<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration No. 333-8391
PROSPECTUS
CPI AEROSTRUCTURES, INC.
4,814,576 Common Shares
1,025,000 Class B Common Share Purchase Warrants
This Prospectus pertains to 4,814,576 Common Shares (the "Shares"),
$.001 par value per share, of CPI Aerostructures, Inc., a New York corporation
("CPI Aerostructures" or the "Company"), as well as 1,025,000 redeemable Class B
Common Share Purchase Warrants ("Warrants") that may be sold by the Selling
Shareholders named herein (the "Selling Shareholders").
The Shares offered hereby were issued by the Company to certain
investors in a private placement (the "Private Placement") of 82 Units (the
"Units"), each Unit consisting of 25,000 Common Shares and Warrants to purchase
12,500 Common Shares, at $25,000 per Unit; to Barber & Bronson Incorporated, the
Company's placement agent in the Private Placement (the "Placement Agent") , in
the form of warrants (the "Placement Agent's Warrants") to purchase 8.2 Units
(the "Placement Agent's Units"), each Placement Agent's Unit consisting of
25,000 Common Shares and Warrants to purchase 12,500 Common Shares; to the
Placement Agent in the form of consultant's warrants issued in consideration for
consulting services (the "Consultant's Warrants"); to Whale Securities Co., L.P.
and its assignees (collectively, the "Underwriter"), the underwriter of the
Company's initial public offering ("IPO") to purchase 566,038 units
("Underwriter's Units"), each Underwriter's Unit consisting of one Common Share
and a Warrant to purchase one Common Share, as adjusted. See "Selling
Shareholders."
The Company will not directly receive any proceeds from the sale of the
Shares by the Selling Shareholders, but will receive the exercise price of all
Warrants exercised. On July 26, 1996, the closing sale price for the Common
Shares on the Nasdaq SmallCap Market was $3.00 per share. See "Use of Proceeds."
The registration of the Shares offered hereby is being effected in
connection with registration rights granted by the Company pursuant to the terms
of the Private Placement, the Consultant's Warrants, the Placement Agent's
Warrants and the Underwriter's Units. In accordance with the terms of such
rights, the Company will bear the expenses of such registration, which are
estimated, except that the Selling Shareholders will bear the cost of all
brokerage commissions and discounts incurred in connection with the sale of
their portion of the Shares and their respective legal expenses.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Commencing on the effective date of this Prospectus, the Shares may be
sold, from time to time, by the Selling Shareholders directly to purchasers or,
alternatively, may be offered through agents, brokers, dealers or underwriters,
who may receive compensation in
The date of this Prospectus is July 29, 1996
the form of commissions or discounts from the Selling Shareholders or purchasers
of the Shares. Sales of the Shares may be made on the Nasdaq SmallCap Market
("Nasdaq"), in privately negotiated transactions or otherwise, and such sales
may be made at the market price prevailing at the time of sale, a price related
to such prevailing market price or at a negotiated price.
Any brokers, dealers or agents that participate in the
distribution of the Shares may be deemed to be underwriters under Section 2(11)
of the Securities Act of 1933, as amended (the "Securities Act"), and any
commissions or discounts received by them on the resale of such Shares may be
deemed to be underwriting compensation under the Securities Act. The sale of the
Shares by the Selling Shareholders is
<PAGE>
subject to the prospectus delivery and other requirements of the Securities
Act. See "Plan of Distribution."
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
this Prospectus and, if given or made, such other information and
representations must not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or that the
information contained herein is correct as of any time subsequent to its date.
This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, such securities in any circumstances in which such offer or
solicitation is unlawful.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the Commission's regional offices located at Seven World Trade
Center, New York, New York 10048, and at Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such material may be
obtained, at prescribed rates, by writing to the Commission, Public Reference
Section, 450 Fifth Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act with respect to the
Common Shares offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits thereto, as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Shares, reference is
hereby made to such Registration Statement and the exhibits thereto or
incorporated therein by reference. The Registration Statement, including such
exhibits, may be inspected without charge at the public reference facilities
maintained by the Commission and at the Commission's regional offices at the
addresses stated above. Copies of these documents may be obtained, at prescribed
rates, by writing to the Commission's Public Reference Section at its office set
forth above.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed with the Commission are incorporated into
this Prospectus by reference:
(1) The Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995 ("Form 10-KSB").
(2) The Company's Definitive Proxy Statement dated December 11,
1995.
(3) The Company's Quarterly Report on Form 10-QSB dated for the
quarter ended March 31, 1996 ("Form 10-QSB").
<PAGE>
(4) The description of the Company's Common Shares contained in
the Company's registration statement on Form 8-A (File No.
1- 11398), dated September 16, 1992, filed pursuant to
Section 12(g) of the Exchange Act.
(5) The Company's Current Report on Form 8-K dated June 19,
1996 ("Form 8-K").
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company furnishes its shareholders with annual reports which contain
financial statements audited by its independent certified public accounts and
such other interim reports containing unaudited financial information as it
deems appropriate.
The Company will provide without charge to each person who receives this
Prospectus, upon written request, a copy of any information that is incorporated
by reference in the Prospectus (not including exhibits to the information that
is incorporated by reference unless the exhibits are themselves specifically
incorporated by reference). Such requests should be directed to the following
address:
CPI AEROSTRUCTURES, INC.
200A Executive Drive
Edgewood, New York 11717
Attention: Corporate Secretary
THE COMPANY
CPI Aerostructures is engaged in contract production of structural
aircraft parts and sub-assemblies (a series of parts fitted together to form a
complex aerodynamic structure) for the commercial and military sectors of the
aircraft industry. The Company's operations consist primarily of incorporating
component aircraft parts supplied by third parties into complex sub-assemblies
to satisfy specific customer requirements and precision certification standards.
The sub-assemblies are incorporated into jet engine housings (nacelles) by the
Company's customers or aircraft manufacturers to form final aircraft assemblies.
In connection with its commercial assembly operations, the Company also provides
engineering, technical and program management services to its customers.
Current Developments
On September 19, 1995, the Company was awarded a contract by the United
States Air Force for the A-10 Aircraft program. The Company will produce leading
edge panels (the panel on the front edge of the wing) for such aircraft. The
total award amount is approximately $3,074,000, with deliveries expected to
commence in late 1996 and be completed during 1997.
On September 22, 1995, the Company was awarded a contract by the United
States Air Force for the C-5 Aircraft program. The Company is producing and has
commenced delivery of structural supports, plates and brackets, mount
assemblies, air deflectors, mounting blocks, hinge brackets, plate assemblies,
fairings,
<PAGE>
landing gear door assemblies and panel assemblies for such aircraft.
As of June 21, 1996, the total contract value was $1,741,400 with additional
orders anticipated, although no assurance can be given as to any such additional
orders.
On June 19, 1996, the Company completed the Private Placement under
Regulation D promulgated under the Securities Act of 82 Units, each Unit
consisting of 25,000 Common Shares and 5-year Common Share Purchase Warrants
(the "Warrants") to purchase 12,500 Common Shares, at $2.00 per share, for a
total purchase price of $2,050,000 ($25,000 per Unit), through Barber & Bronson
Incorporated, as Placement Agent. The net proceeds of the Private Placement,
along with working capital, were used to repay all of the Company's indebtedness
to Chrysler Capital Corporation ("Chrysler"). The purchasers were granted
certain demand and piggyback registration rights with respect to the shares
included in the Units and underlying the Warrants.
The Company paid the Placement Agent a selling commission of 10% of the
gross proceeds of the Private Placement and a non-accountable expense allowance
in an amount equal to 3% of the gross proceeds of the Private Placement. The
Company also sold to the Placement Agent, for nominal consideration, five-year
Placement Agent Warrants to purchase 8.2 additional Units at a purchase price of
$25,000 per Unit. The Company previously retained the Placement Agent, pursuant
to a financial consulting agreement (the "Consulting Agreement"), to provide
financial consulting services for a period of 24 months commencing on April 3,
1996, for an aggregate of $72,000 payable at the rate of $3,000 per month. The
Placement Agent received five-year Consultant's Warrants to purchase 300,000
Common Shares at an exercise price of $1.00 per share. The Placement Agent has
been granted certain demand and piggy-back registration rights with respect to
the Common Shares underlying the Placement Agent Warrants and the Consultant's
Warrants. Furthermore, the Consulting Agreement provides for finder's fee
arrangements and a three-year right of first refusal for the Placement Agent to
serve as the underwriter or placement agent for any future public or private
offering effected by the Company.
