Registration No. 333-____
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
INDUSTRIAL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 5080
(State or other jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
76-0289495
(I.R.S. Employer
Identification Number)
7135 ARDMORE
HOUSTON, TEXAS 77054
(713) 747-1025
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT E. CONE
INDUSTRIAL HOLDINGS, INC.
7135 ARDMORE
HOUSTON, TEXAS 77054
(713) 747-1025
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
COPY TO:
Robert G. Reedy
PORTER & HEDGES, L.L.P.
700 Louisiana, Suite 3500
Houston, Texas 77002
(713) 226-0600
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividends of
interest reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement of the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering.
[ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PRICE PER SHARE OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 1,549,041 $12.13 $18,789,867.33 $6,479.31
- ---------------------------------------------------------------------------------------------------------
Total 1,549,041 $12.13 $18,789,867.33 $6,479.31
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</TABLE>
(1) Pursuant to Rule 416(a), also registered hereunder is an indeterminate
number of shares of Common Stock issuable as a result of the
antidilution provisions of the warrant and debenture agreements.
(2) Pursuant to Rule 457(c), the registration fee is calculated based on the
average of the high and low sale prices for the Common Stock, as
reported by the Nasdaq Stock Market's National Market on July 22, 1997,
or $12.13 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS RESPECTIVE EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
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PROSPECTUS
INDUSTRIAL HOLDINGS, INC.
1,549,041 Shares
The 1,549,041 shares (the "Shares") of common stock, par value $.01 per
share (the "Common Stock"), of Industrial Holdings, Inc. (the "Company") offered
hereby, are shares of Common Stock which are currently outstanding or that may
be acquired upon exercise of certain warrants. This Prospectus relates only to
the resale of the Shares. See "The Offering," "Selling Shareholders" and "Plan
of Distribution." The Company will not receive any proceeds from the resale of
the shares of Common Stock offered hereby, but may receive net proceeds up to
$4,266,000 on the exercise of warrants exercisable to acquire Shares.
The Company's Common Stock trades are quoted on the National Market tier
of the Nasdaq Stock Market ("Nasdaq") under the symbol "IHII." On July 22, 1997,
the last reported closing sale price of the Common Stock was $12.13 per share.
The Shares may be offered and sold from time to time by the selling
shareholders named herein through underwriters, dealers or agents or directly to
one or more purchasers in fixed-price offerings or negotiated transactions and
either at market prices prevailing at the time of sale or at prices related to
such market prices. The terms of the offering and sale of the Shares with
respect to which this Prospectus is being delivered, including any public
offering price, any discounts, commissions or concessions allowed, reallowed or
paid to underwriters, dealers or agents, the purchase price of the Shares, the
proceeds to the selling shareholders and any other material terms shall be as
set forth in the applicable Prospectus Supplement. See "Plan of Distribution"
for information regarding possible indemnification arrangements for
underwriters, dealers and agents.
SEE "RISK FACTORS" ON PAGES SEVEN THROUGH TEN FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is ________, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. Copies of such material may also be obtained from
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates, or on the
Commission's site on the world wide web at www.sec.gov. Such materials may also
be inspected at the offices of Nasdaq, 1735 K Street, N.W. Washington, D.C.,
20006-1506, on which the Common Stock is listed.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act") with respect to
the Shares offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is made to the Registration Statement and the exhibits
and schedules thereto. Statements made in this Prospectus regarding the contents
of any contract or document filed as an exhibit to the Registration Statement
are not necessarily complete and, in each instance, reference is hereby made to
the copy of such contract or document so filed. Each such statement is qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference in this
Prospectus:
(1) The Company's Registration Statement on Form S-1 that contains
the initial description of Common Stock;
(2) the Company's Annual Report on Form 10-K for the year ended
December 31, 1996;
(3) the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997;
(4) the Company's Proxy Statement dated May 27, 1997 regarding its
Annual Stockholder's Meeting held on June 30, 1997;
(5) the Company's Current Report on Form 8-K dated November 18, 1996
as amended;
(6) the Company's Current Report on Form 8-K dated February 6, 1997
and as amended;
(7) the Company's Current Report on Form 8-K dated March 29, 1997
and as amended;
(8) the Company's Registration Statement on Form S-8 filed May 27,
1997 and;
(9) all documents filed by the Company pursuant to Sections 13(a),
13(c) and 15(d) of the Exchange Act after the date of this
Prospectus and before the termination of the offering covered
hereby will be deemed to be incorporated by reference in this
Prospectus and to be
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a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to
be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any
other subsequently filed document that also is or is deemed to
be incorporated by reference modifies or replaces such
statement.
