expertise and knowledge related to the gas conversion
Technology, could be expected to have a material adverse effect upon
the Company. The Company's employment contract with Dr. Benham,
expires on March 31, 1999. It has no employment contract with Dr. Bohn
who works for the Company on a part-time basis as needed.
4. New Business Risks Associated With Entry into Advanced
Technology Business. The likelihood of success of the Company's entry
into the advanced technology business of producing and selling flexible
thin-film substrates by electronic deposition through ITN Electronic
Substrates LLC, and the Company's proposed entry, through ITN/ES LLC
and other entities, into other new businesses involving advanced
technology, must be considered in view of the problems, expenses,
difficulties, complications and delays frequently encountered with
starting up a new business, including the development of new technology
and the marketing of new products. The Company has no history of
operations in these lines of business upon which to evaluate its
prospects for future operating or financial success.
5. Risk of Technological and Regulatory Change and Requirement
for New Products. The market for advanced technology products is
characterized by rapidly changing technology, new legislation and
regulations, and evolving industry standards. The introduction of
products embodying new technology, the adoption of new legislation or
regulations, or the emergence of new industry standards could render
the Company's products and future products, if any, obsolete and
unmarketable. The success and growth of the Company will depend, in
part, upon its ability to anticipate changes in technology, market
needs, law, regulations, and industry standards, and to successfully
develop and introduce new and enhanced products on a timely basis. The
Company will need to devote a substantial amount of its efforts to
research and development as well as to sales and marketing.
6. Effect of Competition. The products of the
gas-to-liquids Technology will compete with other petroleum products,
including products produced by similar methods. To a great extent,
competition in this business will be based upon price, although compliance
with environmental laws may create demand for the Company's low aromatic,
sulphur-free diesel fuel even at premium prices. Others have and are
actively seeking to develop technology that will enable results similar
to the Company's processes for conversion of gas-to-liquid
hydrocarbons. The most likely competition will come from major
corporations in the oil and gas and synthetic fuel industries that have
vastly greater technical and financial resources than the Company. The
stains, sealers and coatings industry is highly competitive and has
historically been subject to intense price competition. It is
estimated that there are approximately 800 coatings manufacturers in
the United States, many of which are small companies that provide
intense competition within regional and local markets, especially with
respect to lower price coatings and custom made specialty items
required on a short-term delivery basis. The Company's primary
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PAGE 13
competition is approximately one dozen other manufacturers, of
which at least five are large, better capitalized, and have more
extensive distribution networks. Other manufacturers are large
diversified corporations, the assets of which are vastly greater than
those of the Company, which compete on a nationwide basis. The
Company's overall position in the coatings industry, as one of the
smallest manufacturers, is minor. The advanced technology industry
producing thin-film substrates by electronic deposition is highly
competitive. Competitors include at least a dozen United States and
international competitors, many of which are large diversified
businesses, and the assets of which are greatly superior to those of
the Company. Competition for the advanced technology products is based
upon price, quality, and quantity of the products, as well as
reputation, none of which have been established by the Company because
it is only now entering into this business.
7. Need for Inexpensive Feedstock to Produce Gas-to-Liquids
Products that Are Competitively Priced. Successful exploitation of the
Company's gas-to-liquids Technology depends upon the availability of
substantial quantities of carbon-bearing, low-cost feedstock for plants
that use the Technology. Management believes such feedstock gas will
be readily available from sources such as natural gas wells that are
not producing gas because of remote locations, and from other sources
such as synthesis gas produced by gasification of coal and refinery
bottoms, as well as industrial off gases. However, in the event
low-cost gas cannot be obtained, then plants using the Technology may
not be able to produce products for sale at competitive prices.
Although the cost of diesel fuel produced at the plants may require
that it be sold at prices somewhat higher than competing diesel fuels,
management expects that many users, particularly those subject to the
increasingly strict mandates of the Clean Air Act, will pay a premium.
If prices for crude oil are in the range of $16 per barrel and diesel
fuel at approximately $.50 per gallon or higher, management believes
that the diesel fuel produced using the Technology can be priced
competitively, but no such assurance can be given. Also, should oil or
commercial No. 2 diesel fuel prices both decrease significantly, any
market for the Company's diesel fuel that may hereafter exist could be
adversely affected.