The Company was incorporated under the laws of the State of New York in
January 1980 under the name Composite Products International, Inc. The Company
change its name to Consortium of Precision Industries, Inc. in April 1989 and to
CPI Aerostructures, Inc. in July 1992. The Company's executive offices are
located at 200A Executive Drive, Edgewood New York 11717; Telephone Number:
(516) 586-5200.
<PAGE>
RISK FACTORS
The Shares offered hereby involve a high degree of risk and should be
purchased only by persons who can afford to risk the loss of their entire
investment. In addition to other information contained in this Prospectus,
prospective investors should carefully consider the following Risk Factors
before making a decision to invest in the Company.
This Prospectus contains, in addition to historical information, forward-
looking statements that involve risks and uncertainties. The Company's actual
results could differ materially. Factors that could cause or contribute to such
difference include, but are not limited to, those discussed below, as well as
those discussed elsewhere in this Prospectus.
Substantial Reductions in Revenues
The Company's revenues decreased by $357,000, or approximately 7%, from
$5,041,000 for the year ended December 31, 1994, to $4,684,000 for the year
ended December 31, 1995. This followed a 17% decrease in revenues from
$6,091,000 for the year ended December 31, 1993 to $5,041,000 for the year ended
December 31, 1994. These decreases followed increasing levels of revenues for
the three-year period ended December 31, 1992. For the year ended December 31,
1995, the Company had a net loss of $1,080,000 as compared to net income of
$233,000 in the same period the prior year. This decrease followed a 38%
decrease in net income from 1993 to 1994 and a 52% decrease in net income from
1992 to 1993. The reductions in sales and earnings resulted primarily from
"stretch outs" (an extension of a program period of performance resulting in
extensions of delivery dates) of certain commercial contracts, the completion of
the McDonnell Douglas MD-90 start-up phase, and non-cash write-offs due to the
loss of the pylon portion of the Company's Hawker 1000 contract and the sale of
the Company's facilities. The commercial sector of the aircraft industry
experienced one of the most severe downturns in its history from 1993 to 1995
characterized by bankruptcies and consolidations among the major airlines.
Permanent reductions in capital spending for the military and current decreased
demand for commercial aircraft, resulting in contract cancellations or stretch
outs, materially adversely affected the Company's operating results in 1994 and
1995. Management does not believe that these adverse conditions are expected to
extend into 1996, as there is an up-swing in the aircraft industry. Although the
Company was recently awarded two major military contracts, there can be no
assurance the Company will return to profitability.
Lack of Profitability
Given the Company's limited financial resources, its anticipated expenses
and the highly competitive environment in which the Company operates, there can
be no assurance that the Company's future operations will become profitable. If
the Company is without sufficient funds to satisfy its cash flow requirements it
would be forced to curtail its operations and could ultimately cause the Company
to have to sell some or all of its assets. See "Item 6. Management's Discussion
and Analysis" and "Item 7. Financial Statements" in the Company's Form 10-KSB.
Significant Capital Requirements; Possible Need for Additional Financing
The Company's capital requirements have been and will continue to be
significant. The Company's cash requirements have exceeded its resources during
the last few years primarily because of reduced revenues. In addition, the
Company's costs and estimated earnings in excess of billings, representing the
aggregate of costs and related profit which has been incurred and earned in
performance of work for which the Company has firm commitments but has not yet
been billed to customers (billing is upon delivery of products), decreased by
$820,000 during the year ended December 31, 1995. Costs and estimated earnings
are recoverable, generally upon shipment of products or completion of a
contract. The Company's continued requirement to incur significant costs
relating to
<PAGE>
commercial contracts in advance of receipt of cash adversely affected the
Company's working capital for 1995.
Because of Chrysler's announced curtailment of its loan operations, the
Company was unable to obtain any new advances from Chrysler and reduced its
aggregate indebtedness to Chrysler from approximately $4,300,000 in 1990 to zero
in June 1996. The Company financed its working capital through its September
1992 initial public offering, January 1995 warrant redemption, June 1996 Private
Placement and operating cash flow.
The Company intends to seek to grow its business by seeking additional
equity and/or debt financing. No assurance can be given that the Company will be
able to obtain additional financing at all, or on terms reasonably acceptable to
the Company. The Company's inability to obtain additional financing may have a
material adverse effect on the Company's ability to grow its business and may
possibly require the Company to curtail its operations if the Company does not
operate profitably. See "Item 6. Management's Discussion and Analysis" in the
Form 10-KSB.
Dependence on Rohr
All but a small portion of 1995's revenues attributable to the commercial
sector of the aircraft industry were derived under three programs which
originated with Rohr, Inc. ("Rohr"). For the years ended December 31, 1994 and
1995, sales of the Company's products to Rohr and The Nordam Corporation
("Nordam") accounted for approximately 81% and 89%, respectively, of the
Company's revenues. Rohr curtailed its operations during the last several years
as a result of a general downturn in the commercial aircraft industry and the
loss of military business. The Company's contract with Rohr concerning the
Raytheon 1000 Executive Jet was sold to Nordam, which terminated the pylon
portion of the contract in September 1995. There can be no assurance that Rohr,
for financial or other reasons, will not seek to further reduce its level of
operations in the future or that a further decline in the economic prospects of
Rohr, which could result in reduction or deferral of capital expenditures, and
either of which could adversely affect the Company.
The Company's agreements with Rohr are subject to termination at will by
Rohr and require the Company to, among other things, deliver certain minimum
quantities of products pursuant to specific schedules. Termination of any of the
Company's contracts with Rohr or the inability of the Company to maintain or
enter into new contracts would have a material adverse effect on the Company
unless it is able to diversify its operations. For the year ended December 31,
1995, the Company's three agreements with Rohr and Nordam for the production of
sub-assemblies for the McDonnell Douglas MD-90, the Boeing 757 and the Raytheon
1000 accounted for approximately 57%, 18% and 14%, respectively, of the
Company's revenues. The Boeing 757 is currently in production and the Company
anticipates that current orders from Rohr under the Company's contract are
expected to be completed in 1996, with additional orders possibly in late 1997
when Rohr is expected to deplete its inventory. The McDonnell Douglas MD-90
program is currently in production and the Company anticipates orders for this
program will continue into the year ending December 31, 2009. Production of
engine mounts for Nordam under the Raytheon 1000 program continue, but
production of pylons under such program was terminated in September 1995. There
can be no assurance that Rohr and Nordam will purchase additional products under
such agreements or that the Company will obtain additional contracts for
programs similar in scope to those previously obtained. In addition to its
dependence on Rohr, the Company is dependent on sales of the particular aircraft
(e.g., by Boeing), over which the Company has no control. See "Item 1. Business
- -Customers and Contracts" in the Form 10-KSB.
Rescheduling and Early Termination; Fixed-Price Contracts; Cost Overruns
<PAGE>
The Company's contracts with Rohr and Nordam are subject to premature
termination and rescheduling. Rohr may, in its sole discretion, elect to
postpone or reschedule product delivery at any time. Delays, suspension and
termination of performance by Rohr under these agreements since the beginning of
1993, have materially adversely affected the Company's operating results. The
Company had expended significant funds for non-recurring costs associated with
design, tooling and prototype development, as well as the purchase of component
parts used in its operations, which have been recovered.
Prices under the Company's contracts with Rohr are fixed during the term
of such contracts, subject to price escalation in accordance with published
indices which account principally for materials and labor costs. Accordingly,
the Company is subject to increased risk of loss in the event production costs
are greater than anticipated. Unforeseen events, including unanticipated
production cost overruns and technical and operating difficulties, could have a
material adverse effect on the Company. In the past, the Company has incurred
cost overruns which could not be recovered, resulting in reduced profitability.
Although the Company maintains procedures to continuously review costs under
contracts and takes such steps as it deems necessary to reduce the Company's
exposure to cost overruns, there can be no assurance that any measures taken
will assure completion of a program or that a completed program will not involve
substantially higher than anticipated costs to the Company, which may reduce its
ability to realize profits from such program. See "Item 1. Business - Customers
and Contracts" in the Form 10-KSB.