The Company will provide, without charge and on oral or written request,
to each person to whom this Prospectus is delivered, a copy of any or all of the
documents incorporated by reference in this Prospectus other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into the information that this Prospectus incorporates. In addition, a copy of
the Company's most recent annual report to shareholders will be promptly
furnished, without charge and on oral or written request, to such persons. All
such requests should be directed to Industrial Holdings, Inc., 7135 Ardmore,
Houston, Texas 77054, Attention: Deborah Bonefas, telephone number (713)
747-1025.
RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE MATERIAL RISKS. IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN
INVESTMENT IN THE SHARES OF COMMON STOCK.
LIMITED CAPITAL; RISKS RELATED TO BUSINESS STRATEGY AND ACQUISITIONS.
The Company's ability to effect its business plan depends on its ability to
raise funds to consummate acquisitions and provide necessary working capital.
The Company's future growth through acquisitions will require substantial
capital expenditures. While the Company evaluates business opportunities on a
regular basis, there can be no assurance that the Company will be successful in
identifying any additional acquisitions or will have sufficient financial
resources with which to make additional acquisitions. In the event that the
Company is unable to obtain cash in order to effect additional acquisitions, the
Company may issue additional shares, and further dilution to shareholders may
result. As the Company effects acquisitions and expands its operations, it will
be subject to all of the risks inherent in an expanding business, including
integrating financial reporting, establishing satisfactory budgetary and other
financial controls, funding increased capital needs and overhead expenses,
obtaining management personnel required for expanded operations, and funding
cash flow shortages that may occur if anticipated sales and revenues are not
realized or are delayed, whether by general economic or market conditions.
At March 31, 1997, the Company had working capital of $645,455,
long-term debt of $7,210,227, shareholders' equity of $24,726,157 and
availability of $1,538,425 under its credit facilities with Comerica Bank -
Texas. The Company anticipates that its operating cash needs for fiscal 1997 can
be met with cash generated from operations, borrowings under its credit
facilities with Comerica Bank-Texas and private placements of equity and debt
securities. Any future acquisition of companies in connection with the Company's
acquisition strategy will require additional financing, which likely would
include a combination of debt and equity financing. There can be no assurance
that the Company will be able to obtain such financing on terms acceptable to
it, if at all.
COMPETITION. The industries in which the Company and its subsidiaries
operate are highly competitive. Many of these competitors have greater financial
and other resources than the Company. Competitive factors for the Company's
subsidiaries include price sensitivity and customer service. The industries in
which the Company's subsidiaries operate are highly fragmented and dominated by
privately-owned businesses. Management's marketing strategy is to institute
centralized inventory controls, reduce personnel costs and achieve greater
buying power through expansion. Management believes that these
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strategies will allow the Company and its subsidiaries to be more competitive.
However, there can be no assurance that the Company will be able to successfully
compete against presently known or future competitors.
FOREIGN SUPPLIERS. Certain of the Company's subsidiaries purchase
products from United States manufacturing companies operating abroad and from
foreign manufacturers. Accordingly, the Company is subject to the risks of doing
business abroad, including 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 events could materially adversely
affect the Company's product supply. All payables are settled in U.S. dollars.
GOVERNMENTAL REGULATION. The Company's business is affected by
governmental regulations relating to its industry segments in general, as well
as environmental and safety regulations that have specific application to the
Company's business. While the Company is not aware of any proposed or pending
legislation, there can be no assurance that future legislation will not have an
adverse effect on the Company's business or competitive position. The Company
believes that it disposes of environmentally sensitive materials in accordance
with present rules and regulations. In the event the Company is required to
adopt additional environmental measures, the cost may be substantial.
DEPENDENCE ON KEY PERSONNEL. The success of the Company is dependent on,
among other things, the services of Robert E. Cone, President and Chief
Executive Officer, James H. Brock, Jr., President - Energy Products and Services
Division and Thomas C. Landreth, President - Fastener Manufacturing and Sales
Division. The Company has entered into employment agreements with Messrs. Cone,
Brock and Landreth. The loss of the services of any of these officers, for any
reason, may have a material adverse effect on the business and prospects of the
Company.
VOTING CONTROL BY CERTAIN SHAREHOLDERS. Directors and officers of the
Company own or exercise voting control of approximately 26% of the Company's
outstanding shares and are therefore able to elect a majority of the Company's
Board of Directors and to control the business and affairs of the Company.
LACK OF CONTRACTUAL SUPPLY AGREEMENTS. The Company's subsidiaries
purchase products from various sources of supply. The Company does not maintain
firm contractual agreements with any of its suppliers with respect to the
product purchases. Instead, the Company purchases its products from suppliers on
the most favorable terms that can be negotiated. Since product purchases are
negotiated on a continuing basis, the Company's reserve stream may not be as
secure as if they were negotiated pursuant to a long-term contract. The
Company's inability to obtain sufficient product from its suppliers would have a
material adverse effect on its business and operations.