8. Lack of Adequate Capital to Exploit the Gas-to-Liquids
Technology. The capital cost of gas conversion plants and natural gas
fields or other sources of feedstock that use the Company's Technology
requires more capital than is available to the Company or to many of
its potential licensees. While the Company does not presently plan to
build its own plants for use of the Technology, and expects its
licensees to acquire feedstock and build and own plants for which they
are licensed by the Company, many potential licensees are unable to
finance the construction costs and acquire feedstock, or to do so
readily. These limitations have slowed and will continue to delay use
of the Technology and resulting revenues to the Company from use of
the Technology unless the Company is able to join with other better
capitalized companies to commercially exploit the Technology. There
are no assurances that such joint arrangements will be available or
acceptable to the Company.
9. Lack of End Product Purchase Contracts. The Company has
previously contacted various potential purchasers of the products of
the gas-to-liquids Technology, primarily users of diesel fuel, and
<PAGE>
PAGE 14
potential purchasers of the thin-film substrates, but has no
contracts for purchase of such end products. The Company's
gas-to-liquids licensees are responsible for marketing products
from gas conversion plants constructed by them. Because the diesel
fuel produced is relatively non-polluting, it is believed that
metropolitan transportation districts and other users of fuel in urban
areas having air pollution problems may be interested in purchasing such
fuel, possibly at a premium over the price of commercial diesel fuel.
However, no such assurance can be given.
10. Risk of Expatriation Laws. In its offshore operations
involving the gas-to-liquids Technology, the Company expects it will
usually be paid design contract fees, license fees, royalties and other
compensation denominated in the currency of the subject country. The
Company will thus be subject to the risk of fluctuation of currency
exchange rates. Whenever possible, however, management intends to
negotiate payment in U.S. dollars. In addition, some countries have
laws that may adversely affect the ability of the Company to remove
funds from that country, may impose taxes upon such removal, or limit
the amount of the payments that a licensee can make to the Company.
11. Uninsured Losses Related to the Gas-to-Liquids Technology.
Certain types of losses (generally losses of a catastrophic nature such
as damage to a gas conversion plant in which the Company may hold an
interest caused by fire, explosion, war, earthquakes and floods) are
either uninsurable or not economically insurable. Should an uninsured
or partially insured loss occur, the Company could suffer a loss of
invested capital and any profits that might otherwise have been
anticipated.
12. Limitation on Protection of Intellectual Property. The
Company relies on a combination of patent, trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures
to protect its intellectual property rights in its lines of business.
There are no assurances that these rights or any additional patents
will be adequate to protect the Company's interest in present and any
future intellectual property. Patents and copyrights may be contested
by competitors and held invalid or not effective to preclude others
from using similar concepts and functionally similar processes. The
protection afforded to intellectual property by other nations is
generally not as effective as that provided within the United States.
13. No Expectation of Dividends. No dividends have been paid on
the Company's Common Stock since inception, and it is highly unlikely
that any dividends will be paid in the near term due to existing
capital needs. However, if the business plan is successful, the
Company may generate substantial revenue from its lines of business,
which, barring unanticipated capital commitments, is expected to allow
payment of dividends. No assurance can be given, however, that the
Company will ever pay, or be in a position to pay dividends.
14. Potential Dilution Due to Exercise of Stock Options and
Warrants and Additional Private Offerings. The Company has committed
to issue a substantial number of shares of Common Stock upon exercise
of presently outstanding stock options, warrants and preferred stock.
The Company may issue additional shares of its Common Stock or
warrants for the purchase of Common Stock to raise operating capital or
acquire other businesses or assets. Issuance of additional shares of
Common Stock will reduce the percentage ownership interest in the
Company represented by shares of Common Stock acquired by purchasers
and may dilute the value of their interest in the Company.
<PAGE>
PAGE 15
15. Potential Dilution of Shareholder Rights by Issuance of
Preferred Stock. The Company is authorized to issue up to 1,000,000
shares of preferred stock, par value $10 per share and has entered into
arrangements for issuing up to all of the preferred stock. See "RECENT
DEVELOPMENTS." Preferred stock can be issued in one or more series,
the terms of which are determined at the time of issuance by the
board of directors without any requirement for shareholder approval.