Dependence on Government Contracts
For the years ended December 31, 1994 and 1995, 10.3% and 6.7%,
respectively, of the Company's revenues were derived from United States
Government military contracts. Government reductions in capital expenditures for
the military have significantly decreased production of new aircraft during the
last several years. The Company believes, however, that reductions in military
budgets for new aircraft have not affected demand for replacement parts and
servicing of aging military aircraft. Recently announced awards for the A-10 and
C-5 military contracts are expected to increase the Company's future annual
revenues derived from military contracts to between 30% and 40%. There can be no
assurance that future reductions in military spending will not adversely affect
the Company's future operating results. Termination of the Company's contracts
with the United States Government or the inability to obtain or maintain new
contracts could have a material adverse effect on the Company. Moreover, the
Company's operations in the military sector are subject to risks, including
delay; termination for convenience; reduction or modification of contracts in
the event of changes in the government's policies or as a result of budgetary
constraints; and increased or unexpected costs resulting in losses, any or all
of which could have a material adverse effect on the Company. See "Item 1.
Business - Customers and Contracts" in the Form 10-KSB.
Competitive Bidding
The Company obtains military contracts through the process of competitive
bidding. Contracts from which the Company has derived and expects to derive a
significant portion of its revenues were obtained through competitive bidding.
There can be no assurance that the Company will continue to be successful in
having its bids accepted or, if accepted, that awarded contracts will generate
sufficient revenues to result in profitability for the Company. Additionally,
inherent in the competitive bidding process is the risk that if a bid is
submitted and a contract is subsequently awarded, actual performance costs may
exceed the projected costs upon which the submitted bid or contract price was
based. To the extent that actual costs exceed the projected costs on which bids
or contract prices were based, the Company's profitability could be materially
adversely affected. See "Item 1. Business - Customers and Contracts; and
Marketing" in the Form 10-KSB.
<PAGE>
Possible Fluctuations in Operating Results
The Company's sales cycle, which generally commences at a time a
prospective customer issues a request for a proposal and ends with the award of
a contract with that customer, typically ranges from six months to one year. The
period from the time of execution of the contract until completion of one or
more pre-production phases of such contract (i.e., design, tooling and prototype
development), during which time the Company recognizes revenue, typically ranges
from two to three years. The Company's production cycle, which generally
commences at the time the Company orders component parts and ends upon shipment
of the final assembly, generally ranges from six to eighteen months. The
principal factors affecting production scheduling are the length of time
required to procure component parts and the customer's desire to accelerate or
stagger delivery schedules. Pursuant to the Company's contracts with Rohr, the
Company is not entitled to receive cash payments until products are shipped. The
Company recognizes revenue as costs are incurred under such contracts based upon
the percentage of completion method of accounting, which is measured by the
percentage of actual costs incurred to date against estimated total costs.
Accordingly, revenues may be recognized by the Company even though associated
cash payments have not been received. To the extent that estimated costs of
completion increase or progress under a contract is otherwise impeded, revenue
recognition may be adversely affected. Furthermore, since provision for
estimated losses on uncompleted contracts is made in the period in which such
losses are determined, the Company's recorded revenues may be written-off in
later periods in the event the Company's cost estimates prove to be inaccurate
or a contract is terminated. There can be no assurance that such factors will
not cause significant fluctuations in operating results.
In fact, upon the termination of the pylon portion of the Hawker 1000
contract in September 1995, the Company incurred a charge against cost of goods
sold of $1,473,000. This charge was based, on its impact on past revenues using
the percentage of completion method of accounting. In the event that such
recovery is for a lesser amount than to what the Company believes it is
contractually entitled to, the Company would incur an additional charge. See
"Item 6. Management's Discussion and Analysis" and "Item 7. Note 1 of Notes to
Financial Statements" in the Form 10-KSB.
Dependence on Third Party Suppliers and Manufacturers
The Company purchases substantially all of its supply of raw materials,
principally metals and special parts, and component parts incorporated into its
products, from third-party suppliers and manufacturers. The Company believes
that there are numerous available sources of supply for the Company's raw
materials. While the Company attempts to maintain alternative sources for the
Company's raw materials, the Company's business is subject to the risk of price
fluctuations and periodic delays in delivery of raw materials. Failure by
certain suppliers to continue to supply the Company with raw materials on
commercially reasonable terms, or at all, would have a material adverse effect
on the Company. The Company has subcontracted production of substantially all
component parts incorporated into its products to third party manufacturers.
Accordingly, the Company is substantially dependent on the ability of such
manufacturers, among other things, to meet stringent performance and quality
specifications and to conform to delivery schedules. Failure by the Company's
manufacturers to comply with these and other requirements would have a material
adverse effect on the Company. Furthermore, there can be no assurance that such
manufacturers will dedicate sufficient production capacity to satisfy the
Company's requirements for component parts within scheduled delivery times. The
Company from time to time is required to purchase special parts from sole
suppliers and manufacturers. The Company generally does not maintain supply
agreements with its suppliers or manufacturers and purchases raw materials and
component parts pursuant to purchase orders in the ordinary course of business.
Failure or delay by suppliers and manufacturers in supplying necessary raw
materials and components to the Company would adversely affect the Company's
<PAGE>
profit margin and the Company's ability to obtain and deliver products on a
timely and competitive basis. See "Item 1. Business - Raw Materials, Suppliers
and Manufacturers" in the Form 10-KSB.
Competition; Technological Changes
The markets for the Company's products are highly competitive. The Company
competes with numerous well-established foreign and domestic subcontractors
engaged in the supply of aircraft parts and assemblies to the commercial and
military sectors of the aircraft industry, most of which possess substantially
greater financial, marketing, personnel and other resources than the Company and
have established reputations for success in the development, manufacture, sale
and service of products. The Company also faces competition from foreign and
domestic prime contractors, including Rohr, all of whom possess greater
resources than the Company, thereby permitting such companies to implement
extensive production programs in response to orders from aircraft manufacturers.
The market for commercial aircraft is dominated by The Boeing Company, McDonnell
Douglas Corporation and Airbus Industries, a government supported European
aircraft consortium, which typically contract production of assemblies to a
limited number of large commercial contractors. Consequently, the Company's
ability to increase market penetration in the commercial sector may be limited
by the relatively small number of prime contractors in this market.
In addition, the markets for the Company's services and products are
characterized by technological changes. The Company's ability to compete
successfully depends, in large part, on the Company having a technically
competent staff and quality control procedures and on the Company's ability to
adapt to technological changes and advances in the aircraft industry, including
ensuring continuing compatibility with evolving requirements of its customers
and aircraft manufacturers. There can be no assurance that the Company will be
able to continue to keep pace with the technological demands of the marketplace
or successfully enhance its services and products to be compatible with products
of specific aircraft manufacturers. See "Item 1. Business - Competition" in the
Form 10-KSB.
Adverse Effects of Expansion
Internal expansion of the Company's operations is dependent on, among
other things, its ability to obtain new contracts. The Company's prior lack of
new business had caused the Company to consider diversification of its
operations outside of the aerospace industry. Although the Company will continue
to seek acquisitions outside of the aerospace industry, there can be no
assurance the Company will effect any such acquisition, or that if the Company
is able to effect any acquisition it will be able to manage a business outside
of the aerospace industry and otherwise integrate the operation of any acquired
business into the Company's operations.
Even if the Company was awarded a new commercial contract, it may be
required to finance all of its non-recurring costs, which will be amortized over
the term of any such contract. Such costs, as well as any costs associated with
the Company's expansion of its operations and/or facilities, could be
substantial and would subject the Company to substantial risks of loss if a
particular program is terminated subsequent to significant investments by the
Company. There can be no assurance any new aircraft for which the Company may
obtain a contract will receive certification from the Federal Aviation
Administration or that any such aircraft will be successfully commercialized.
See "Item 1. Business" in the Form 10-KSB.