DIVIDENDS NOT LIKELY. The Company has never paid cash dividends on its
Common Stock and does not anticipate paying cash dividends for the foreseeable
future. It is anticipated that any earnings that may be generated from the
Company's operations will be used to finance the Company's growth. Certain of
the Company's outstanding debt instruments currently prohibit the Company from
paying dividends. See "Dividend Policy."
FUTURE SALES OF COMMON STOCK. Of the Company's currently outstanding
6,425,453 shares, 1,250,094 are "restricted securities" within the meaning of
Rule 144 promulgated under the Securities Act ("Restricted Shares"). 316,053 of
the Restricted Shares are currently eligible for public sale in accordance
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with the requirements of Rule 144. The remaining 5,175,359 shares are freely
tradeable without restrictions or further registration under the Securities Act,
except for shares held by "affiliates" of the Company, which will be subject to
resale limitations of Rule 144. In addition, the Company has filed registration
statements on Form S-3 under the Securities Act relating to 227,559 shares of
Common Stock issued or issuable upon the exercise of warrants or conversion of
convertible securities and offered by certain selling security holders. Such
shares of Common Stock are (or if not issued, will be when issued) freely
tradeable without restriction or further registration under the Securities Act,
except for shares held by "affiliates" of the Company, which shares will be
subject to the resale limitations of Rule 144. The Company has also filed a
registration statement under the Securities Act to register the shares of Common
Stock issuable under its stock option plans. Shares issued under such plans,
other than shares issued to affiliates of the Company, will be freely tradeable
in the public market.
The Company is unable to predict the effect that sales made under Rule
144 or otherwise may have on the then-prevailing market price of the Common
Stock. The issuance of a significant number of additional securities, or even
the possibility thereof, could depress the market price of such securities. See
"Shares Eligible for Future Sale."
ANTI-TAKEOVER EFFECT. The provisions of the Amended and Restated
Articles of Incorporation ("Amended Articles") may be deemed to have an
anti-takeover effect or may delay, defer or prevent a tender offer or takeover
attempt that a shareholder might consider in such shareholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by a shareholder. Pursuant to the Amended Articles, the
Board of Directors may, by resolution, establish one or more series of preferred
stock, having such number of shares, designation, relative voting rights,
dividend rates, liquidation or other rights, preferences and limitations as may
be fixed by the Board of Directors without any further shareholder approval.
Such rights, preferences, privileges and limitations as may be established could
have the effect of impeding or discouraging the acquisition of control of the
Company.
LIMITATION OF DIRECTOR LIABILITY. Texas law authorizes a Texas
corporation to eliminate or limit the personal liability of a director to the
Company and its shareholders for monetary damages for breach of certain
fiduciary duties as a director. The Company believes that such a provision is
beneficial in attracting and retaining qualified directors, and accordingly, its
Amended Articles include a provision eliminating a director's liability for
monetary damages for any breach of fiduciary duty as a director, except in
certain specified instances. The foregoing provision of the Amended Articles may
reduce the likelihood of derivative litigation against directors and may
discourage or deter shareholders or management from bringing a lawsuit against
directors for breaches of their fiduciary duties, even though such an action, if
successful, might otherwise have benefitted the Company and its shareholders.
THE COMPANY
Industrial Holdings, Inc. (including its subsidiaries, the "Company")
was incorporated in Texas in August 1989. The Company's principal executive
offices are located at 7135 Ardmore, Houston, Texas 77054, and its telephone
number is (713) 747-1025.
The Company's business is organized into two divisions: the Fastener
Manufacturing and Sales Division, comprised of Landreth Engineering Company
("Landreth"), Connecticut Rivet ("CRivet"), American Rivet Company, Inc.
("American"), and LSS-Lone Star-Houston, Inc. ("Lone Star") and the
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Energy Products and Services Division comprised of the Valve and Supplies Sales
Group which includes Pipeline Valve Specialty ("PVS"), Industrial Municipal
Supply ("IMSCO"), and Manifold Valve Services, Inc. ("MVS"); the New Machine
Sales and Services Group which includes Regal Machine Tools ("Regal") and Rex
Machinery Movers ("RMM"); the Export Crating Group which includes U.S. Crating
("USC"); and the Used Machine Sales Group which includes Rex/Paul's Machine
Sales ("RPMS"). Regal, RMM, USC and RPMS comprise the Rex Group, Inc. ("REX").
The Fastener Manufacturing and Sales Division manufactures industrial
metal fasteners, including special cold-formed fasteners and threaded fastener
products for sale primarily to manufacturers in the home furniture, home
appliance and automotive industries. In the Energy Products and Services
Division, the Valve and Supplies Sales Group remanufactures pipeline valves and
distributes pipe, valves, fittings and other products primarily to the
petrochemical, chemical and petroleum refining industries and to the pipeline
transportation and product storage industries. The New Machine Sales and
Services Group sells new machine tools and conducts a machine moving operation.
The Export Crating Group provides international export crating services. The
Used Machine Sales Groups sells used machine tools.
