As filed with the Securities and Exchange Commission on February 6, 1997
Registration No. 33-15803
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Amendment No. 2 to Form S-3
Registration Statement
Under
The Securities Act of 1933
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RT INDUSTRIES, INC.
(Name of small business issuer as specified in its charter)
Delaware 3714 65-0309477
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(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction of Industrial Identification
Incorporation or Classification Number)
Organization) Number)
1875 East Lake Mary Boulevard
Sanford, Florida 32773
(407) 322-8000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
John Kenney, President
RT Industries, Inc.
1875 East Lake Mary Boulevard
Sanford, Florida 32773
(407) 322-8000
(Name, address, including zip code, and telephone
number, including area code of agent for service)
---------------------
Copies to:
Gary A. Schonwald, Esq.
Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Telephone: (212) 885-5522
Telecopier: (212) 885-5001
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, please check the following box: [X]
Pursuant to Rule 416, there are also being registered hereby such additional
indeterminate shares of Common Stock as may be issuable by reason of stock
splits, stock dividends and similar adjustments as set forth in the provisions
of the Redeemable Warrants.
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 this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed Maximum Proposed Maximum Amount of
Type of Shares to be Amount to be Offering Price Per Aggregate Offering Registration
Registered Registered (1) Share Price (2) Fee
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<S> <C> <C> <C> <C>
Common Stock (3) 3,485,278(4) $ 5.25 $18,297,710 $ 5,544.76
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Common Stock Issuable Upon 4,717,200(5) 5.25 24,765,300 7,504.64
Exercise of Warrants (3) ----------------------------------------------------------------------------------------------
1,180,000(6) 5.25 6,047,500 1,832.58
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Common Stock Issuable
Upon Exercise of Option(3) 100,000(7) 5.25 512,500 155.30
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Common Stock Issuable Upon
Conversion of Notes (3) 300,000(8) 5.25 1,539,500 465.90
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Total Registration Fee $ 15,503.18
====================================================================================================================================
</TABLE>
(1) The amount to be registered have been adjusted to give effect to any
recapitalization with respect to the Company as of the date of this
Prospectus, including without limitation that 1 for 5 reverse stock split
which became effective on February 16, 1995.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(b) of the Securities Act of 1933, as amended, (the
"Securities Act") the registration fee has been calculated based upon a
price of $5.25 per share, the average of the bid and asked prices of the
common stock, par value of $.001 per share (the "Common Stock"), of RT
Industries, Inc. (the "Company") as reported in the reporting system
(NASDAQ SmallCap Market) for the Company on January 30, 1997.
(3) Pursuant to Rule 416 of the Securities Act there are also being registered
hereunder such additional shares as may be issued to the selling
stockholders because of future stock dividends, stock distributions, stock
splits or similar capital readjustments or, in the case of the holders of
options or warrants, the operation of the anti-dilution provisions thereof.
(4) All such shares of Common Stock being registered hereby are issued and
outstanding as of the date of this Prospectus and are being registered for
the resale of such shares pursuant to "piggyback" registration rights of
the selling stockholders who previously acquired such shares from the
Company in private transactions.
(5) Issuable to 53 Selling Stockholders upon the exercise of their respective
Redeemable Common Stock Purchase Warrants acquired by such stockholders
pursuant to the Company's Confidential Private Offering Memoranda dated
February 21, 1996 and May 22, 1996, which warrants are exercisable at an
exercise price of $4.20 per share.
(6) Issuable to Elm Grove Associates II, L.P. upon the exercise of its warrants
acquired from the Company pursuant to two private transactions on February
1, 1996 and on March 15, 1996, which warrants are exercisable at an
exercise price of $2.28 per share.
(7) Issuable to RT Consulting, Inc. upon the exercise of outstanding stock
options granted by the Company pursuant to a private transaction dated
Octiber 20, 1995, which options are exercisable at an exercise price of
$5.00 per share
(8) Issuable to Alliance Capital Investments Corp. upon the conversion of
convertible promissory notes granted by the Company pursuant to two private
transactions on March 1, 1995 and on March 10, 1995, which notes are
convertible at a conversion price of $1.00 per share.
---------------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
PRELIMINARY PROSPECTUS DATED FEBRUARY 6, 1997
SUBJECT TO COMPLETION
RT INDUSTRIES, INC.
9,782,478 Shares of Common Stock
This Prospectus relates to the offering by certain selling stockholders of
an aggregate of up to 9,782,478 shares of the common stock, par value $.001 per
share (the "Common Stock") of RT Industries, Inc. (the "Company"), as follows:
(a) an aggregate of up to 3,485,278 shares of Common Stock, having
"piggyback" registration rights, issued by the Company to 59 individuals and
entities pursuant to various private transactions;
(b) an aggregate of up to 5,897,200 shares of Common Stock, having
"piggyback" registration rights, which may be issued upon exercise of warrants
issued by the Company in private transactions during the first and second
quarters, 1996 (collectively, the "Warrants");
(c) an aggregate of up to 100,000 shares of Common Stock, having
"piggyback" registration rights, which shares may be issued upon exercise of
options issued by the Company in private transactions (the "Option");and
(d) an aggregate of up to 300,000 shares of Common Stock, having
"piggyback" registration rights, which shares may be issued upon conversion of
notes issued pursuant to private transactions (the "Convertible Debt").
Unless the context otherwise requires, all of the foregoing selling
stockholders shall be referred to collectively as the "Selling Stockholders."
The Common Stock may be offered from time to time by the Selling
Stockholders through ordinary brokerage transactions in the over-the-counter
markets, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices. The Company will not receive any of
the proceeds from the sales of Common Stock by the Selling Stockholders. See
"Selling Stockholders and Plan of Distribution" and "Use of Proceeds."
The Common Stock is listed on the SmallCap Market of the NASDAQ Stock
Market, Inc. ("NASDAQ") under the symbol: RTIC. On January 30, 1997, the average
bid and asking price of the Common Stock as reported by NASDAQ was $5.25.
----------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK AND SHOULD NOT BE PURCHASED BY INVESTORS
WHO CANNOT AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS."
-------------------------
THE COMPANY IS IN CONTINUING DEFAULT OF CERTAIN
FINANCIAL MAINTENANCE COVENANTS UNDER ITS PRINCIPAL REVOLVING
LINE OF CREDIT WITH CONGRESS FINANCIAL CORPORATION.
SEE "RISK FACTORS - OUTSTANDING INDEBTEDNESS"
-------------------------
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 filed by the Company can be inspected and
copied at the public reference facilities of the Commission located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at 500 West Madison Street, Suite 1400 Chicago, Illinois 60661 and 7 World Trade
Center, New York, New York 10048. Copies of such material can also be inspected
at the offices of the National Association of Securities Dealers, Inc., 1735 K
Street, N.W., Washington, D.C. 20006. Copies of such materials can also be
obtained by mail at prescribed rates upon written request addressed to the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the SEC's web site (http//:www.sec.gov.)