Potential Products Liability and Warranty Expense
The Company may be exposed to potential significant products liability
claims although it has not been sued to date. The Company maintains a $2 million
general liability insurance policy, a $10 million products liability insurance
<PAGE>
policy, and a $5 million umbrella liability insurance policy, which it believes
is adequate coverage for the types of products presently marketed. There can be
no assurance, however, that such insurance will be sufficient to cover potential
claims or that the present level of coverage will be available in the future at
reasonable cost. A partially insured or a completely uninsured successful claim
against the Company could have a material adverse effect on the Company. The
Company generally warrants its products to be free from defects in materials,
workmanship and manufacturing processes for a specified period, generally
limited to three years from the date of shipment. There can be no assurance that
future warranty expenses will not have a material adverse effect on the Company.
Under the Company's agreements with Rohr, the Company has agreed to
indemnify Rohr for any costs, damages, expenses or other loss or liability
incurred or paid (including reasonable attorneys' fees) arising out of any
asserted claims made against Rohr, for parts supplied by the Company, provided
that such claims do not arise out of the sole fault of Rohr. There can be no
assurance that the Company will not be required to indemnify Rohr in the event
of an adverse claim made against Rohr or that it will have the financial or
other resources to do so. Moreover, to the extent the Company assumes design
responsibility for products in the future, the Company could be required to
obtain a higher level of insurance in order to cover possible design defects.
There can be no assurance that the Company will be able to obtain a
significantly increased level of coverage on commercially reasonable terms,
which could limit the Company's ability to expand its operations. See "Item 1.
Business -Insurance" in the Form 10-KSB.
Potential Liability; Government Regulation
The Company's operations require the use of a limited amount of chemicals
and other materials for painting and cleaning, including solvents and thinners,
that are classified under applicable laws as hazardous chemicals and substances.
The Company does not maintain environmental impairment insurance. There can be
no assurance that the Company will not incur environmental liability arising out
of the use of hazardous substances. To date, the Company has not incurred any
such liability. The use of hazardous substances is subject to extensive and
frequently changing federal, state and local laws and substantial regulation
under these laws by governmental agencies, including the United States
Environmental Protection Agency, the Occupational Safety and Health
Administration, various state agencies and county and local authorities acting
in conjunction with federal and state authorities. Among other things, these
regulatory bodies impose requirements to control air, soil, and water pollution,
to protect against occupational exposure to such chemicals, including health and
safety risks, and to require notification or reporting of the storage, use and
release of certain hazardous chemicals and substances. The Company believes that
it is in substantial compliance with all material federal, state and local laws
and regulations governing its operations and has obtained all licenses and
permits required for the operation of its business.
Amendments to statutes and regulations and/or the Company's operations in
the future could require the Company to continually modify or alter methods of
operations at costs which could be substantial and could subject the Company to
increased regulation. There can be no assurance that the Company will be able,
for financial or other reasons, to comply with applicable laws and regulations.
Failure by the Company to comply with applicable laws and regulations could
subject the Company to civil remedies, including fines and injunctions as well
as potential criminal sanctions, which could have a material adverse effect on
the Company. See "Item 1. Business - Government Regulation" in the Form 10-KSB.
Federal Aviation Administration Regulation and Quality Control Standards
The manufacture of commercial aircraft is subject to extensive regulation
by the Federal Aviation Administration ("FAA") and foreign regulatory
authorities. Under the FAA requirements, each aircraft is required to undergo
<PAGE>
a stringent certification process pursuant to which it is inspected for
conformity with specifications and manufacturing processes and tested for
safety, airworthiness and design characteristics. Upon receipt by an aircraft
manufacturer of a production certificate issued by the FAA for a new aircraft,
such manufacturer is required to assure that its suppliers comply with all
applicable laws and regulations. Under FAA implementation of such regulations,
each supplier, including the Company, is subject to periodic FAA surveillance
and investigation. As a result, each manufacturer places contractual obligations
upon each of its suppliers requiring such suppliers to comply with the FAA
regulations. In order to assure compliance with FAA regulations, the Company's
customers impose quality control standards upon the Company which incorporate
the FAA requirements. These requirements are also incorporated into the
inspection criteria and data to be supplied to the Company's customers pursuant
to the Company's contracts. Among other things, the Company is required to
inspect parts, maintain back-up documents from its suppliers relating to
materials and processes and prepare documentation in order to substantiate all
of the foregoing. In addition, the Company's customers require the Company to
qualify as an approved supplier. In order to so qualify, the Company is required
to satisfy stringent quality control standards and undergo extensive in-plant
inspections of the Company's personnel, production processes, equipment and
quality control systems. Although the Company's efforts are devoted to ensure
that its capabilities and quality control standards meet its customers'
requirements, there can be no assurance that the Company will be able to comply
with quality control standards, that the Company's customers will comply with
the FAA's or aircraft manufacturers' requirements, or that the Company will be
able, for financial or other reasons, to qualify as an approved supplier for its
existing and prospective customers. See "Item 1. Business - Operations" in the
Form 10-KSB.
Limited Marketing Capability
The Company has limited marketing capabilities and resources. To date,
substantially all of the Company's commercial marketing activities have been
conducted by members of Management. Such activities have consisted primarily of
personal contact with potential customers. Because of the nature of the
Company's business, Management will continue to devote a substantial amount of
time developing and maintaining continuing personal relationships with the
Company's customers. The Company's growth prospects will be largely dependent
upon the Company's ability to achieve greater penetration of the commercial
aircraft market and an up-swing in military procurement, in addition to any
diversification efforts. Achieving market penetration will require significant
efforts by the Company to create awareness of and demand for the Company's
services. Accordingly, the Company's ability to build its client base will be
limited by the number of marketing personnel and will be dependent on the
efforts of such individuals. See "Item 1. Business - Marketing" in the Form
10-KSB.
Lack of Patents; Trademarks and Proprietary Protection
None of the Company's current assembly processes or products are protected
by patents. The Company relies on proprietary know-how and confidential
information and employs various methods to protect the processes, concepts,
ideas and documentation associated with its products. However, such methods may
not afford complete protection and there can be no assurance that others will
not independently develop such processes, concepts, ideas and documentation.
There can be no assurance that the Company will be able to adequately protect
its trade secrets or that other companies will not acquire information which the
Company considers to be proprietary.
In March 1994, the Company determined that it would be prudent to protect
its reputation in the aircraft structural products market. It applied for, and
received, trademark protection from the United States Patent and Trademark
Office as to the use of its name and logo. See "Item 1. Business - Proprietary
Information" in the Form 10-KSB.
<PAGE>
Control by Current Shareholders
Arthur August and Theodore J. Martines, President and Executive Vice
President, respectively, of the Company, and their affiliates, beneficially own
approximately 22% of the Company's outstanding Common Shares, prior to the
exercise of the Warrants. Accordingly, as the two largest shareholders in the
Company, Messrs. August and Martines and their affiliates may be able to elect
all of the Company's directors; increase the authorized capital; dissolve,
merge, or sell the assets of the Company; and generally direct the affairs of
the Company. See "Shares Eligible for Future Sale" below; and "Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance with
Section 16(a) of the Exchange Act," "Item 11. Security Ownership of Certain
Beneficial Owners and Management" and "Item 12. Certain Relationships and
Related Transactions" in the Form 10-KSB.
Dependence on Key Personnel
The success of the Company is largely dependent on the personal efforts of
Arthur August and Theodore J. Martines and other key employees. Although Messrs.
August and Martines are both employed under three-year employment agreements
ending in September 1998, the loss of the services of such individuals would
have a material adverse effect on the Company's business and prospects. The
Company currently maintains "key man" life insurance on the lives of Messrs.
August and Martines in the amount of $1,200,000 and $300,000, respectively.
No Dividends
To date, the Company has not paid any cash dividends on its Common Shares
and does not expect to declare or pay any cash or other dividends in the
foreseeable future. See "Item 5. Market for Common Equity and Related
Shareholder Matters - Dividend Policy" in the Form 10-KSB.
Shares Eligible for Future Sale
The Company has 5,778,304 Common Shares outstanding as of the date of this
Prospectus, of which 3,350,000 shares are deemed to be "restricted securities,"
as that term is defined under Rule 144 promulgated under the Securities Act, in
that such shares were issued and sold by the Company in private transactions not
involving a public offering. Of such shares, 1,300,000 are held by Messrs.