The Company's strategy is to identify and pursue acquisitions within the
lines of business in which the Company currently operates. The Company believes
that it is a leading manufacturer of semi-tubular rivets and cold-headed
specials. The Company's pro forma revenues for its Fastener Manufacturing and
Sales Division (excluding Lone Star) for the twelve months ended December 31,
1996 are approximately $30,222,000. The Company's growth strategy includes an
emphasis on the continued acquisition of fastener manufacturing companies with a
particular emphasis on expansion into new customer bases and geographical
markets.
Since its inception, the Company has expanded its business through
acquisition. The following table lists the name and location of the Company's
principal operating entities, the date acquired and primary product:
Year
Name Location Acquired Description
---- -------- -------- -----------
IMSCO Baytown, Texas 1989 pipe, valves and fittings
distributor
PVS Houston, Texas 1992 valve remanufacturing
Landreth Houston, Texas 1992 rivet manufacturing
REX Houston, Texas 1993 machine tool distributor
CRivet Waterbury, Connecticut 1995 rivet manufacturing
American Chicago, Illinois 1996 rivet manufacturing
Lone Star Houston, Texas 1997 stud bolt manufacturing
MVS Jennings, Louisiana 1997 valve remanufacturing
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The Company has financed these acquisitions with cash provided by operations,
borrowings under its credit agreements and public and private financings. The
Company anticipates that future acquisitions, if any, will be similarly
financed.
RECENT DEVELOPMENTS
In June 1997, the Company signed a Letter of Intent to acquire
substantially all the assets and to assume certain liabilities of Rogers
Equipment & Supply, Inc. and Rogers Rental Tools, Inc. (together "Rogers") for a
purchase price of $700,000. Rogers, whose sales for the twelve months ended
December 31, 1996 were $2,723,765, remanufactures blow-out preventers for the
drilling industry. Rogers will operate as part of MVS. The Company expects the
purchase, which is subject to the signing of a definitive purchase agreement, to
be completed in July 1997.
THE OFFERING
Of the 1,549,041 shares offered hereby, 540,000 shares are issuable from
time to time on the exercise of Common Stock purchase warrants (the "St. James
Warrants") to purchase an aggregate of 540,000 shares of Common Stock that were
sold in connection with the Company's private placement of 12% Convertible
Promissory Notes (the "Promissory Notes") in the amounts of $1,900,000 and
$1,600,000 to St. James Capital Partners, L.P. ("St. James"), a portion of the
proceeds of which was used to fund the acquisition of American. Each of the St.
James Warrants is exercisable at any time through December 8, 2000, at an
exercise price of $7.00 per share. Subsequently, St. James distributed the St.
James Warrants to its various partners.
Of the 1,549,041 shares offered hereby, 50,000 shares are issuable from
time to time on the exercise of Common Stock purchase warrants (the "McBlue
Warrants") to purchase an aggregate of 50,000 shares of Common Stock at $10.00
per share. Of the 1,549,041 shares offered hereby, 25,000 shares (the "McBlue
Shares") are currently outstanding shares of common stock. The McBlue Shares and
McBlue Warrants were sold to a corporation in June 1997. The proceeds from the
sale were used for general corporate purposes.
This offering relates solely to resales of the shares acquired on the
exercise of the St. James Warrants and McBlue Warrants and does not involve an
offering by the Company of the St. James Warrants and McBlue Warrants. This
prospectus also relates to the resale of any additional shares as may become
issuable on the exercise of the St. James Warrants pursuant to the anti-dilution
provisions thereof. The Company will not receive any cash proceeds from the
resale of the shares issuable on exercise of the St. James Warrants and McBlue
Warrants. The Company will receive net proceeds of approximately $4,266,000 on
the exercise of the St. James and McBlue Warrants.
Of the 1,549,041 shares offered hereby, 203,300 shares (the "St. James
Shares") are currently outstanding shares of Common Stock which were exchanged
effective June 1997 for the $1,900,000 Promissory Note issued to St. James in
connection with the acquisition of American along with the related accrued
interest.
Of the 1,549,041 shares offered hereby, 84,211 shares (the "Jandl
Shares") are currently outstanding shares of Common Stock which were issued in
February 1997 in connection with and as a portion of the purchase price of Lone
Star.
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Of the 1,549,041 shares offered hereby, 600,000 shares (the "CDI
Shares") are currently outstanding shares of Common Stock which were issued in
March 1997 in connection with and as a portion of the purchase price of MVS.
The remaining 46,530 shares (the "MVS Shares") offered hereby are
currently outstanding shares of Common Stock which were sold to employees of MVS
in April 1997.
The McBlue Shares, St. James Shares, Jandl Shares, the CDI Shares and
the MVS Shares (the "Resale Shares") may be resold in the market from time to
time. The Company is not offering the Resale Shares and will not receive any
cash proceeds from the resale of the Resale Shares
USE OF PROCEEDS
The Company will receive cash proceeds equal to the exercise price of
the Warrants, which will total approximately $4,266,000. The Company presently
intends to add the cash proceeds from the exercise of the Warrants to its
general working capital.