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) Annual Report on Forms 10-KSB and 10-KSB/A for the fiscal year ended
December 31, 1995; (ii) Quarterly Reports on Forms 10-QSB for the quarterly
periods ended March 31, 1996, June 30, 1996 and September 30, 1996,
respectively; (iii) Amendment to the Quarterly Report on Form 10-QSB/A for the
quarterly period ended September 30, 1996; (iv) Reports on Forms 10-C for the
events dated January 20, 1996, March 29, 1996, April 19, 1996 and May 3, 1996;
and (v) the description of the Company's Common Stock contained in its
Registration Statement on Form S-18 filed with the Securities and Exchange
Commission (the "SEC") on April 8, 1992 (Registration No. 33-47037-A).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference herein and to be a part hereof on the date of
filing of such documents. Any statement contained in a document incorporated by
reference herein is modified or superseded for all purposes to the extent that a
statement contained in this Registration Statement or in any other subsequently
filed document which is incorporated by reference modifies or replaces such
statement.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, on the written or oral request of such person, a copy
of any or all of the documents incorporated herein by reference, except for the
exhibits to such documents. Requests should be directed to RT Industries, Inc.,
Attn: President, 1875 East Lake Mary Boulevard, Sanford, Florida 32773;
telephone: (407) 322-8000.
-2-
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in or incorporated by reference into this Prospectus. Each
prospective investor is urged to read this prospectus in its entirety. Unless
otherwise indicated, all share and per share information in this prospectus
gives effect to a 1 for 5 reverse stock split on February 16, 1995 and (ii) an
increase in the total authorized capital stock of the Company from 10,000,000 to
30,000,000 shares effected on August 7, 1996.
The Company
RT Industries, Inc., a Delaware corporation formed on January 16, 1992 (the
"Company"), through its subsidiary, Roinco Manufacturing, Inc. ("Roinco"),
manufactures, assembles and/or distributes new automotive friction products
(brake linings and new brake pads) and assembles and distributes ignition wires
for the automotive aftermarket (replacement parts sold for use on motor vehicles
after initial purchase). Sales of the Company's products are made to automotive
distributors, mass merchandisers and chain stores. The Company does not market
its products directly to retail customers. The Company currently maintains a
manufacturing/ assembly/distribution facility and a warehouse facility located
in the state of Florida.
The Company was incorporated in in the state of Delaware on January 16,
1992. Unless the context otherwise requires, all references in this Prospectus
to the Company include the Company and its wholly-owned subsidiaries Roinco,
Ultratech, RT Friction, and Ultra Brake. The Company's executive offices are
located at 1875 East Lake Mary Boulevard, Sanford, Florida 32773, and its
telephone number is (407) 322-8000.
As part of a general restructuring plan, the Company has consolidated
operations formerly performed by Ultratech of South Florida, Inc. ("Ultratech"),
RT Friction, Inc. ("RT Friction") and Ultra Brake Corporation ("Ultra Brake"),
all subsidiaries of the Company. None of these subsidiaries currently conduct
any business operations. Such operations are now performed by the Company or
have been contracted out to the industry. The Company intends to undertake the
necessary steps to dissolve such subsidiaries under the applicable laws of each
such subsidiary's place of incorporation.
The Offering
Securities Offered 9,782,478 shares of Common Stock,
including 6,297,200 shares of Common
Stock underlying outstanding Warrants,
Options and Convertible Debt.
Common Stock Outstanding:
Prior to the Offering: 8,322,782 shares (1)
After the Offering 14,619,982 shares (2)
Use of Proceeds: Although the Company will not receive
any proceeds from the sale of Common
Stock by the Selling Stockholders, the
Company will realize gross proceeds of
up to $23,302,640 to the extent the
Selling Stockholders exercise all
outstanding Warrants and Options and
convert all the Convertible Debt. The
net amount of such proceeds, if any,
will be used by the Company for working
capital and general corporate purposes,
as determined by the management in its
sole discretion, as well as for the
expansion of the Company's operations
through possible acquisition of existing
companies in businesses which the
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3
<PAGE>
- --------------------------------------------------------------------------------
Company believes are compatible with its
business. See "Use of Proceeds"
NASDAQ Symbol: Common Stock - RTIC
Risk Factors The securities offered hereby involve a
high degree of risk. See "Risk Factors."
- ----------
(Footnotes)
(1) Based on shares of Common Stock outstanding on January 30, 1997.
(2) Assumes the issuance of 6,297,200 shares of Common Stock, the maximum
number of shares issuable upon the exercise of all outstanding Warrants and
Options and the conversion of all Convertible Debt of the Company.
- --------------------------------------------------------------------------------
4
<PAGE>
RISK FACTORS
The securities offered hereby involve a high degree of risk, including, but
not necessarily limited to, the risk factors described below. Each prospective
investor should carefully consider the following risk factors before making an
investment decision. Prospective investors should consult with their own legal,
tax and financial advisors. This Prospectus contains forward-looking statements.
The Company's actual results may differ materially from the results discussed in
the forward-looking statements. Factors that might cause such a difference
include, but are not limited to, those discussed in "Risk Factors".
1. Limited Relevant Operating History; Uncertainty of Plan of Operation.
During the third and fourth quarters of 1994 and continuing through the fiscal
year ended 1995, the Company engaged in the restructuring and consolidation of
its operations resulting in the closings of its integrally molded brake pad
production facility in Caruthersville, Missouri (the "Missouri Plant") and its
riveted brake pad production facilities in each of Lindenhurst, New York and
Brownsville, Tennessee (the "New York Plant" and the "Tennessee Plant,"
respectively) (the Missouri Plant, New York Plant and Tennessee Plant
collectively called the "Production Facilities"). With respect to the closing of
the Production Facilities, the Company transferred all of the production
equipment, raw materials, finished goods and supplies to its Sanford, Florida
facilities. All management personnel as well as hourly employees at the
Production Facilities were dismissed. In addition to the above consolidation,
the Company further reduced costs by eliminating five management positions at
its Sanford, Florida facilities. In light of the aforesaid restructuring and
consolidation, the Company has a limited relevant operating history upon which
an evaluation of its prospects and performance may be made. Prospects for the
Company must be considered in light of the risks, expenses, problems and
difficulties frequently encountered in the restructuring of a business in a
continually evolving industry, chiefly characterized by an increasing number of
market entrants and intense competition. Over the last several years the
automotive replacement parts industry has experienced continuing consolidation
of manufacturers, distributors and retailers of automotive replacement parts,
including, without limitation, the acquisition of mid-sized brake pad
manufacturers by larger automotive replacement parts manufacturing companies
with substantially greater financial resources than the Company. At the same
time, a number of manufacturers have entered the market for riveted brake pads,
selling at the regional markets based primarily on price. As a result,
manufacturers have fewer customers to sell which increases the competition for
these customers. There can be no assurance that the Company's restructuring plan
will result in reduced operating costs or significantly improved operating
results.