August and Martines and members of their families, and are eligible for sale
under Rule 144. The remaining 2,050,000 Shares were sold in the June 1996
Private Placement and are being registered as part of this Registration
Statement.
Messrs. August and Martines agreed with the Company's former investment
banking consultant (which agreement is in dispute and has been terminated by the
Company), not to sell or otherwise dispose of their shares prior to January 26,
1998, unless the Company (i) is able to complete an underwritten secondary
public offering, or (ii) obtains $11,000,000 of gross revenue as shown on its
audited financial statements or as shown on a pro forma basis with any acquired
company, for the then current fiscal year, at which time the lock-up would be
terminated. The foregoing lock-up, however, is exclusive of Rule 144 sales
through the Company's former investment banking consultant, in the amount of
$250,000 per annum for Arthur August and $62,500 for Theodore Martines (which
increases to $250,000 per annum should Mr. Martines retire).
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, including an affiliate of
the Company (or person whose shares are aggregated), who has owned restricted
Common Shares beneficially for at least two years is entitled to sell, within
any three-month period, a number of shares that does not exceed the greater of
1% of the total number of outstanding shares of the same class or, if the Common
Shares are quoted on the Nasdaq system, the average weekly trading volume during
the
<PAGE>
four calendar weeks preceding the sale. A person who has not been an affiliate
of the Company for at least the three months immediately preceding the sale and
who has beneficially owned Common Shares for at least three years is entitled to
sell such shares under Rule 144 without regard to any of the limitations
described above.
In addition, the Company agreed to file by September 5, 1996, this
registration statement with the Commission for the purpose of registering the
Common Shares included in the Units (the "Unit Shares") offered in the Private
Placement. The Company will use its best efforts to ensure the Registration
Statement is declared effective by the Commission and remains effective until
the Unit Shares are sold. At any time (subject to certain limitations) after
such registration statement is deemed stale and no longer effective, or if a
Registration Statement has not been filed by September 5, 1996, the holders of
at least 50% of the Unit Shares have two "demand" registration rights for a
period of five years after the closing of the Private Placement. The holders
also have unlimited piggy-back registration rights (subject to certain
limitations) for a period of five years after the closing of the Private
Placement. The Placement Agent has similar registration rights with respect to
the shares underlying the Placement Agent's Warrants and the Consultant's
Warrants which are included as part of this Registration Statement.
The underwriter for the Company's IPO has two demand registration
statements to register an aggregate of 1,132,076 shares underlying Underwriters'
Warrants until September 24, 1997 and unlimited piggyback registration rights
until September 24, 1999. These shares are a part of this Registration Statement
and are offered for sale hereby. The Company's former investment banking
consultant has one demand registration statement to register an aggregate of
120,000 Common Shares underlying the former consultant's options (which
agreement is in dispute and has been terminated by the Company) until January
31, 2000 and unlimited piggyback registration rights until January 31, 2000.
The Company could register the Common Shares issuable upon exercise of
outstanding stock options at any time in which event such shares would be
immediately eligible for sale.
No prediction can be made as to the effect, if any, that market sales of
Common Shares or the availability of such shares for sale will have on the
market prices prevailing from time to time. Nevertheless, the possibility that
substantial amounts of Common Shares may be sold in the public market may
adversely affect prevailing market prices for the Common Shares and could impair
the Company's ability to raise capital through the sale of its equity
securities.
Effect of Outstanding Exercisable Securities and Registration Rights
The Company had outstanding as of the date of this Prospectus, options and
warrants to purchase Common Shares exercisable at various prices from $1.00 to
$3.00 (subject to adjustment) pursuant to which an aggregate of approximately
3,296,911 Common Shares (subject to adjustment) may be issued. This includes
warrants to the Company's former underwriter, former investment banking
consultant and the Placement Agent to purchase up to an aggregate of
approximately 1,553,000 Common Shares (subject to adjustment) (the
"Underwriters' Warrants"); Warrants issued in the Private Placement to purchase
1,025,000 Common Shares and 412,335 employee and consultant stock options
granted as of June 24, 1996.
During the respective terms of the Company's outstanding derivative
securities, the holders thereof may be able to purchase Common Shares at prices
substantially below the then current market price of the Company's Common Shares
with a resultant dilution in the interests of the existing shareholders. The
holders of the Company's derivative securities may be expected to exercise their
rights to acquire Common Shares at times when the Company would, in all
<PAGE>
likelihood, be able to obtain needed capital through a new offering of
securities on terms more favorable than those provided by these outstanding
securities. Thus, the terms upon which the Company may obtain additional
financing during the next several years may be adversely affected. In addition,
the exercise of outstanding derivative securities and the subsequent public
sales of Common Shares by holders of such securities pursuant to a registration
statement, including the one for the Shares offered hereby, effected at their
demand, under Rule 144 or otherwise, could have an adverse effect upon the
market for and price of the Company's securities. See "Description of
Securities," "The Offering and Sale of Units," "Shares Eligible for Future Sale"
and "Item 10. Executive Compensation - Stock Options" in the Form 10-KSB."
Securities Market Factors
In recent years, the securities markets have experienced a high level of
volume volatility and market prices for many companies, particularly small and
emerging growth companies, have been subject to wide fluctuations in response to
quarterly variations in operating results. The securities of many of these
companies which trade in the over-the-counter market, have experienced wide
price fluctuations, which in many cases were unrelated to the operating
performance of, or announcements concerning, the issuers of the affected stock.
Factors such as announcements by the Company or its competitors concerning
technological innovations, new products or procedures, government regulations
and developments or disputes relating to proprietary rights and factors
affecting the aerospace industry generally may have a significant impact on the
market for the Company's securities. General market price declines or market
volatility in the future could adversely affect the future price of the
Company's securities. See "Item 5. Market for Common Equity and Related
Shareholder Matters" in the Form 10-KSB.
Inability to Exercise Warrants
The Company intends to qualify the sale of the Shares and Warrants in a
limited number of states. Although certain exemptions in the securities ("blue
sky") laws of certain states might permit Warrants to be transferred to
purchasers in states other than in which the Securities were initially
qualified, the Company will be prevented from issuing Common Shares in such
states upon the exercise of the Warrants unless an exemption (e.g., private
placement) from qualification is available or unless the issuance of Common
Shares upon exercise of the Warrants is qualified. The Company may decide not to
seek or may not be able to obtain qualifications of the issuance of such Common
Shares in all of the states in which the ultimate purchasers of the Warrants
reside. In such a case, the Warrants held by purchasers will expire and have no
value if such Warrants cannot be sold. Accordingly, the market for the Warrants
may be limited because of these restrictions. Further, a current prospectus
covering the Common Shares issuable upon exercise of the Warrants must be in
effect before the Company may accept Warrant exercises. There can be no
assurance the Company will be able to have a prospectus in effect when the
holders of the Warrants desire to exercise them, notwithstanding the Company's
commitment to use its best efforts to do so. See "Description of Securities -
Warrants."
Potential Adverse Effect of Redemption of Warrants
The Warrants may be redeemed by the Company at any time upon prior written
notice of not less than 30 days, at a price of $.05 per Warrant, provided the
closing bid price of the Common Shares as quoted on the Nasdaq SmallCap Market,
equals or exceeds $3.00 per share for a period of twenty (20) consecutive
trading days ending within 15 calendar days of the date on which notice of
conversion is given. Redemption of the Warrants could force the holders to
exercise the Warrants and pay the exercise price at a time when it may be
disadvantageous for the holders to do, to sell the Warrants at the then current
market price when they might otherwise wish to hold the Warrants, or to accept
the redemption
<PAGE>
price, which is substantially less than the market value of the Warrants at the
time of redemption. See "Description of Securities - Warrants."
USE OF PROCEEDS
The Shares offered hereby were issued by the Company to certain investors
in the Private Placement consisting of 82 Units, each Unit consisting of 25,000
Common Shares and redeemable Warrants to purchase 12,500 Common Shares, at
$25,000 per Unit; to the Placement Agent of the Private Placement in the form of
Placement Agent's Warrants to purchase 8.2 Units consisting of 205,000 Common
Shares and Warrants to purchase 102,500 Common Shares; to the Placement Agent in
April 1996 as Consultant's Warrants to purchase 300,000 Common Shares issued in
consideration for consulting services; and to Whale Securities Co., L.P. and its
assignees (collectively, the "Underwriter"), the Underwriter of the Company's
IPO to purchase 566,038 units, each unit consisting of one Common Share and a
warrant to purchase one Common Share, as adjusted.