The Company will not receive any proceeds from the sale of the Shares
that may be resold from time to time by the selling shareholders.
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SELLING SHAREHOLDERS
The selling shareholders listed below (the "Selling Shareholders") may
resell, from time to time, all or a portion of the Shares offered hereby. The
following table sets forth the beneficial ownership of the Company's securities
by each of the Selling Shareholders:
<TABLE>
<CAPTION>
SHARES SHARES SHARES PERCENTAGE
OWNED PRIOR OFFERED OWNED AFTER OWNED
NAME OF SELLING SHAREHOLDER TO OFFERING HEREBY THE OFFERING AFTER OFFERING
- --------------------------- ----------- ------ ------------ --------------
<S> <C> <C> <C> <C>
Isaac Arnold, Jr.(1) 5,856 5,856 0(12) *
Hugh Roy Cullen Estate Trust
for Isaac Arnold, Jr.(1) 2,928 2,928 0(12) *
Lillie C. Cullen Estate Trust
for Isaac Arnold, Jr.(1) 2,928 2,928 0(12) *
1959 Trust for Robert Tilly Arnold(1) 5,856 5,856 0(12) *
Todd M. Binet(1) 2,928 2,928 0(12) *
Pinkye Lou Blair Estate Trust(1) 2,928 2,928 0(12) *
George V. Burkholder (1) 7,320 7,320 0(12) *
Ronald E. Clark(1) 17,567 17,567 0(12) *
Scott Crist (1) 2,928 2,928 0(12) *
Harry H. Cullen(1) 14,640 14,640 0(12) *
Equity Resource Group(1) 14,640 14,640 0(12) *
James Hansen(1) 2,928 2,928 0(12) *
Titus Harris, Jr.(1) 1,464 1,464 0(12) *
St. James Capital Corp.(1) 107,994 107,994 0(12) *
SV Capital Partners, L.P.(1) 117,113 117,113 0(12) *
HUB, Inc.(2) 150,543 76,123 74,420 1%
Guadalupe Funding Company (3) 81,369 61,485 19,884 *
Thomas M. Vertin(4) 117,020 42,600 74,420 1%
Dennis J. LaValle(5) 45,134 35,134 10,000 *
Blake T. Liedtke(6) 29,523 14,640 14,883 *
Judith C. Jandl (7) 84,211 84,211 0(12) *
CDI Holdings, Inc.(8) 600,000 600,000 0(12) *
Harry L. Ardoin(9) 8,780 2,530 6,250 *
Andrew Cormier(9) 50,000 20,000 30,000 *
Paige S. Cormier Trust(9) 4,000 4,000 0(12) *
Matthew J. Cormier Trust(9) 4,000 4,000 0(12) *
Gary L. Cryer(9) 14,250 8,000 6,250 *
Troy Cormier(9) 14,250 8,000 6,250 *
McBlue Corporation(10) 75,000 75,000 0(12) *
St. James Capital Partners, L.P.(11) 368,300 203,300 165,000 2%
</TABLE>
- -------------
* Less than 1%
(1) These Shares are acquirable on exercise of the St. James Warrants at an
exercise price of $7.00 per share, subject to adjustment.
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(2) Of these Shares, 76,123 are acquirable on exercise of St. James Warrants
at an exercise price of $7.00 per share, subject to adjustment.
(3) Of these Shares, 61,485 are acquirable on exercise of St. James Warrants
at an exercise price of $7.00 per share, subject to adjustment.
(4) Of these Shares, 42,600 are acquirable on exercise of St. James Warrants
at an exercise price of $7.00 per share, subject to adjustment
(5) Of these Shares, 35,134 are acquirable on exercise of St. James Warrants
at an exercise price of $7.00 per share, subject to adjustment
(6) Of these Shares, 14,640 are acquirable on exercise of St. James Warrants
at an exercise price of $7.00 per share, subject to adjustment
(7) These Shares were issued in connection with the acquisition of Lone
Star.
(8) These Shares were issued in connection with the acquisition of MVS.
(9) These Shares were acquired by employees of MVS.
(10) These shares are acquirable on exercise of McBlue Warrants at an
exercise price of $10.00 per share.
(11) Of these shares, 203,300 were issued in exchange for the $1,900,000
Promissory Note issued in connection with the acquisition of American
and the related accrued interest.
(12) After the sale of the shares contemplated by this offering and assuming
that the Sellers own no other shares, of which the Company has no
knowledge, the percent of class owned after the offering is 0%.
12
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders may offer the Shares subject to this Prospectus
for resale from time to time in one or more offerings through underwriters,
dealers or agents or directly to one or more purchasers in fixed-price offerings
or in negotiated transactions and at either current market prices or at prices
related to such market price. Resales by the purchasers of such shares may be
made in the same manner.