Such rights may include voting rights, preferences as to dividends and,
upon liquidation, conversion and redemption rights, and mandatory
redemption provisions pursuant to sinking funds or otherwise.
Conversion of the preferred stock or issuance of preferred stock in the
future could affect the rights of the holders of Common Stock and
therefore reduce the value of the Common Stock. Rights could also be
granted to holders of preferred stock issued after this date that could
reduce the attractiveness of the Company as a potential takeover
target. See "DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK."
16. Deterrence of Tender Offers by Fair Price Provisions. The
Company's Articles of Incorporation include provisions designed to
assure shareholders, to the extent possible, that any hostile takeover
attempt or merger of the Company with a significant shareholder or its
affiliate will result in shareholders receiving a fair value for their
securities. These provisions include grouping of the board of
directors into three classes with staggered terms; a requirement that
directors may be removed without cause only with the approval of the
holders of 66-2/3% of the outstanding voting power of the capital stock
of the Company; and a requirement that the holders of not less than
66-2/3% of the voting power of the outstanding capital stock of the
Company approve certain business combinations of the Company with any
holder of more than 10% of such voting power or an affiliate of any
such holder unless the transaction is either approved by at least a
majority of the uninterested and unaffiliated members of the board of
directors or unless certain minimum price and procedural requirements
are met. These provisions could deter a hostile tender offer by a
third party for the purchase of some or all of the Company's
outstanding securities and could have the effect of entrenching
management. See "DESCRIPTION OF COMMON STOCK AND PREFERRED
STOCK."
17. Volatility of Stock Prices; Penny Stock Rules. The
over-the-counter markets for securities such as the Company's Common
Stock historically have experienced extreme price and volume
fluctuations. These broad market fluctuations, variations in the
Company's results of operations, and other economic and industry trends
may adversely affect the market price of the Company's Common Stock.
Although the Common Stock is listed for quotation on the NASDAQ
SmallCap Market, there are no assurances that the Common Stock will
meet the minimum bid price of $1 or other listing requirements.
Accordingly, there can be no assurance that the Common Stock will
remain eligible for quotation on NASDAQ. In the event of ineligibility
and delisting, the Common Stock would become subject to rules of the
Securities and Exchange Commission regulating broker-dealer practices
in connection with transactions in "penny stocks." The penny stock
rules may make many brokers unwilling to engage in transactions in the
Company's Common Stock because of the added burdens imposed on the
broker by those rules to make disclosures and to determine and
<PAGE>
PAGE 16
establish the suitability of each prospective purchaser of the Common
Stock. The penny stock rules may make it more difficult for purchasers
of Common Stock in this offering to dispose of their securities and
could adversely affect the market price of the Common Stock.
Use of Proceeds
The Shares are being offered for the account of Selling Shareholders.
The Company will not receive any proceeds from the sale of their Shares.
The Company will receive approximately $366,807 if all of the stock options
presently issued pursuant to the 1990 Plan for the purchase of 740,988
shares of Common Stock are exercised, and $173,125 if all of the stock
options presently issued pursuant to the 1994 Plan for the purchase of
292,000 shares of Common Stock are exercised, of which there is no
assurance. The Company intends to use any net proceeds from the exercise of
the stock options for working capital and general corporate purposes.
SELLING SHAREHOLDERS
<TABLE>
<CAPTION>
The shares of Common Stock owned by the Selling Shareholders and the shares of Common
Stock (the "Shares") underlying stock purchase warrants held by them are being offered by
the Selling Shareholders identified in the following table.
Number of Shares
Number of to be Beneficially Owned
Name of Number of Shares Shares That On Completion of the Offering
Selling Beneficially Owned May Be % of
Shareholder Record Indirect Offered(1) Record Indirect Class
- - ----------------- ------ -------- ---------- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Charles B. Benham 275,440 488,380 87,500 275,440 400,880 2.2%
Mark S. Bohn 443,431 289,592 87,500 443,431 202,092 2.3%
Ronald C. Butz 533,583 488,380 87,500 533,583 400,880 3.1%
Donald C. Christensen 0 400,000 15,000 0 385,000 1.3%
Linda D. Kansorka 2,969 95,988 95,988 2,969 0 *
Mark Koenig 0 112,000 112,000 0 0 *
Frank L. Livingston 40,000 30,000 30,000 40,000 0 *
D. Barry McKennitt 65,000 70,000 70,000 65,000 0 *
James P. Samuels 127,500 579,500 270,000 127,500 309,500 2.2%
Erich W. Tiepel 123,277 272,448 90,000 123,277 182,448 1.2%
Dennis L. Yakobson 404,354 499,900 87,500 404,354 412,400 2.7%
---------
Total 1,032,988(1)
- - ---------------
<FN>
*Less than 1%
<F1> Includes 740,988 shares of common stock issuable upon exercise of presently issued
stock options pursuant to the 1990 Plan and 292,000 shares of common stock issuable
upon exercise of presently issued stock options pursuant to the 1994 Plan.