The Company will not receive the proceeds of sales of the Shares by the
Selling Shareholders. However, upon the full exercise of the Warrants, the
Placement Agent's Units, the Placement Agent's Warrants, the Consultant's
Warrants and the Underwriter's Warrants, the Company will receive aggregate cash
of $2,050,000, $205,000, $205,000, $300,000 and $600,000, respectively. The
Company will use the proceeds from the payment of the respective exercise prices
for working capital and general corporate purposes.
The Company may also use a portion of the exercise price of the Warrants
allocated to working capital to expand its operations by acquiring companies or
parts of companies which the Company believes are compatible with its business.
The Company has no plans, agreements, understandings or arrangements with
respect to any such acquisition. There can be no assurance that the Company will
be able to make any such acquisition.
<PAGE>
SELLING SHAREHOLDERS
The table below sets forth, with respect to each Selling Shareholder,
based upon information available to the Company as of the date hereof, the
number of Common Shares beneficially owned, the number of Shares to be sold, and
the number and percentage of outstanding Common Shares beneficially owned before
and after the sale of the Shares offered hereby. None of the Selling
Shareholders has been an affiliate of the Company during the preceding three
years, except as noted. Although there can be no assurance that the Selling
Shareholders will sell any or all of the Shares, the following table assumes
that each of the Selling Shareholders will sell all Shares offered by this
Prospectus.
<TABLE>
<CAPTION>
================================================================================================================================
Shares
Benefici-
Amount and ally Percent of Class
Nature Shares Owned (2)
Beneficial to After After
Name Ownership(1) Be Sold Offering Offering
================================================================================================================================
<S> <C> <C> <C> <C>
Leonard Adler & 37,500(3) 37,500 -0- -0-
Eileen Adler TEN BY
ENT
Mark Allbaugh & 41,500(3) 41,500 -0- -0-
Florence Allbaugh
JTWROS
Barry Barak & Helen 37,500(3) 37,500 -0- -0-
Barak JTWROS
Bruce C. Barber & 138,426(5) 138,426 -0- -0-
Karen Eva Barber
JTWROS(4)
George C. Barber & 39,000(3) 39,000 -0- -0-
Shirley Barber JTWROS
Sonya Ben-Shmuel 37,500(3) 37,500 -0- -0-
Herman Bhojwani 37,500(3) 37,500 -0- -0-
Billy H. Branch & Tom 18,750(6) 18,750 -0- -0-
Branch JTWROS
Paul M. Bronson & 37,500(3) 37,500 -0- -0-
Laura Mae Bronson
JTWROS
Peter David Bronson & 37,500(3) 37,500 -0- -0-
Maguy F. Bronson
JTWROS
Steven N. Bronson(4) 311,140(7) 311,140 -0- -0-
James S. Cassel (4) 156,000(8) 156,000 -0- -0-
James S. Cassel & 18,750(6) 18,750 -0- -0-
Mindy E. Cassel TEN
BY ENT(4)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Shares
Benefici-
Amount and ally Percent of Class
Nature Shares Owned (2)
Beneficial to After After
Name Ownership(1) Be Sold Offering Offering
================================================================================================================================
<S> <C> <C> <C> <C>
Marwin S. Cassel & 18,750(6) 18,750 -0- -0-
Leslie Cassel JTWROS
EVEREN Clearing Corp 18,750(6) 18,750 -0- -0-
Cust
FBO Mindy E. Cassel
IRA
C G Chase 37,500(3) 37,500 -0- -0-
Construction Co.
EVEREN Clearing Corp. 18,750(6) 18,750 -0- -0-
Cust FBO Gary Wayne
Cole SEPIRA
Anthony Conza 37,500(3) 37,500 -0- -0-
James A.W. Cook 37,500(3) 37,500 -0- -0-
Vincent Coppola Jr., 37,500(3) 37,500 -0- -0-
MD & Lillian Coppola
JTWROS
Susan Crampton & 37,500(3) 37,500 -0- -0-
Stuart Crampton
JTWROS
Prema Das 37,500(3) 37,500 -0- -0-
EVEREN Clearing Corp 37,500(3) 37,500 -0- -0-
CUST FBO Ronald A.
David IRA
Thomas L. Delaney 37,500(3) 37,500 -0- -0-
Roy A. Dempsey 56,250(10) 56,250 -0- -0-
EVEREN Clearing Corp 37,500(3) 37,500 -0- -0-
Cust FBO Gordon J.
Dow SEP IRA
Martin Elkin & 18,750(6) 18,750 -0- -0-
Dolores Elkin TEN ENT
Eric R. Elliott 67,184(11) 67,184 -0- -0-
Leanore R. Elliot 38,500(3) 38,500 -0- -0-
Feller Development 37,500(3) 37,500 -0- -0-
Corp
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Shares
Benefici-
Amount and ally Percent of Class
Nature Shares Owned (2)
Beneficial to After After
Name Ownership(1) Be Sold Offering Offering
================================================================================================================================
<S> <C> <C> <C> <C>
Fred Fialkow 18,750(6) 18,750 -0- -0-
Ronald R. Fieldstone 37,500(3) 37,500 -0- -0-
& Linda Fieldstone
TEN BY ENT
William T. Foran Tr 37,500(3) 37,500 -0- -0-
William T. Foran
Trust
U/A Dtd 5-29-92
Everen Clearing Corp 37,500(3) 37,500 -0- -0-
Cust FBO David E.
French IRA Rollover
Francisco Garcia 37,500(3) 37,500 -0- -0-
Emanuel Goldstein & 18,750(6) 18,750 -0- -0-
Rosa Goldstein JTWOS
Robert D. Goldstein 37,500(3) 37,500 -0- -0-
Herman Goodman & Rose 40,500(3) 40,500 -0- -0-
Marie Goodman JTWROS
EVEREN Clearing Corp 18,750(6) 18,750 -0- -0-
Cust FBO Raymond H.
Grabasch IRA
Thomas J. Hanford 37,500(6) 37,500 -0- -0-
Mark Hart 37,500(3) 37,500 -0- -0-
Daniel F. Herz 18,750(6) 18,750 -0- -0-
First Union National 37,500(3) 37,500 -0- -0-
Bank FBO Joel D.
Kamphuis
Stanley B. Kane TR 37,500(3) 37,500 -0- -0-
Stanley B. Kane REV
TRUST U/A Dtd 3/14/89
Frank Lagalia & Lydia 37,500(3) 37,500 -0- -0-
Lagalia, JT TEN
Steven Levin 18,750(6) 18,750 -0- -0-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Shares
Benefici-
Amount and ally Percent of Class
Nature Shares Owned (2)
Beneficial to After After
Name Ownership(1) Be Sold Offering Offering
================================================================================================================================
<S> <C> <C> <C> <C>
Sylvia Levine 18,750(6) 18,750 -0- -0-
Mark Allen Llano & 40,500(3) 40,500 -0- -0-
Suzanne Llano JTWROS
John O'Gorman 18,750(6) 18,750 -0- -0-
Doug Olson 40,000(3) 40,000 -0- -0-
Nancy A. Pantori & 41,400(3) 41,400 -0- -0-
Michael
Pantori JTWROS
Robert S. Pearlman & 41,500(3) 41,500 -0- -0-
Rita J. Pearlman
JTWROS
EVERN Clearing Corp 37,500(3) 37,500 -0- -0-
Cust FBO Dr. Paul
Pesce IRA
EVERN Clearing Corp. 18,750(6) 18,750 -0- -0-
Cust FBO S. Daniel
Ponce IRA
Leonard A. Poulin 18,750(6) 18,750 -0- -0-
Independent Trust 37,500(3) 37,500 -0- -0-
Corporation
F/B/O Prime Discount
Securities
Private Opportunity 375,000(7) 375,000 -0- -0-
Partners Limited
Attn: Steven N.