The Selling Shareholders have represented to the Company that they have
no current arrangements with any broker-dealer and that they will comply with
Regulation M under the Exchange Act. If underwriters are used in any offering of
the Shares, such underwriters will be named in the applicable Prospectus
Supplement. Only underwriters named in a Prospectus Supplement will be deemed to
be underwriters in connection with the Shares. Firms not so named will have no
direct or indirect participation in the underwriting of the Shares, although
such a firm may participate in the distribution of such shares under
circumstances entitling it to a dealer's commission. Unless otherwise set forth
in the Prospectus Supplement relating to such offering, any underwriting
agreement pertaining to any offering of the Shares will (i) entitle the
underwriters to indemnification by the Company and the Selling Shareholders
against certain civil liabilities under the Securities Act, (ii) provide that
the obligations of the underwriters will be subject to certain conditions
precedent, and (iii) provide that the underwriters will be obligated to purchase
the Shares so offered if any such shares are purchased. If underwriters are used
in any offering of Shares, the names of such underwriters, the anticipated date
of delivery and other material terms of the transaction will be set forth in the
Prospectus Supplement relating to such offering.
The Company has been advised that the distribution of the Shares by the
Selling Shareholders, or by pledgees, transferees or other successors-in-
interest of the Selling Shareholders, may be effected from time to time in one
or more transactions (which may involve block transactions) on Nasdaq (if the
Common Stock continues to be listed on Nasdaq) or in the over-the-counter
market, in negotiated transactions or in a combination of such methods of sale,
at fixed prices, 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 directly to
purchasers or to or through broker-dealers acting as principals or agents. Such
broker-dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Shareholders or the purchasers of
the Shares from whom broker-dealers may act as agent or to whom they may sell as
principal or both (which compensation, as to a particular broker-dealer, may be
less than or in excess of customary commissions). In addition, the Shares
covered by this Prospectus that subsequently qualify for sale pursuant to Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant to
this Prospectus.
The Selling Shareholders and any broker-dealers or agents who
participate in a sale of the Shares may be deemed to be underwriters within the
meaning of such term under the Securities Act, and any commissions received by
them, as well as any proceeds from any sales as principal by them, may be deemed
to be underwriting discounts and commissions under the Securities Act. Such
broker-dealers or agents may, under agreements with the Selling Shareholders, be
entitled to indemnification by the Company and the Selling Shareholders against
certain civil liabilities under the Securities Act. Certain purchasers to whom
the Selling Shareholders may sell shares in negotiated transactions may be
deemed to be underwriters with respect to any resale by them of shares so
acquired.
Underwriters, dealers and agents may engage in transactions with or
perform services for the Company in the ordinary course of business.
13
<PAGE>
LEGAL MATTERS
The legality of the securities offered hereby will be passed on for the
Company by Porter & Hedges, L.L.P., Houston, Texas.
14
<PAGE>
================================================================================
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES
IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
--------------------
TABLE OF CONTENTS
PAGE
Available Information ..................................................... 4
Incorporation of Certain
Documents by Reference .................................................. 4
Risk Factors .............................................................. 5
The Company ............................................................... 7
Recent Developments ....................................................... 9
The Offering .............................................................. 9
Use of Proceeds ........................................................... 10
Selling Shareholders ...................................................... 11
Plan of Distribution ...................................................... 13
Legal Matters ............................................................. 14
--------------------
Industrial Holdings, Inc.
1,549,041 Shares of
Common Stock
---------------------
P R O S P E C T U S
---------------------
-----------------
________, 1997
================================================================================
<PAGE>
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Expenses payable in connection with the issuance and distribution of the
securities to be registered, other than underwriting discounts and commissions,
are estimated as follows:
Securities and Exchange Commission filing fee.......... $ 6,479
Printing expenses...................................... 400*
Legal fees and expenses................................ 2,000*
Accounting fees and expenses........................... 4,000*
Miscellaneous.......................................... 1,121*
--------
TOTAL........................................... $14,000
========
- --------------------------
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 2.02 of the Texas Business Corporation Act (the "TBCA") provides
that a Texas corporation shall have the power to indemnify directors, officers,
employees and agents and to purchase and maintain liability insurance for those
persons. Article 2.02-1 of the TBCA empowers the Company to indemnify any
director or officer for expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred in the defense
of any action, suit or proceeding in which such director or officer is a party
by reason of his position. In no event however, shall a director or officer be
entitled to indemnification in any action, suit, or proceeding in which such
director shall have been found not to have acted in good faith and in the
reasonable belief that his conduct as such director was in the Company's best
interests; and, in the case of an officer of the Company, that such officer did
not act in good faith and in the reasonable belief that his conduct was at least
not opposed to the Company's best interests; and in the case of any criminal
proceeding, such director or officer had no reasonable cause to believe his
conduct was unlawful. Moreover, no director shall be indemnified for any
obligations arising from any action, suit, or proceeding in which (i) such
director is found liable on the basis that personal profit was improperly
received by him, whether or not the action resulted from an action taken in his
official capacity, or (ii) such director is found liable to the Company.