2. Significant Continuing and Increasing Losses; Declining Revenues;
Explanatory Paragraph in Report of Independent Certified Public Accountants. The
Company has generated limited revenues and incurred substantial and increasing
losses since its inception. For the years ended December 31, 1994 and 1995 and
the nine months ended September 30, 1996, the Company incurred net losses of
$3,298,587, $4,179,642 and $2,257,076, respectively, resulting in an accumulated
deficit of $7,320,286 at September 30, 1996. Losses are continuing through the
date of this Prospectus. The Company also expects it will continue to incur
significant operating expenses in connection with its operations. As a result of
these expenses, the Company anticipates that it will continue to incur
significant operating losses for the foreseeable future, and until such time, if
ever, as the Company is able to attain adequate sales levels to support
operations, sufficiently reduce its operating expenses and fully implement its
restructuring. The generation of that level of revenues and reduction of
operating expenses is dependent upon the Company's reestablishing satisfactory
relationships with suppliers and successfully implementing its restructuring
plan. There can be no assurance that the Company's revenues will not decline
further in the future, that the Company will be able to reduce operating
expenses, that losses will not continue, or that the Company will ever achieve
profitable operations. The Company's independent certified public accountants
have included an explanatory paragraph in their report on the Company's
financial statements as of year end 1995 stating that the Company has
experienced significant operating losses, has an accumulated deficit and is in
default on a note payable to its primary lender. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
5
<PAGE>
3. Inability to Obtain Trade Credit. Many suppliers and contractors of the
Company require cash payments prior to supplying goods or rendering services to
it. Although the Company has been able to arrange for credit with some of such
suppliers and contractors, if the Company does not generate and collect revenues
in a timely manner, its ability to pay its suppliers and contractors on a cash
basis could be severely curtailed. The Company's inability to obtain credit to
purchase supplies has in the past had a materially adverse effect on the
Company, significantly decreasing the Company's ability to satisfy the Company's
then existing demand for its products, resulting in the significant decrease in
the Company's revenues. Continued inability to obtain adequate sources of supply
in the future could continue to have a materially adverse effect on the
Company's operating results, including a further decrease in revenues, and could
require the Company to further limit or cease operations entirely.
4. Risks Relating to Important Debt Restructuring. The Company restructured
certain of its outstanding trade debt in March 1995. In connection with such
debt restructuring, a committee of the Company's unsecured trade creditors (the
"Trade Creditors") agreed on March 7, 1995 (the "Composition Agreement") to
repayment by the Company of the unsecured trade debt (the "Trade Debt") of the
Trade Creditors electing to participate in the Composition Agreement,
representing approximately $2,732,000 of the $3,032,000 in Trade Debt. Trade
Creditors, representing approximately $2,500,000 of the Trade Debt elected a
lump sum payment of $0.35 for every $1.00 of the Trade Debt and were paid in
1995. The balance of the electing Trade Creditors, representing $232,000 of the
Trade Debt, chose periodic payments and have received twenty-two and one-half
percent (22.5%) of the periodic payments. The Company is required to continue to
make payments of approximately $26,000 every six months, with the next payment
due in the first fiscal quarter 1997 and the final payment becoming due in
March, 2000. The Company has timely paid all lump-sum payments and periodic
payments required under the Composition Agreement. However, there can be no
assurance that the Company will be able to satisfy its obligations. Failure to
do so could have a material adverse effect on the Company.
5. Significant Capital Requirements; Dependence on Offering Proceeds;
Possible Need for Additional Financing. The Company's capital requirements have
been and will continue to be significant. The Company has been dependent upon
placements of its equity and debt securities, which have raised an aggregate of
$6,160,600 during 1996, borrowings under its line of credit with Congress
Financial Corporation ("Congress") and equipment leases in order to satisfy its
working capital requirements. The Company continues to operate with severe cash
flow restraints and the amount of cash generated by the Company's operations is
currently insufficient to satisfy the Company's cash requirements. Accordingly,
the Company will require significant financing to continue operations. Other
than a line of credit with Congress (currently having an additional borrowing
base of $35,000 as determined on an asset valuation basis), the Company has no
other sources of financing. Moreover, the Company's line of credit matures in
April 1997 and automatically renews on a yearly basis, unless terminated by
either party in accordance with the loan and security agreement. Additionally,
to the extent that the Company incurs additional indebtedness or issues debt
securities in connection with any acquisition, the Company will be subject to
risks associated with incurring substantial indebtedness, including the risks
that interest rates may fluctuate and cash flow may be insufficient to pay
principal and interest on any such indebtedness. There can be no assurance that
the Company will be able to increase its borrowing base, that the line of credit
will be extended or refinanced or that the Company will be able to obtain
additional financing on commercially reasonable terms, or at all. In addition,
there can be no assurance that a sufficient number of holders will elect to
exercise their respective Warrants and Options or to convert their outstanding
Convertible Debt, if any, to enable the Company to raise sufficient net proceeds
to pay operating costs, provide working capital for the Company and to finance
the Company's efforts to identify potential acquisition candidates. Moreover,
any additional equity financing may involve substantial dilution to the
interests of the Company's then existing stockholders.
6. Outstanding Indebtedness; Security Interests; Restrictive Covenants;
Defaults Under Outstanding Indebtedness. In order to finance the Company's
capital requirements, the Company has incurred substantial indebtedness. The
Company currently has approximtely $1.44 million in outstanding indebtedness,
including $753,482.28 (at January 1, 1997) under its secured line of credit with
Congress, approximately $260,372
6
<PAGE>
(at January 1, 1997) to the Trade Creditors, and approximately $430,013 of
equipment lease financing indebtedness. The line of credit and the equipment
leases are secured by security interests in substantially all of the assets of
the Company. The Company is current in its payments on the outstanding
indebtedness to the Trade Creditors and the equipment lessors. The Company,
however, is in continuing default of certain financial covenants (but not its
payment obligations) under its loan with Congress. While Congress has verbally
informed the Company that it will not call its loan with the Company, provided
the Company is in compliance with certain applicable lending formulas, there can
be no assurance that such default may not cause Congress to accelerate the loan.
Congress has not waived the Company's defaults and, as such, can cease funding
the credit line and/or accelerate the loan and demand payment in full of the
outstanding balance. Although the Company has been able to obtain renewals of
its credit facilities in the past, there can be no assurance that Congress will
continue its lending arrangements with the Company. As a result, Congress could
declare the Company's obligations immediately due and payable and foreclose on
the Company's assets. To the extent that all of the Company's assets continue to
be pledged to secure outstanding indebtedness, such assets will not be available
to secure additional indebtedness. The Company's loan agreement relating to the
line of credit with Congress restricts the ability of the Company to incur
additional indebtedness and requires the Company to satisfy certain financial
ratios. The terms of the secured indebtedness may limit the ability of the
Company to obtain additional financing on terms favorable to the Company or at
all.
7. Seasonality, Fluctuations and Operating Results. The Company's operating
results may vary from period to period as a result of purchasing patterns of
potential customers, the timing of introduction of new products by the Company's
suppliers and competitors, variations in sales by distribution channels, product
availability and pricing and the seasonal nature of the Company's business. The
Company's business has a seasonal decline during the colder winter months of the
first and fourth fiscal quarters which corresponds to a decline in retail sales
of the Company's products. Results for one period, however, are not indicative
of sales for the year.
8. Dependence on Third Party Marketing and Sales Efforts. The Company has
relied, and intends to continue relying to a large extent, on arrangements with
independent sales representatives to market its products as well as sell and
distribute its products. The Company's prospects will depend upon its ability to
develop and maintain strategic marketing relationships with additional
independent sales representatives and upon the marketing and distribution
efforts of its distributors and other strategic partners. Moreover, the
arrangements with such sales representatives may be terminated at any time by
the sales representatives or the Company. While the Company believes that any
independent sales representatives with which it enters into such arrangements
will have an economic motivation to commercialize the Company's products, the
time and resources devoted to these activities generally will be contributed and
controlled by such representatives and not by the Company. There can be no
assurance that the Company will be able, for financial or other reasons, to
finalize any additional third-party distribution, marketing or joint venture
arrangements, that such arrangements, if finalized, will result in the
successful commercialization of any of the Company's products or that the
Company's sales representatives will apply substantial efforts or resources to
sales of the Company's products.