</FN>
</TABLE>
<PAGE>
PAGE 17
To the knowledge of the Company, each of the Selling Shareholders is
presently an officer, director or employee of the Company or has held an
office, position or other material relationship with the Company, its
predecessors or affiliates during the past three years.
Each Selling Shareholder has represented that he purchased the
Common Stock for investment and with no present intention of distributing
or reselling such Shares unless registered for resale. However, in
recognition of the fact that holders of restricted securities may wish to
be legally permitted to sell their Shares when they deem appropriate, the
Company has filed with the Commission under the Securities Act a Form
S-8 registration statement of which this Prospectus forms a part with
respect to the resale of the Shares from time to time in the
over-the-counter market or in privately negotiated transactions. The
Company has agreed to prepare and file such amendments and supplements to
the Registration Statement and to use its best efforts to obtain
effectiveness of the Registration Statement and to keep the Registration
Statement effective until all the Shares offered hereby have been sold
pursuant thereto, until such Shares are no longer, by reason of Rule 144
under the Securities Act or any other rule of similar effect, required to
be registered for the sale thereof by the Selling Shareholders, or for a
period of 180 days, whichever occurs first.
Certain of the Selling Shareholders, their associates and affiliates
may from time to time be customers of, engage in transactions with,
and/or perform services for the Company or its subsidiaries in the
ordinary course of business.
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time to
purchasers directly by the Selling Shareholders. Alternatively, the
Selling Shareholders may from time to time offer the Shares to or
through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions or
commissions from the Selling Shareholders or the purchasers of Shares
for whom they may act as agents. The Selling Shareholders and any
underwriters, broker/dealers or agents that participate in the
distribution of Shares may be deemed to be "underwriters" within the
meaning of the Securities Act and any profit on the sale of the Shares
by them deemed to be "underwriters" within the meaning of the
Securities Act and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or agents
may be deemed to be underwriting discounts and commissions under the
Securities Act.
The Shares offered hereby may be sold from time to time in one or
more transactions at fixed prices, at prevailing market prices at the
time of sale, any varying prices determined at the time of sale, or at
negotiated prices. The sale of the Shares may be effected in
transactions (which may involve crosses or block transactions) (i) on
any national or international securities exchange or quotation services
on which the Shares may be listed or quoted at the time of sale, (ii)
in the over-the-counter market, (iii) in transactions otherwise than on
such exchanges or in the over-the-counter market or (iv) through the
writing of options. At the time a particular offering of the Shares is
<PAGE>
PAGE 18
made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount and type of Shares being offered
and the terms of the offering, including the name or names of any
underwriters, broker/dealers of agents, any discounts, commissions and
other terms constituting compensation from the Selling Shareholders and
any discounts, commissions or concessions allowed or reallowed or paid
to broker/dealers. Selling Shareholders may also sell such shares
pursuant to Rule 144 or Rule 144A under the Securities Act of 1933 if
the requirements for the availability of such rules have been
satisfied.
To comply with the securities laws of certain jurisdictions, if
applicable, the Shares will be offered or sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition,
in certain jurisdictions the Shares may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions
or any exemption from registration or qualification is available and
is complied with.
The Selling Shareholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder, which
provisions may limit the timing of purchases and sales of any of the
Shares by the Selling Shareholders. The foregoing may affect the
marketability of the Shares.
Pursuant to the Registration Rights Agreement, all expenses of the
registration of the Shares will be paid by the Company, including,
without limitation, Commission filing fees and expenses in compliance
with state securities or "blue sky" laws; provided, however, that the
Selling Shareholders will pay all underwriting discounts and selling
commissions, if any. The Selling Shareholders will be indemnified by
the Company against certain civil liabilities, including certain
liabilities under the Securities Act, or will be entitled to
contribution in connection therewith.