The Company's Amended and Restated Bylaws ("Bylaws") provide that the
Company shall indemnify each director or former director and each officer or
former officer of the Company and each person who is or who may have served at
its request as a director or officer of another corporation in which it owned
shares of stock or of which it is a creditor, or as a partner, venturer,
proprietor, trustee, employee, agent or similar functionary of another
partnership, joint venture, sole proprietorship, trust, employee benefit plan,
or other enterprise against judgments, settlements, penalties and reasonable
expenses (including court costs and attorneys' fees) incurred by him in
connection with any claim made against him or any action, suit, or proceeding in
which he is or is threatened to be made a named defendant or respondent by
reason of his being or having been such director or officer.
The Company shall indemnify such director or officer to the greatest
extent permitted by law for reasonable expenses incurred in connection with any
action, suit, or proceeding in which such director or officer has been wholly
successful in the defense of the proceeding, on the merits or otherwise, except
that
<PAGE>
if such action, suit, or proceeding was brought by or on behalf of the Company,
indemnification shall be limited to reasonable expenses actually incurred by
such director or officer with respect to such proceeding; provided, however,
that such indemnity shall be conditioned on the prior determination by a
majority of the Board of Directors or a committee thereof who are not named
defendants or respondents in such action, suit, or proceeding, or special legal
counsel appointed thereby, or, solely in the event the Board of Directors is not
able to act and unable to select special legal counsel, by vote of those
shareholders who are not also directors named as defendant or respondent in such
action, suit, or proceeding, that such director or officer has acted in good
faith and in the reasonable belief as to the best interests of the Company.
If any pending, threatened, or completed proceeding is settled, amounts
paid as indemnification of the settlement shall not exceed costs, fees and
expenses that would have been reasonably incurred if the action, suit or
proceeding had been litigated to a conclusion. The determination by the Board of
Directors, or by independent counsel, and the payment of amounts by the Company
on the basis thereof, shall not prevent a shareholder from challenging such
indemnification by appropriate legal proceedings. Neither shall a determination
by the Board of Directors, a committee thereof, or special legal counsel
appointed thereby, that indemnification is not permissible, prevent a director
or officer from challenging such determination by appropriate legal proceedings.
Reasonable expenses of a director or officer who was, is, or is threatened to be
made a named defendant or respondent in any proceeding shall be paid in advance
before any final disposition following appropriate written request to the
Company.
The Company may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee, or agent of the Company as a
director, officer, partner, venturer, proprietor, trustee, employee, agent or
similar functionary of another foreign or domestic corporation, partnership,
joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise, against any liability asserted against him in such a capacity or
arising out of his status as such a person, whether or not the Company would
have the power to indemnify him against that liability.
The foregoing rights and indemnification shall be construed in
accordance with the laws of the State of Texas presently in force and as
hereinafter amended. In all events, the Company's Bylaws shall be deemed to
grant the Company's directors and officers the maximum protection consistent
with law and shall be deemed amended from time to time to reflect any changes in
such law. The foregoing shall not be exclusive of any private contractual right
of indemnification, nor shall it limit the same; provided, however, such
contractual agreement shall not be inconsistent with the TBCA presently in force
or hereafter enacted.
The Company's Articles of Incorporation, as amended, contain provisions
eliminating or limiting the liability of a director for an act or omission in
his capacity as director; however, those provisions do not eliminate or limit
the liability of a director for: (i) a breach of a director's duty of loyalty to
the Company or its shareholders; (ii) an act or omission not in good faith or
that involves intentional misconduct or a knowing violation of the law; (iii) a
transaction from which a director received an improper benefit, whether or not
the benefit resulted from an action taken within the scope of the director's
office; (iv) an act or omission from which the liability of a director is
expressly provided for by statute; or (v) an act related to an unlawful stock
repurchase or payment of a dividend.
II-2
<PAGE>
ITEM 15. EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER IDENTIFICATION OF EXHIBIT PAGE
------- ------------------------- ------------
5* -- Opinion of Porter & Hedges, L.L.P. Ex-1
24.1* -- Consent of Price Waterhouse L.L.P. Ex-2
24.2* -- Consent of Simonton, Kutac & Barnidge, L.L.P. Ex-3
24.3* -- Consent of Hein + Associates LLP Ex-4
24.4* -- Consent of KMPG Peat Marwick LLP Ex-5
24.5 -- Consent of Porter & Hedges, L.L.P.
(included in its opinion filed as Exhibit 5 hereto).
- ------------------------
* Filed herewith.