9. Dependence on Third-Party Suppliers and Contractors. The Company is
dependent on third-party arrangements for the manufacture and supply of
component parts, including steel, the largest material component in the
production of brake pads. The Company does not maintain supply contracts with
any of its manufacturers and purchases components pursuant to purchase orders
placed from time to time in the ordinary course of business. For the eight
months ended August 31, 1996, the Company purchased approximately 44.6% of its
component requirements from one manufacturer. Such purchases represented all of
the Company's purchases of steel during such period. Although the Company
currently has four sources for this component and believes that additional
alternative sources are readily available, failure by such manufacturer to
continue to supply the Company with components on commercially reasonable terms,
or at all, in the absence of readily available alternative sources, could have a
material adverse effect on the Company. The Company is substantially dependent
on the ability of its manufacturers, among other things, to satisfy performance
and quality specifications and dedicate sufficient production capacity for
components within
7
<PAGE>
scheduled delivery times. There can be no assurance that the Company's suppliers
will have sufficient production capacity to satisfy the Company's component
requirements during any period of sustained demand. Failure or delay by the
Company's suppliers in supplying necessary components to the Company could
adversely affect the Company's ability to obtain material components and deliver
its products on a timely and competitive basis.
10. Lack of Patent Protection; Proprietary Rights Risks. The Company has
developed and currently owns certain proprietary processes and formulas with
respect to the production and manufacture of its integrally molded brake pads.
The Company's products have not been patented and the Company relies on a
combination of contractual rights, non-disclosure agreements with its employees,
distributors and customers, and technical measures to establish and protect the
ideas, concepts, and documentation of its proprietary technology and know-how.
Such methods, however, may not afford complete protection, and there can be no
assurance that third parties will not independently develop such know-how or
obtain access to the Company's know-how, ideas, concepts, and documentation.
Although the Company believes that its technology has been developed
independently and does not infringe on the proprietary rights of others, there
can be no assurance that the technology does not and will not so infringe or
that third parties will not assert infringement claims against the Company in
the future. In the case of infringement, the Company would, under certain
circumstances, be required to modify its products or obtain a license. There can
be no assurance that the Company will have the financial or other resources
necessary to defend successfully a patent infringement or other proprietary
rights infringement action. Failure to do any of the foregoing could have a
material adverse effect on the Company. Furthermore, if the Company's products
or technologies are deemed to infringe upon the rights of others, the Company
could become liable for damages, which would have a material adverse effect on
the Company.
11. Collection of Accounts Receivable. The Company's sales to resellers and
distributors are made on credit terms and it does not hold collateral to secure
payment. As of September 30, 1996, approximately $1,192,884 of account
receivables were overdue and payable, of which $928,119 were outstanding over 90
days. There can be no assurance that uncollectible receivables will not exceed
the Company's reserves for doubtful accounts ($823,058 as of September 30,
1996). Any significant increase in uncollected accounts receivables beyond
reserves could have a material adverse effect on the Company's business, results
of operation and financial condition. Continued delays in collection or
uncollectability of accounts receivable could have a material adverse effect on
the Company's liquidity and working capital position and could result in the
write off of any such account receivable which could have a material adverse
effect on the Company's operating results in the future.
12. Competition. The distribution of automotive replacement parts is a
highly competitive business. The Company competes in its market area with other
auto parts manufacturers and distributors. Many of the Company's competitors
have greater financial, marketing, personnel and other resources than the
Company, better name recognition and wider or otherwise stronger distribution
networks which may position such competitors to compete more effectively for the
sale of automotive replacement parts. Competition in the automotive aftermarket
industry is based on service provided to customers, price of products, speed of
filling orders and delivery of products, as well as customer convenience. As in
the case of most distributors, the Company's products are priced based upon the
competitive situation and purchaser volume. Distributors larger than the Company
may be able to offer large discounts and offer better terms on volume purchases
than those offered by the Company. Many of the Company's competitors in both the
jobber and specialty brake parts distribution markets are larger and have
greater capital and management resources than the Company. There can be no
assurance that the Company will be able to compete successfully or that
competitors will not develop products that render the Company's products less
marketable or its equipment obsolete. There are no significant barriers to entry
into the business operated by the Company. There are usually no proprietary
rights which can be protected from competition by patents, copyrights or similar
intellectual property protections. Many of the Company's current and potential
competitors have significantly greater financial, manufacturing, marketing and
personnel and other resources than the Company. Accordingly, there can be no
assurance that the Company will be able to compete successfully against such
existing and potential competitors.
8
<PAGE>
13. Possible Volatility of the Securities. The market prices of the
securities may respond to quarterly variations in operating results and other
events or factors, including, but not limited to, the sale or attempted sale of
a large amount of the securities into the market. Additionally, in recent years,
the stock market has experienced extreme levels of price and volume volatility,
particularly in the securities of smaller companies. These fluctuations have had
a substantial effect on the market prices of many companies, often unrelated to
the operating performance of the specific companies. Similar events in the
future may adversely affect the market prices of the securities.
14. Control of the Company. As of the date of this Prospectus, a director
of the Company, Mandel Sherman, also serves as the executive officer of the
general partner of Elm Grove Associates II, L.P. ("Elm Grove"), a limited
partnership owning, on a fully diluted basis, 1,930,000 shares of Common Stock
(assuming exercise of outstanding warrants to purchase 980,000 and 200,000
shares at $2.28 per share), which represents approximately 20.3% of the issued
and outstnding Common Stock of the Company prior to the exercise of any warrants
by selling stockholders hereunder. Other than the beneficial ownership interest
of Mr. Sherman described above, the officers and directors of the Company do not
collectively own (assuming exercise of outstanding options and warrants held by
such officers and directors except for 750,000 shares of Common Stock authorized
for issuance pursuant the Company's Stock Option Plan, none of which have been
granted as of the date of this Prospectus), any shares of the Common Stock. As a
result, Elm Grove will be in a position to materially influence, if not control,
the outcome of all matters requiring stockholder approval in connection with the
operation of the Company, including electing directors, increasing authorized
capital and dissolving, merging, or selling the assets of, the Company. See
"Selling Stockholders and Plan of Distribution."
15. Limitations on Use of Net Operating Loss Carry Forwards. As of December
31, 1995, the Company had net operating loss carry forwards of approximately
$4,600,000, in respect of future federal income taxes, and approximately
$2,300,000, in respect of future Delaware and Florida franchise taxes, which
expire in the years 2009 and 2010, respectively, but may be utilized in the
interim period until expiration. The Company's use of its net operating loss
carry forwards to offset taxable income in any period subsequent to the
consummation of its 1992 initial offering may be subject to certain annual
limitations as a result of an "ownership change" (as defined in Section 382 of
the Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder), which may have occurred or which may recur in the
future. If one or more "ownership changes" is deemed to have occurred, there can
be no assurance as to the specific amount of net operating loss carry forwards
available in any post-change year since the calculation is based upon a
fact-dependent formula.