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
The authorized capital stock of the Company consists of
100,000,000 shares of Common Stock, $.01 par value per share, and
1,000,000 shares of preferred stock, $10 par value per share. A quorum
for purposes of meetings of common shareholders consists of a majority
of the issued and outstanding shares of Common Stock, and once a quorum
is established, action of a routine nature may properly be taken by a
majority of the shares represented in person or by proxy at the
meeting. Most major corporate transactions such as mergers,
consolidations, sales of all or substantially all assets, and certain
amendments to the articles of incorporation require approval by the
holders of two-thirds of the issued and outstanding shares of Common
Stock entitled to vote. The Company's board of directors is
authorized to issue shares of Common Stock and preferred stock without
approval of shareholders. Shares of preferred stock may be issued in
one or more series, the terms of which will be determined at the time
of issuance by the board of directors without any requirement for
shareholder approval. Such rights may include voting rights,
references as to dividends, and upon liquidation, conversion and
<PAGE>
PAGE 19
redemption rights, and mandatory redemption provisions pursuant to
sinking funds or otherwise. The Company has issued 200,000 shares
of Series 1998-A Preferred Stock, and may issue 800,000 shares of
Series 1998-B Preferred Stock. See "SUMMARY-Recent Developments."
The Shares of Common Stock covered by this Prospectus are fully
paid and nonassessable. Holders of the Common Stock have no preemptive
rights. Each stockholder is entitled to one vote for each share of
Common Stock held of record by such stockholder. There is no right to
cumulate votes for election of directors. Upon liquidation of the
Company, the assets then legally available for distribution to holders
of the Common Stock will be distributed ratably among such shareholders
in proportion to their stock holdings. Holders of Common Stock are
entitled to dividends when, as and if declared by the Board of
Directors out of funds legally available therefor. While shares of
the Series 1998-A and Series 1998-B Preferred Stock are outstanding, no
dividends may be paid on the Common Stock unless dividends on the
Preferred Stock have been paid, and no shares of Common Stock may be
purchased or funds set aside for that purpose by the Company except in
amounts of less than $100,000 per year.
LEGAL OPINIONS
Brega & Winters, P.C., 1700 Lincoln Street, Suite 2222, Denver,
Colorado 80203 has rendered an opinion as to the legality of the Shares
issued to the Selling Shareholders. A lawyer associated with Brega &
Winters P.C. beneficially owns 283,052 Shares of the Company's common
stock.
EXPERTS
The financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-KSB for the twelve
months ended September 30, 1997 and the nine-month period ended September
30, 1996 have been audited by BDO Seidman, LLP, independent certified
public accountants, as stated in their report (which contained an
explanatory paragraph relative to the going concern uncertainty), which
is incorporated herein, and has been so incorporated in reliance upon
such report given upon the authority of the firm as experts in accounting
and auditing.
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING HEREIN CONTAINED AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN 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 AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS TO ANY OF
THE TIME SUBSEQUENT TO ITS DATE. HOWEVER, THE COMPANY HAS UNDERTAKEN TO
<PAGE>
PAGE 20
AMEND THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART TO
REFLECT ANY FACTS OR EVENTS ARISING AFTER THE EFFECTIVE DATE THEREOF
WHICH INDIVIDUALLY OR IN THE AGGREGATE REPRESENT A FUNDAMENTAL CHANGE IN
THE INFORMATION SET FORTH IN THE REGISTRATION STATEMENT. IT IS
ANTICIPATED, HOWEVER, THAT MOST UPDATED INFORMATION WILL BE INCORPORATED
HEREIN BY REFERENCE TO THE COMPANY'S REPORTS FILED UNDER THE SECURITIES
EXCHANGE ACT OF 1934. SEE "DOCUMENTS INCORPORATED BY REFERENCE."
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS 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>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Available Information 2
Documents Incorporated by Reference 2
Summary 3
Risk Factors 5
Use of Proceeds 9
Selling Shareholders 11
Plan of Distribution 12
Description of Common Stock and Preferred Stock 13
Legal Opinions 14
Experts 14
</TABLE>