ITEM 16. 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:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933 (the "1933 Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table
in the effective 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;
(2) That, for the purpose of determining any liability under the
1933 Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(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.
II-3
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Act 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.
(c) the undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual report pursuant to Section 13(a) or 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.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement on Form S-3 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Houston, State of Texas, on July 23, 1997.
INDUSTRIAL HOLDINGS, INC.
/s/ CHRISTINE A. SMITH
Christine A. Smith,
Vice President and Chief Financial Officer
We, the undersigned directors and officers of the Company do hereby
constitute and appoint Robert E. Cone and Christine A. Smith, and each of them
singly, our true and lawful attorney and agent, to do any and all acts and
things in our name and on our behalf in our capacities as directors and
officers, and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorney and agent may deem necessary or
advisable to enable said corporation to comply with the Securities Act of 1933,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with the filing of this Registration
Statement, including specifically, without limitation, power and authority to
sign for us or any of us, in our names in the capacities indicated below, any
and all amendments hereto; and we do hereby ratify and confirm all that said
attorneys and agents or any of them, shall do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this to its
Registration Statement on Form S-3 has been signed by the following persons in
the capacities indicated on July 23, 1997.
SIGNATURE TITLE
--------- -----
/s/ ROBERT E. CONE Director, Chairman of the Board of Directors,
Robert E. Cone President and Chief Executive Officer (Principal
Executive Officer)
/s/ JAMES H. BROCK, JR. Executive Vice-President, Director and President
James H. Brock, Jr. -- Energy Products and Services Division
/s/ CHRISTINE A. SMITH Vice President and Chief Financial Officer
Christine A. Smith (Principal Accounting Officer and Principal
Financial Officer)
__________________________ Director, Secretary
Barbara S. Shuler
/s/ CHARLES J. ANDERSON Director
Charles J. Anderson
/s/ JAMES W. KENNEY Director
James W. Kenney
/s/ JOHN P. MADDEN Director
John P. Madden
/s/ JOHN THOMPSON
John Thompson Director
II-5
EXHIBIT 5.1
July 22, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: INDUSTRIAL HOLDINGS, INC. - S-3 REGISTRATION STATEMENT COVERING
1,549,041 SHARES (THE "REGISTRATION STATEMENT")
Gentlemen:
We have acted as counsel to Industrial Holdings, Inc., a Texas
corporation (the "Company"), in connection with the registration on Form S-3
under the Securities Act of 1933, as amended, of 1,549,041 shares of the
Company's common stock, par value $.01 per share (the "Common Stock"). In such
capacity we have examined the articles of incorporation, bylaws and corporate
proceedings of the Company, and based upon such examination and having regard
for applicable legal principles, it is our opinion that:
1. The 590,000 shares of Common Stock covered by the Registration
Statement issuable on the exercise of warrants will, when issued
in accordance with the terms of said warrants be validly issued,
fully paid and nonassessable shares of outstanding Common Stock;
and
2. The 959,041 shares of Common Stock previously issued and covered
by the Registration Statement are validly issued, fully paid and
nonassessable shares of outstanding Common Stock.
We consent to the use of this opinion as an exhibit to the Registration
Statement and in the reference to our firm under the heading "Legal Matters" in
the Prospectus included as part of the Registration Statement.
Very truly yours,
PORTER & HEDGES, L.L.P.
Ex-1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
March 5, 1997, which appears on page F-2 of Industrial Holdings, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1996.
PRICE WATERHOUSE LLP
Houston, Texas
July 23, 1997
Ex-2
EXHIBIT 24.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Current Report on Form S-3 of our report dated
January 31, 1997, relating to the consolidated balance sheet of LSS - Lone Star
- - Houston, Inc. and Subsidiary as of December 31, 1996, and for the year then
ended, incorporated by reference in this Registration Statement.
Simonton, Kutac & Barnidge, L.L.P.
Houston, Texas
July 22, 1997
Ex-3
EXHIBIT 24.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of our report dated February 21, 1997, with respect to the balance
sheets of Manifold Valve Service, Inc. as of December 31, 1995 and 1996, and the
related statements of income and retained earnings, and cash flows for the years
then ended which report appears in the Form 8-K of Industrial Holdings, Inc.
dated June 12, 1997.
Hein + Associates LLP
Houston, Texas
July 22, 1997
Ex-4
EXHIBIT 24.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in this Registration Statement on
Form S-3 of Industrial Holdings, Inc. of our report dated October 2, 1996, with
respect to the balance sheets of American Rivet Company, Inc. as of August 31,
1996 and 1995, and the related statements of operations and retained earnings
and cash flows for each of the years in the three-year period ended August 31,
1996, which report appears in the Form 8-K of Industrial Holdings, Inc. dated
November 18, 1996.
KPMG Peat Marwick LLP
Chicago, Illinois
July 22, 1997
Ex-5