16. Shares Eligible for Future Sale; Registration Rights of Certain
Stockholders. Of the 8,322,782 shares of Common Stock outstanding as of the date
of this Prospectus, 4,735,879 shares are "restricted securities" (as that term
is defined under Rule 144 promulgated under the Securities Act). Such securities
are eligible for resale under Rule 144. The Company also has outstanding
Warrants and Options to purchase, as well as Convertible Debt convertible to, an
aggregate of approximately 6,741,445 shares of Common Stock (assuming a
conversion as of January 15, 1997), substantially all of which are registrable
pursuant to "piggyback" registration rights granted to the holders of such
Warrants, Options and Convertible Debt. Substantially all of the restricted
securities of the Company as well as the shares issuable upon the election of
Warrants and Options or conversion of the Convertible Debt, are being registered
hereunder. Although there can be no assurance that all the Shares or underlying
shares of Common Stock issuable upon the exercise of the Warrants and Options or
conversion of the Convertible Debt will be registered hereunder pursuant to
"piggyback" registration rights granted to the holders of such Warrants, Options
and Convertible Debt, to the extent such underlying shares of Common Stock are
registered, such shares may be sold at any time by the holders thereof or their
transferees. Under Rule 144, a person who has held restricted securities for a
period of two years may, every three months, sell, in ordinary brokerage
transactions or in transactions directly with a market maker, an amount equal to
the greater of 1% of the Company's then-outstanding common stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits the sale of shares without any quantity limitations by a person
who is not an affiliate of the Company and has satisfied a three-year holding
period. No prediction can be made as to the effect, if any, that sales of such
shares will have on the market
9
<PAGE>
prices prevailing from time to time. Nevertheless, sales (or availability for
sale) of such shares or the shares of Common Stock underlying the Warrants,
Options and the Convertible Debt, or even the existence of the right to exercise
the Warrants and Options or to convert the Convertible Debt, may depress the
market price of the Common Stock in any market on which such shares are traded
and could impair the Company's ability to raise capital through the sale of its
equity securities.
17. Recent Changes in Management. The Company has recently undergone
certain changes in personnel, including the termination of certain key personnel
engaged in executive, marketing and managerial capacities. In addition, certain
of the Company's executive officers and directors recently joined the Company.
The success of the Company is largely dependent upon its ability to hire and
retain qualified management, technical, marketing, financial and other
personnel. There can be no assurance that the Company will be able to hire or
retain such necessary personnel or that any such personnel will become
sufficiently familiar with the Company's operations or customer base in a timely
manner. Failure to hire such personnel could have a material adverse effect on
the Company.
18. Delaware Anti-Takeover Law. The Company, a Delaware corporation, is
subject to the General Corporation Law of the State of Delaware, including
Section 203, an anti-takeover law enacted in 1988. In general, the law prohibits
a public Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder unless: (i)
prior to such date, the board of directors approved the business combination; or
(ii) upon becoming an interested stockholder, the stockholder then owns at least
85% of the voting securities, as defined in Section 203; or (iii) subsequent to
such date, the business combination is approved by both the board of directors
and the stockholders. "Business combination" is defined to include mergers,
asset sales and certain other transactions with an "interested stockholder." An
"interested stockholder" is defined as a person who, together with affiliates
and associates, owns (or, within the prior three years, did own) 15% or more of
a corporation's voting stock. Although Section 203 permits the Company to elect
not to be governed by its provisions, to date, the Company has not made this
election. As a result of the application of Section 203, potential acquirors of
the Company may be discouraged from attempting to effect an acquisition
transaction with the Company, thereby possibly depriving holders of the
Company's securities of certain opportunities to sell or otherwise dispose of
such securities at above-market prices pursuant to such transactions.
19. No Cash Dividends. To date, the Company has not paid any cash dividends
on its Common Stock and does not expect to declare or pay any such dividends in
the foreseeable future. Moreover, the Company is currently prohibited from
paying dividends on its Common Stock pursuant to the terms of its line of credit
with Congress, and otherwise, and does not anticipate that it will be able to,
for this and other reasons, pay any such dividends in the foreseeable future.
20. Current Prospectus and State Registration Required. The right of any
Selling Shareholder and subsequent purchaser to sell, transfer, pledge or
otherwise dispose of the Common Stock included in this Prospectus will be
limited by the Securities Act and state securities laws and the regulations
promulgated thereunder and certain offering terms. Consequently, a holder of
Common Stock may not be able to liquidate his investment unless the Company has
a current prospectus covering such shares of Common Stock registered or
qualified or deemed to be exempt under the securities or "blue sky" laws of the
state of residence of such stockholder. Although the Company has undertaken to
use its best efforts to continue to maintain the effectiveness of the
registration and qualification of all the shares of Common Stock and to maintain
a current prospectus relating thereto, there is no assurance that it will be
able to do so. The value of the Common Stock may be greatly reduced if a
prospectus covering the Common Stock is not kept current or if such Common Stock
is not qualified or exempt from qualification in the states in which the
stockholders then reside. In jurisdictions in which shares underlying the
Warrants, Options and Convertible Debt are not qualified or not exempt under the
securities laws of such jurisdictions, the Company would not be able to issue
shares of Common Stock to Stockholders desiring to exercise their respective
Warrants and Options or to convert their Convertible Debt unless and until such
shares could be qualified for sale in the jurisdictions in which such persons
reside, or an exemption from such qualification exists in such jurisdictions.
Such persons would have no choice
10
<PAGE>
but to attempt to sell their shares of Common Stock in a jurisdiction where such
sales are permissible or allow such Warrants, Options and Convertible Debt to
expire unexercised or unconverted, as the case may be.
21. Requirements for Continued Listing on NASDAQ; Risk of Low-Priced
Securities. The Common Stock is listed on the NASDAQ SmallCap Market (the
"SmallCap Market"). The National Association of Securities Dealers, Inc. has
established certain standards for the initial listing and continued listing of a
security on the SmallCap Market. The standards for initial listing require,
among other things, that an issuer have total assets of $4,000,000 and capital
and surplus of at least $2,000,000; that the minimum bid price for the listed
securities be $3.00 per share; and that the minimum market value of the public
float (the shares held by non-insiders) be at least $2,000,000. For continued
listing, an issuer must, among other things, maintain at least $2,000,000 in
total assets, a $200,000 market value of the public float, and at least
$1,000,000 in total capital and surplus. In addition, continued listing requires
a minimum of two market makers and a minimum bid price of $1.00 per share. A
deficiency in the market value of the public float or the bid price maintenance
standard will be deemed to exist if the issuer fails the individual stated
requirement for ten consecutive trading days. If an issuer falls below the bid
price maintenance standard, it may remain on NASDAQ if the market value of the
public float is at least $1,000,000 and the issuer has $2,000,000 in equity.
There can be no assurance that the Company will continue to satisfy requirements
for maintaining a NASDAQ listing. If the Company's securities were excluded from
NASDAQ, it would adversely affect the prices of such securities and the ability
of holders to sell them, and the Company would be required to comply with, among
other things which may be at issue, the initial listing requirements to be
relisted on NASDAQ. Delisting may restrict investors' interest in the Company's
securities and materially adversely affect the trading market and prices for
such securities and the Company's ability to issue additional securities or to
secure additional financing. It is anticipated that if the Company's securities
are delisted, trading, if any, in such securities would be conducted in the
over-the-counter market on the National Association of Securities Dealers, Inc.