Bronson(4)
R.J. Srein Corp. 37,500(3) 37,500 -0- -0-
Profit Sharing Plan
U/A/D 10/31/83
Laura G. Roberts 37,500(3) 37,500 -0- -0-
Mildred Rostolder 18,750(6) 18,750 -0- -0-
Deanna R. Salpeter 18,750(6) 18,750 -0- -0-
Richard Serbin & 18,750(6) 18,750 -0- -0-
Kathie Serbin JTWROS
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Shares
Benefici-
Amount and ally Percent of Class
Nature Shares Owned (2)
Beneficial to After After
Name Ownership(1) Be Sold Offering Offering
================================================================================================================================
<S> <C> <C> <C> <C>
James Allan Settlage 37,500(3) 37,500 -0- -0-
& Carol Lynn Settlage
JTWROS
David Shear & Hannah 18,750(3) 18,750 -0- -0-
Shear TEN ENT
Haguy Schechter 37,500(3) 37,500 -0- -0-
EVEREN Clearing Corp 37,500(3) 37,500 -0- -0-
Cust
FBO Yehuda Schechter
IRA Rollover
Zvika Schechter 19,750(5) 19,750 -0- -0-
Nancy B. Sherertz 37,500(3) 37,500 -0- -0-
Craig L. Silverman 37,500(3) 37,500 -0- -0-
David Singerman 37,500(3) 37,500 -0- -0-
Richard Sinise 75,000(12) 75,000 -0- -0-
Mark A. Skoda 40,400(3) 40,400 -0- -0-
Joseph A. Spinella 37,500(3) 37,500 -0- -0-
Delaware Charter 37,500(3) 37,500 -0- -0-
Guarantee & Trust Co.
Custodian PBO Law
Office of Bruce R.
Thaw KEOUGH Plan
Allan Thaw 37,500(3) 37,500 -0- -0-
Tropical Time 37,500(3) 37,500 -0- -0-
Robert Van Lier 18,750(6) 18,750 -0- -0-
Frank Vicino, Jr. 37,500(6) 37,500 -0- -0-
Stephen Yetzer & 45,500(3) 45,500 -0- -0-
Karen Yetzer TR The
Yetzer Family Trust
U/A dtd 3-12-93
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
================================================================================================================================
Shares
Benefici-
Amount and ally Percent of Class
Nature Shares Owned (2)
Beneficial to After After
Name Ownership(1) Be Sold Offering Offering
================================================================================================================================
<S> <C> <C> <C> <C>
Stephen W. Zack 18,750(6) 18,750 -0- -0-
Boris Zalkind 37,500(3) 37,500 -0- -0-
Robert B. Zann TR 37,500(3) 37,500 -0- -0-
Robert B. Zann REV
TRUST
U/A dtd 2/22/94
Charles Watkins 30,000(13) 30,000 -0- -0-
Barry J. Booth 6,000(14) 6,000 -0- -0-
Alvin Katz 30,000(13) 30,000 -0- -0-
Whale Securities Co., 596,876(15) 596,876 -0- -0-
L.P.
William G. Walters 120,520(15) 120,520 -0- -0-
Elliot J. Smith 120,511(15) 120,511 -0- -0-
Estate of Howard D. 93,135(15) 93,135 -0- -0-
Harlow
Nicholas Anari 19,030(15) 19,030 -0- -0-
James D. Whitten 9,419(15) 9,419 -0- -0-
Cynthia Buckwalter 2,774(15) 2,774 -0- -0-
Mark Silverman 169,811(15) 169,811 -0- -0-
============= =========
4,814,576 4,814,576
</TABLE>
(1) Under Securities and Exchange Commission rules, beneficial ownership
includes any shares as to which an individual has sole or shared voting
power or investment power. Unless otherwise indicated, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all Common Shares beneficially owned by
them. A person is also deemed to be the beneficial owner of securities
that can be acquired by such person within 60 days from the date hereof
upon the exercise of warrants or options. Each beneficial owner's
percentage ownership is determined by assuming that options or warrants
that are held by such person (but not those held by any other person) and
are exercisable within 60 days from the date hereof have been exercised.
(2) Based on a total of 5,778,304 Common Shares issued and outstanding as of
June 18, 1996.
<PAGE>
(3) Includes 12,500 Common Shares issuable upon exercise of currently
exercisable Warrants.
(4) Bruce Barber, Steven N. Bronson and James S. Cassel are each officers and
directors of Barber & Bronson Incorporated ("BBI"), the Placement Agent.
BBI is a consultant of the Company pursuant to a consulting agreement
dated April 3, 1996, which expires on April 2, 1998, and pursuant to which
the Placement Agent and its assigns received Consultant's Warrants to
purchase 300,000 Common Shares in April 1996. BBI also acted as Placement
Agent of the Private Placement pursuant to which it received Placement
Agent's Warrants to purchase 8.2 Units, each Unit consisting of 25,000
Common Shares and warrants to purchase 12,500 Common Shares at a price of
$25,000 per Unit.
(5) Includes 12,500 Common Shares issuable upon exercise of currently
exercisable warrants, 49,926 Common Shares issuable upon exercise of
Consultant's Warrants and 51,000 shares issuable upon exercise of the
Placement Agent's Units and Placement Agent's Warrants included herein.
(6) Includes 6,250 Common Shares issuable upon exercise of currently
exercisable Warrants.
(7) Includes 12,500 Common Shares issuable upon exercise of currently
exercisable warrants, 119,890 shares issuable upon exercise of
Consultant's Warrants issued on April 3, 1996 to the Placement Agent under
the Company's consulting agreement with the Placement Agent, and 153,750
shares issuable upon exercise of the Placement Agent's Units and Placement
Warrants included herein. Does not include an additional 375,000 Common
Shares beneficially owned by Private Opportunity Partners, Ltd., of which
Mr. Bronson is President of the partnership's sole general partner. Mr.
Bronson disclaims beneficial ownership of the securities owned by Private
Opportunity Partners, Ltd.
(8) Includes 6,250 Common Shares issuable upon exercise of currently
exercisable warrants issued to Everen Clearing Corp. Cust. FBO James S.
Cassel IRA, 52,500 shares issuable upon exercise of Consultant's Warrants
and 84,750 shares issuable upon exercise of Placement Agent's Units and
Placement Agent's Warrants included herein.
(9) For purposes of this calculation, the number of shares beneficially owned
has been increased to include 12,500 Common Shares and 6,250 Common Shares
issuable upon exercise of currently exercisable warrants issued to EVEREN
Clearing Corp. Cust FBO Mindy E. Cassel IRA and James S. Cassel & Mindy E.
Cassel TEN BY ENT. Does not include 12,500 Common Shares and 6,250 Common
Shares issuable upon exercise of currently exercisable warrants issued to
Mr. Cassel's wife's IRA. Mr. Cassel disclaims beneficial ownership of such
securities.
(10) Includes 18,750 Common Shares issuable upon exercise of currently
exercisable warrants.
(11) Includes 12,500 Common Shares issuable upon exercise of currently
exercisable warrants issued to Everen Clearing Corp. Cust. FBO Eric E.
Elliot IRA, 14,684 shares issuable upon exercise of Consultant's Warrants
and 15,000 shares issuable upon exercise of Placement Agent's Units and
Placement Agent's Warrants included therein.
<PAGE>
(12) Includes 25,000 Common Shares issuable upon exercise of currently
exercisable Warrants.
(13) Consists of shares issuable upon exercise of Consultant's Warrants.
(14) Consists of 3,000 Common Shares issuable upon exercise of Consultant's
Warrants and 3,000 Common Shares issuable upon exercise of Placement
Agent's Units and Placement Agent's Warrants included therein.
(15) Issuable upon full exercise of Underwriter's Units (one-half of which
shares are issuable upon exercise of underlying warrants ) issued to Whale
Securities Co., L.P. and its assignees as the underwriter of the Company's
initial public offering. Does not include any Common Shares that may be
held by Whale Securities Co., L.P., a registered NASD member firm, in its
firm) trading account.