OTC Electronic Bulletin Board established for securities that do not meet the
NASDAQ listing requirements or quoted in what are commonly referred to as the
"pink sheets." As a result, an investor may find it more difficult to dispose
of, or to obtain accurate price quotations and volume information concerning the
Common Stock. Moreover, if the Common Stock is delisted from the SmallCap Market
because trading price of the Common Stock is less than $1.00 per share, such
securities might be subject to the low priced security or so-called "penny
stock" rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally defined as investors with a net
worth in excess of $1,000,000 or annual income exceeding $200,000, or $300,000
together with a spouse). For any transaction involving a penny stock, unless
exempt, the rules require, among other things, the delivery, prior to the
transaction, of a disclosure schedule required by the Securities and Exchange
Commission relating to the penny stock market. The broker-dealer also must
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Although the
Company believes that the Common Stock will not be defined as a penny stock due
to their listing on The NASDAQ SmallCap Market, in the event such securities
subsequently become characterized as a penny stock, the market liquidity for
such securities could be severely affected. In such an event, the regulations
relating to penny stocks could limit the ability of broker-dealers to sell such
securities and, thus, the ability of purchasers in this offering to sell their
shares of Common Stock in the secondary market.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Common Stock
by the Selling Stockholders. In the event that the shares of Common Stock
offered hereby are issued pursuant to the terms of the outstanding Warrants,
Options or the Convertible Debt of the Company, of which there can be no
assurance, the Company would realize up to approximately $23,302,640 in gross
proceeds. Net proceeds, if
11
<PAGE>
any, will be used by the Company for working capital and general corporate
purposes, as determined by the management in its sole discretion, including the
payment of operating expenses and outstanding obligations as well as the
continued implementation of its restructuring plan designed to reduce its debt
and expand its operations through the possible acquisition of existing companies
in businesses which the Company believes are compatible with its business. While
the Company from time to time evaluates potential acquisition companies, the
Company has no written agreements, understandings or arrangements with respect
to any acquisition as of the date of this Prospectus. In the event that
management determines that a potential acquisition is in the best interests of
the Company, management shall allocate the net proceeds to cover costs incurred
to consummate the Merger. The Company also intends to use a portion of the net
proceeds to cover costs incurred in connection with this Registration Statement.
While the initial allocation of any net proceeds obtained, as set forth
above, represents the Company's best estimate of its future financing needs, the
amounts actually expended may vary significantly from the specific allocation of
the net proceeds set forth above, depending on numerous factors. The Company,
therefore, reserves the right to reallocate the net proceeds of this offering
among the various categories set forth above as it, in its sole discretion,
deems necessary and advisable.
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
An aggregate of up to 9,782,478 shares of Common Stock may be offered and
sold pursuant to this Prospectus by the Selling Stockholders, including
6,233,200 shares issuable upon exercise of the Warrants and Options and upon
conversion of the Convertible Debt. The Warrants are exercisable to purchase (i)
up to 4,653,200 shares of Common Stock at an exercise price of $4.20 per share
and (ii) up to 1,180,000 shares of Common Stock at an exercise price of $2.28
per share. The Options are exercisable to purchase up to 100,000 shares of
Common Stock at an exercise price of $5.00 per share. The Convertible Debt
entitles a certain creditor of the Company to convert at a price of $1.00 per
share with respect to up to 300,000 shares. The Company has agreed to register
all such shares under the Securities Act (assuming that the Selling Stockholders
opt to exercise to the fullest extent their respective "piggyback" registration
rights) and to pay all expenses in connection therewith (other than brokerage
commissions and fees and expenses of counsel). Such shares have been included in
the Registration Statement of which this Prospectus forms a part. The
Registration Statement covers both resales of the Common Stock and the issuance
of underlying Common Stock pursuant to the exercise of outstanding Warrants and
Options and the conversion of outstanding Convertible Debt.
Except as described in the notes to the table below, none of the Selling
Stockholders has ever held any position or office with the Company or had any
other material relationship with the Company. The following table sets forth
certain information as of January 15, 1997, with respect to beneficial ownership
of the Company's Common Stock by each person known by the Company to be a
beneficial owner of more than 5% of the outstanding shares of Common Stock and
all directors and executive officers as a group.
<TABLE>
<CAPTION>
=========================================================================================================
Amount and Nature of Percentage (%) of
Name of Beneficial Owner Beneficial Ownership Beneficial Ownership
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Elm Grove Associates II, L.P. (1) 1,930,000(2) 20.3(3)
- ---------------------------------------------------------------------------------------------------------
directors and executive officers
as group (4 persons) 1,930,000(4) 20.3(5)
=========================================================================================================
</TABLE>
(1) A current director of the Company, Mandel Sherman, is President of Miss
Sloan Capital Limited, the general partner of Elm Grove.
(2) Elm Grove acquired 750,000 shares of Common Stock from Ronald Tygar, then a
director and officer of the Company, pursuant to that purchase agreement,
dated October 20, 1995, as amended by amendments dated February 6, 1996,
October 11, 1996 and November 25, 1996. In addition, Elm Grove holds
warrants currently exercisable to purchase up to 1,180,000 shares of Common
Stock, at the exercise price of $2.28.
(3) Assumes exercise by Elm Grove of all of its outstanding warrants.
12
<PAGE>
(4) Consists of 1,930,000 shares of Common Stock purchased by, or subject to
exercise of outstanding warrants held by, Elm Grove (see Note (2) above).
(5) See Note (3) above.
The following table sets forth certain information with respect to the
Selling Stockholders:
<TABLE>
<CAPTION>
=============================================================================================================================
Beneficial
Ownership Shares Beneficially
of Shares of Owned
Common Stock Shares to be Sold After the
Selling Stockholder Prior to Sale(1) in the Offering(1) Offering(2)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert E. Ahr 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Alliance Capital
Investments Corp. 300,000 300,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Steven Axman 144,000 144,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Gerald E. Batt, Trustee 25,000 25,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Neil Bellet 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Ellis S. Belodoff 288,000 288,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Robert J. Blackwell 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Morton Blaufaud 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Wallace James Brown 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Justin Brown 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Gary Brustein 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Ana K. Cohen 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Gary Cohen 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Michael P. Curtis 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Elm Grove Associates II,
L.P. 1,930,000 1,930,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Kenneth Ewald 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Research Corp. 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Galaxy Investments, Inc. 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Marvin Ginsberg 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Leah Guary 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Nina Goldberg 576,000 576,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Moshe Hasson 144,000 144,000 0
- -----------------------------------------------------------------------------------------------------------------------------
John B. Hempstead 192,000 192,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Donna C. Hoefer 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Monty Hyman 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Arthur Inden 60,000 60,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Joseph "Craig" Intelisano 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Interpacific Capital
Management Corp. 576,000 576,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Wayne/Barbara Jenkins 144,000 144,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Lawrence Kaplan 60,000 60,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Stanley A. Kaplan 60,000 60,000 0
- -----------------------------------------------------------------------------------------------------------------------------
E. Gerald Kay 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
William I. Kracke 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
Beneficial
Ownership Shares Beneficially
of Shares of Owned
Common Stock Shares to be Sold After the
Selling Stockholder Prior to Sale in the Offering Offering(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kenneth J. Kross 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
George Loeb 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Anna Marie Longo 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Douglas B. Luce 567,000 567,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Nghia Vinh Luong 144,000 144,000 0
- -----------------------------------------------------------------------------------------------------------------------------
F. Lanham Lyne, Jr. 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Valerie Lynn 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Edward B. McDaid 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Delbert/Elmeda McNamara 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Robert N. Murray 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Thomas C. Murray, Jr. 40,800 40,800 0
- -----------------------------------------------------------------------------------------------------------------------------
NATCO Trading Company 144,000 144,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Walter Nazarewicz 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Marc A. Osheroff 50,000 50,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Fred Perry 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Peter and Maragaret Pritz 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
David Quinn 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Richard E. Riebel 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Jeremy S. Rosen 205,000 205,000 0
- -----------------------------------------------------------------------------------------------------------------------------
David I. Rosen, Trustee 20,000 20,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Joel Russell 48,000 48,000 0
- -----------------------------------------------------------------------------------------------------------------------------
John Schoenmaker 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Leslie Schwartz 144,000 144,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Jerome & Rochelle Sirot 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Michael Todd 240,000 240,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Leslie Torino 96,000 96,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Ronald Tygar 76,678 76,678 0
- -----------------------------------------------------------------------------------------------------------------------------
RT Consulting, Inc. 100,000 100,000 0
- -----------------------------------------------------------------------------------------------------------------------------
Richard Wisely 96,000 96,000 0
=============================================================================================================================
Totals 9,782,478 9,782,478 0
=============================================================================================================================
</TABLE>
(1) Assumes exercise of all Warrants and Options or conversion of all
Convertible Debt, as applicable, held by such stockholder.
(2) Assumes all of the shares of Common Stock offered hereby are sold by the
Selling Stockholders.
The Common Stock issuable upon exercise of the Warrants and Options and
upon conversion of the Convertible Debt, as well as the Common Stock held by the
Selling Stockholders, may be offered and sold from time to time as market
conditions permit in the over-the-counter market, or otherwise, at prices and
terms then prevailing or at prices related to the then-current market price, or
in negotiated transactions which may be below the prevailing market price. The
shares offered hereby may be sold by one or more of the following methods,
without limitation: (a) a block trade in which a broker or dealer so engaged
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Stockholders may
arrange for other brokers or dealers to participate. Such broker or dealers may
14
<PAGE>
receive commissions or discounts from Selling Stockholders in amounts to be
negotiated. Such brokers and dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act, in connection with such sales. Sales in the market by the Selling
Stockholder may be subject to the anti-manipulative Rules 10b-6 and 10b-7 of the
Exchange Act and, upon notice to the Company by any Selling Stockholder that a
material arrangement has been entered into with a broker-dealer for the sale of
shares of Common Stock through a cross or block trade, a supplemental prospectus
will be filed under Rule 424(c) under the Securities Act, setting forth the name
of the participating broker-dealer(s), the number of shares of Common Stock
involved, the price at which such shares were sold by the Selling Stockholder,
the commissions paid or discounts or concessions allowed by the Selling
Stockholder to such broker-dealer(s), and where applicable, that such
broker-dealer(s) did not conduct any investigation to verify the information set
out in this Prospectus.
Walsh, Manning Securities, LLC ("Walsh Manning") is a registered broker- dealer
and is a market maker in the Common Stock. In connection with the registration
of the shares of Common Stock under this Prospectus, at least 95% of the Selling
Stockholders have agreed (i) not, without the prior written consent of Walsh
Manning, to sell, offer for sale, or otherwise dispose of, during any given
month, more than 5% of their shares of Common Stock until nine (9) months after
the date of this Prospectus and (ii) so long as Walsh Manning offers terms at
least as favorable as obtained by the Selling Stockholder elsewhere, to utilize
Walsh Manning in connection with any sell, offer for sale or other disposition
of their respective shares of Common Stock. Under certain circumstances, Rule
10b-6 promulgated under the Exchange Act may preclude Walsh Manning from making
a market in any of the Company's securities for up to nine (9) business days
prior to the sale of any shares of Common Stock held by Walsh Manning pursuant
to this Prospectus and continuing until Walsh Manning has completed the
distribution of such shares. The cessation of market making activities by Walsh
Manning during the distribution of the Common Stock pursuant to this Prospectus
may have a material adverse effect on the market, including price, for the
Common Stock.
INDEMNIFICATION
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a corporation, by
so providing in its certificate of incorporation, to eliminate or limit
director's liability to the corporation and its stockholders for monetary
damages arising out of certain alleged breaches of their fiduciary duty. Section
102(b)(7) provides that no such limitation of liability may affect a director's
liability with respect to any of the following: (i) breaches of the director's
duty of loyalty to the corporation or its stockholders; (ii) acts or omissions
not made in good faith or which involve intentional misconduct of knowing
violations of law; (iii) liability for dividends paid or stock repurchased or
redeemed in violation of the Delaware General Corporation Law; or (iv) any
transaction from which the director derived an improper personal benefit.
Section 102(b)(7) does not authorize any limitation on the ability of the
corporation or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Sixth of the Company's Amended Certificate of Incorporation and Article
X of the Company's By-laws provide that all persons who the Company is empowered
to indemnify pursuant to the provisions of Section 145 of the General
Corporation law of the State of Delaware (or any similar provision or provisions
of applicable law at the time in effect), shall be indemnified by the Company to
the full extent permitted thereby. The foregoing right of indemnification is not
deemed to be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
Article Seventh of the Company's Amended Certificate of Incorporation provides
that no director of the Company will be personally liable to the Company or its
15
<PAGE>
stockholders for any monetary damages (i) for breaches of fiduciary duty of
loyalty to the Company or its stockholders' (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the General Corporation of Law of the state of
Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Securities Act and is therefore unenforceable.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for the
Company by Tenzer Greenblatt LLP, New York, New York.
EXPERTS
The consolidated financial statements as of December 31, 1995, incorporated
by reference in this Prospectus, have been audited by BDO Seidman, LLP,
independent certified public accountants, to the extent and for the period set
forth in their report incorporated herein by reference, and are incorporated
herein by reference in reliance upon such reports given upon the authority of
said firm as experts in auditing and accounting.
The consolidated financial statements as of December 31, 1994, incorporated
by reference in this Prospectus, have been audited by Marks Shron & Company, LLP
(the "Previous Auditor"), independent certified public accountants, to the
extent and for the period set forth in their report incorporated herein by
reference, and are incorporated herein by reference in reliance upon such
reports given upon the authority of said firm as experts in auditing and
accounting. The Company has agreed to indemnify the Previous Auditor for the
payment of solely the legal costs and expenses that the Previous Auditor might
incur in its successful defense of a legal action or proceeding that arises as a
result of the consent of the Previous Auditor to the inclusion of its audit
report on the Company's past financial statements in this Registration
Statement. With respect to such indemnification, legal costs and expenses must
be actually and reasonably incurred by the Previous Auditor in connection with
the defense or settlement of such action or proceeding and so long as the
Previous Auditor acted in good faith and in a manner in or not opposed to the
best interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which the Previous Auditor shall
have been determined to be liable to the Company or for which the Previous
Auditor was unsuccessful in its defense. A successful defense in this context
would be one in which the Previous Auditor (or any of its members) is determined
to have been neither culpable nor obligated to pay any part of the plaintiff's
damages as a result of a judgment or settlement with respect to any such action
or proceeding.
16
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Commission, a registration statement (the
"Registration Statement"), under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus, filed as part of such
Registration Statement, does not contain all of the information set forth in, or
annexed as exhibits to, the Registration Statement, certain portions of which
have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and this
offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be inspected without charge at the Office of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of the
Registration Statement may be obtained from the Commission at its principal
office upon payment of prescribed fees. Statements contained in this Prospectus
as to the contents of any contract or other document are not necessarily
complete and, where the contract or other document has been filed as an exhibit
to the Registration Statement, each statement is qualified in all respects by
reference to the applicable document filed with the Commission.