<PAGE>
DESCRIPTION OF SECURITIES
Common Shares
The Company is authorized to issue 10,000,000 Common Shares, $.001 par
value per share, of which 5,778,304 shares were outstanding as of July 23, 1996
and held of record by 173 registered holders; however, the Company reasonably
believes that there are in excess of 400 beneficial holders of its Common
Shares. Holders of Common Shares are entitled to one vote for each share held of
record on all matters to be voted on by shareholders. There are no preemptive,
subscription, conversion or redemption rights pertaining to the Common Shares.
Holders of Common Shares are entitled to receive dividends when, as and if
declared by the Board of Directors from funds legally available therefor and to
share ratably in the assets of the Company available upon liquidation,
dissolution or winding up. The holders of Common Shares do not have cumulative
voting rights for the election of directors and, accordingly, the holders of
more than 50% of the Common Shares voting for the election of directors are able
to elect all directors. All of the outstanding Common Shares are duly
authorized, validly issued, fully paid and non-assessable, and the Common Shares
issuable upon exercise of the Warrants, have been duly authorized and reserved
for issuance upon the exercise of the Warrants and, upon issuance, will be
validly issued, fully paid and non-assessable.
Warrants
The Warrants contained in the Units issued in the Private Placement
entitle the registered holder thereof to purchase one Common Share at a price of
$2.00 per share, subject to redemption and adjustment under certain
circumstances, at any time after June 19, 1996 and until June 19, 2001.
The Warrants contain provisions that protect the holders thereof against
dilution. The exercise price and the number of Common Shares or other securities
issuable on exercise of the Warrants are subject to adjustment in certain
circumstances including, but not limited to, dividends, splits,
reclassifications, recapitalizations, reorganizations, mergers, or
consolidations of the Company. However, the Warrants are not subject to
adjustment for issuances of Common Shares pursuant to the Company's 1992 and
1995 Employee Stock Option Plans, or any securities issued to the Placement
Agent in connection with the Private Placement and shares issued at fair market
value in connection with an acquisition.
The Company may call the Warrants for redemption, in whole or in part, at
a price of $.05 per Warrant, upon not less than 30 days' prior written notice,
if the closing bid price of the Common Shares as quoted on the Nasdaq SmallCap
Market, equals or exceeds $3.00 per share for a period of twenty consecutive
trading days ending within fifteen calendar days of the date on which notice of
<PAGE>
conversion is given, provided such Warrants can then be exercised pursuant to an
effective registration statement covering the issuance and the resale of the
underlying Common Shares. The holders of Warrants shall have the right to
exercise the Warrants until the close of business on the date fixed for
redemption.
The Company may reduce the exercise price or extend the exercise period of
the Warrants provided a registration statement reflecting such changed terms is
in effect prior to the exercise of any Warrants. The Company will also take
appropriate steps to insure that information regarding such impending change is
disseminated to holders of the Warrants in an adequate and timely manner.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering Common Shares issuable upon exercise of such
Warrants under an effective registration statement filed with the SEC and such
shares have been qualified for sale or are exempt from qualification under the
securities laws of the state of residence of the holder of such Warrants.
No fractional shares will be issued upon exercise of the Warrants.
However, if a holder exercises all Warrants then owned of record by him, the
Company will pay to such holder, in lieu of the issuance of any fractional share
which is otherwise issuable, an amount in cash based on the market value of the
Common Shares on the last trading day prior to the exercise date.
Warrants are generally more speculative than Common Shares which are
purchasable upon the exercise thereof. Historically, the percentage increase or
decrease in the market price of a warrant has tended to be greater than the
percentage increase or decrease in the market price of the underlying common
shares. A warrant may become valueless, or of reduced value, if the market price
of the common shares decreases, or increases only modestly, over the term of the
warrant.
The Warrants may be exercised upon surrender of the Warrant on or prior to
the expiration date at the offices of the Company, with the exercise form
attached to the Warrant certificate completed and executed as indicated,
accompanied by full payment of the exercise price for the number of Warrants
being exercised. The holders of Warrants do not have the rights or privileges of
holders of Common Shares.
Registration Rights
The Common Shares, the Warrants and the Common Shares issuable upon
exercise thereof, have not been registered for purposes of public distribution
under the Securities Act. The Company is obligated to file with the SEC, by
September 5, 1996, a registration statement, such as this one, for the purpose
of registering the Common Shares issued or issuable upon exercise of the
Warrants. The Company will use its best efforts to ensure the
<PAGE>
Registration Statement is declared effective by the SEC and remains effective
until the Common Shares are sold. The holders also have unlimited "piggy-back"
registration rights (subject to certain limitations) for a period of five years
after the Closing Date.
Transfer Agent, Warrant Agent and Registrar
The Company's Transfer Agent for its Common Shares and Warrant Agent for
the Warrants is North American Transfer Co., 147 W. Merrick Road, Freeport, New
York 11520.
Reports to Shareholders
The Company furnishes its shareholders with annual reports containing
audited financial statements and other periodic reports containing unaudited
financial statements as the Company may determine to be appropriate or as may be
required by law.
PLAN OF DISTRIBUTION
The Selling Shareholders are offering the Shares for their own account and
not for the account of the Company. The Selling Shareholders may continue to
sell the Shares directly to purchasers or, alternatively, may offer the Shares
from time to time through other agents, brokers, dealers or underwriters, who
may receive compensation in the form of concessions or commissions from the
Selling Shareholders. Sales of the Shares may be made in one or more
transactions on Nasdaq, in privately negotiated transactions or otherwise, and
such sales may be made at the market price prevailing at the time of sale, a
price related to such prevailing market price or a negotiated price. The sale of
the Shares is subject to the Prospectus delivery and other requirements of the
Act.
Under the Exchange Act and the regulations thereunder, any person engaged
in a distribution of the Common Shares of the Company offered by this Prospectus
may not simultaneously engage in market-making activities with respect to the
Common Shares of the Company during the applicable "cooling off" period (9 days)
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Shareholders will be subject to applicable
provisions of the Exchange Act and the rules and regulations thereunder
including, without limitation, Rules 10b-6 and 10b-7, which provisions may limit
the timing of purchases and sales of Common Shares by the Selling Shareholders.
To the extent required, the Company will use its best efforts to file,
during any period in which offers or sales are being made, one or more
amendments or supplements to this Prospectus or a new registration statement
with respect to the Shares to describe any material information with respect to
the plan of distribution not previously disclosed in this Prospectus, including
the name or
<PAGE>
names of any additional underwriters, dealers or agents, if any, the purchase
price paid by the underwriter for Shares purchased from a Selling Shareholder,
and any discounts, commissions or concessions allowed or reallowed or paid to
dealers.
COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
LEGAL MATTERS
Snow Becker Krauss P.C., 605 Third Avenue, New York, New York 10158 is
acting as counsel to the Company and will pass upon the legality of the Common
Shares offered hereby. SBK Investment Partners, a partnership consisting of
certain members of Snow Becker Krauss P.C., holds options to purchase 20,000
shares of the Company's Common Shares.
EXPERTS
The financial statements of CPI Aerostructures, Inc. at December 31, 1995
and for each of the two years in the period ended December 31, 1995 incorporated
herein by reference to the Company's Form 10-KSB for the fiscal year ended
December 31, 1995 in this prospectus have been included in reliance upon the
report of Goldstein Golub Kessler & Company, P.C., independent certified public
accountants, given upon the authority of said firm as experts in accounting and
auditing.
<PAGE>
No person has been authorized to give any information or to make any
representations in connection with this offering other than those contained in
or incorporated by reference into the Prospectus and, if given or made, such
other information and representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or the solicitation of an offer to buy any securities other than the securities
to which it relates or any offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such offer or solicitation is
unlawful. Subject to any duties and obligations under applicable securities laws
to update information contained or incorporated by reference herein, neither the
delivery of this Prospectus nor any sales made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
Available Information....................................................2
Information Incorporated by Reference....................................3
The Company..............................................................4
Risk Factors.............................................................6
Use of Proceeds........................................................ 19
Selling Shareholders................................................... 20
Description of Securities...............................................27
Plan of Distribution................................................... 29
Commission Position on Indemnification
for Securities Act Liabilities ................................... 30
Legal Matters.......................................................... 30
Experts................................................................ 30
4,814,576 Common Shares
1,025,000 Class B Common Share
Purchase Warrants
CPI AEROSTRUCTURES, INC.
Prospectus
July 29, 1996