17
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by the Company, the Selling
Stockholders or any Underwriter. This Prospectus does not constitute an offer to
sell or the solicitation of an offer to buy any security other than the Common
Stock offered by this Prospectus, or an offer to sell or a solicitation of an
offer to buy any security by any person in any jurisdiction in which such offer
or solicitation would be unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, imply that the
information in this Prospectus is correct as of any time subsequent to the date
of this Prospectus.
-----------------
TABLE OF CONTENTS
Page
----
Available Information ..................................................... 2
Information Incorporated by Reference ..................................... 2
Prospectus Summary ........................................................ 3
Risk Factors .............................................................. 5
Use of Proceeds ........................................................... 11
Selling Stockholders and Plan of
Distribution ........................................................... 12
Indemnification ........................................................... 15
Legal Matters ............................................................. 16
Experts ................................................................... 16
Additional Information .................................................... 17
================================================================================
<PAGE>
================================================================================
RT INDUSTRIES, INC.
----------
PROSPECTUS
----------
[ ], 1997
================================================================================
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances |against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such persons because of their being or having
been an officer or director.
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may affect
a director's liability with respect to any of the following: (i) breaches of the
director's duty of loyalty to the corporation or its stockholders; (ii) acts or
omissions not made in good faith or which involve intentional misconduct of
knowing violations of law; (iii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation Law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section 102(b)(7) does not authorize any limitation on the ability of
the corporation or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Sixth of the registrant's Certificate of Incorporation, as amended
and restated, and Article X of the registrant's By-laws provide that all persons
who the Company is empowered to indemnify pursuant to the provisions of Section
145 of the General Corporation law of the State of Delaware (or any similar
provision or provisions of applicable law at the time in effect), shall be
indemnified by the Company to the full extent permitted thereby. The foregoing
right of indemnification shall not be deemed to be exclusive of any other rights
to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors, or otherwise.
Article Seventh of the registrant's Certificate of Incorporation, as
amended and restated, provides that no director of the registrant shall be
personally liable to the Company or its stockholders for any monetary damages
(i) for breaches of fiduciary duty of loyalty to the registrant or its
stockholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing -violation of law; (iii) under Section 174
of the General Corporation of Law of the state of Delaware; or (iv) for any
transaction from which the director derived an improper personal benefit.
Item 25. Other Expenses of Issuance and Distribution
Expenses payable in connection with the issuance and distribution of the
securities being registered (estimated, except in the case of the registration
fee) are as follows:
SEC registration fee .............................. $15,503.18*
NASDAQ filing fee ................................. 7,500
Reproduction ...................................... 1,000
Legal fees/expenses and
accounting fees and expenses ..................... 60,000
Blue Sky fees and expenses (including counsel fees) 10,000
Miscellaneous expenses ............................ 859.55
Total ............................................. $94,862.73
- ----------
* $15,140.45 previously paid in connection with initial filing of Form S-3
Registration Statement on November 8, 1996; balance of $362.73 paid prior
to filing this Amendment No. 2.
II-1
<PAGE>
Item 27. Exhibits
Exhibit No. Description
----------- -----------
4.1 Specimen Common Stock Certificate(1)
5.1 Opinion of Tenzer & Greenblatt LLP as to the legality of the
securities being offered (2)
23.1 Consent of BDO Seidman, LLP (3)
23.2 Consent of Marks Shron & Company, LLP (3)
23.3 Consent of Tenzer & Greenblatt LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on Page II-3 of this
Registration Statement)
- ----------
(1) Previously supplied by the registrant's Registration Statement on Form S-18
filed with the SEC on April 8, 1992 (Registration No. 33-47037-A).
(2) Previously supplied by the registrant's Registrations Statement on Form S-3
filed with the SEC on November 8, 1996 (Registration No. 33-15803)
(3) Filed by the registrant with this Amendment No. 2 to Registrant's
Registration Statement on Form S-3.
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows:
(a) To file, during any period in which the registrant offers or
sells securities, a post-effective amendment(s) to this
Registration Statement:
(1) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(2) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the Registration Statement; and
(3) To include any additional or changed material information
with respect to the plan of distribution;
(b) File a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering;
and
(c) For determining liability under the Securities Act, the
registrant will treat each post-effective amendment as a new
registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona
fide offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 22, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-2
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sanford, State of Florida, on the 4th day of
February, 1997.
RT INDUSTRIES, INC.
----------------------------------
(Registrant)
By: /s/Alfred H. Paul
-------------------------------
Alfred H. Paul, CFO and Chief
Accountinf Officer
Each person whose individual signature appears below hereby authorizes
Alfred H. Paul as his true and lawful attorney-in-fact with full power of
substitution to execute in the name and on behalf of each person, individually
and in each capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, as amended, has been signed by the following persons in
the capacities and on the dates stated:
Signature Title Date
--------- ----- ----
/s/John Kenney
- ---------------------- Chairman of the February 4, 1997
John Kenney Board, President and
Director
/s/David Love
- ---------------------- Director February 4, 1997
David Love
/s/Mandel Sherman
- ---------------------- Director February 4, 1997
Mandel Sherman
/s/Alfred H. Paul
- ---------------------- Chief Financial Officer February 4, 1997
Alfred H. Paul and Chief Accounting
Officer
II-3
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
4.1 Specimen Common Stock Certificate(1)
5.1 Opinion of Tenzer & Greenblatt LLP as to the legality of the
securities being offered(2)
23.1 Consent of BDO Seidman, LLP(3)
23.2 Consent of Marks Shron & Company, LLP(3)
23.3 Consent of Tenzer & Greenblatt LLP (included in Exhibit 5.1)
24.1 Power of Attorney (included on Page II-3 of this
Registration Statement)
(1) Previously supplied by the registrant's Registration Statement on Form S-18
filed with the SEC on April 8, 1992 (Registration No. 33-47037-A).
(2) Previously supplied by the registrant's Registration Statement on Form S-3
filed with the SEC on November 8, 1996 (Registration No. 33-15803)
(3) Filed by the registrant with this Amendment No. 2 to Registrant's
Registration Statement on Form S-3.
II-4
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
RT Industries, Inc.
Sanford, Florida
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement of our report dated March 15,
1996, except as to Note 11, which is as of March 27, 1996, relating to the
consolidated financial statements of RT Industries, Inc. appearing in the
Company's Annual Report on form 10KSB for the year ended December 31, 1995. Our
report contains an explanatory paragraph regarding the Company's ability to
continue as a going concern.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
BDO Seidman, LLP
Orlando, Florida
February 3, 1997
CONSENT OF INDEPENDENT AUDITORS
RT Industries, Inc.
We hereby consent to the incorporation by reference in this Registration
Statement of RT Industries, Inc. on Form S-3 of our report dated March 4, 1995,
except for Notes referred to in such report, appearing in the Company's 1995
Annual Report on Form 10-KSB for the year ended December 31, 1994. We also
consent to the reference to our Firm under the caption "Experts" in such
Registration Statement.
/s/ Marks Shron & Company, LLP
- ------------------------------
Marks Shron & Company, LLP
Certified Public Accountants
Great Neck, New York
February 4, 1997
