SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
ADVANCED DEPOSITION TECHNOLOGIES, INC.
(NAME OF ISSUER)
ADVANCED DEPOSITION TECHNOLOGIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
(TITLE OF CLASS OF SECURITIES)
007521-115
(CUSIP NUMBER OF CLASS OF SECURITIES)
GLENN J. WALTERS, PRESIDENT
ADVANCED DEPOSITION TECHNOLOGIES, INC.
580 MYLES STANDISH BOULEVARD
TAUNTON, MASSACHUSETTS 02780
(508) 823-0707
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
MAY 13, 1996
(DATE TENDER OFFER FIRST PUBLISHED, SENT OR GIVEN TO SECURITY HOLDERS)
Calculation of Filing Fee
- --------------------------------------------------------------------------------
Transaction valuation* - $1,581,250 Amount of filing fee - $316.25
- --------------------------------------------------------------------------------
*Calculated pursuant to Rule 0-11 based on the average of the high and low
prices for a Warrant of $1.375 as reported by NASDAQ on May 7, 1996 multiplied
by the 1,150,000 Warrants outstanding.
SCHEDULE 13E-4
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)
ITEM 1. SECURITY AND ISSUER
(a) Advanced Deposition Technologies, Inc.
580 Myles Standish Boulevard
Taunton, Massachusetts 02780
(b) As of May 7, 1996, 1,150,000 Redeemable Common Stock Purchase Warrants
(the "IPO Warrants") were outstanding. For the period from May 13, 1996
through June 12, 1996 (the "Tender Period"), the Company will reduce
the number of IPO Warrants required to purchase one (1) share of Common
Stock, $.01 par value per share (the "Common Stock"), from two IPO
Warrants to one IPO Warrant. Persons who tender their IPO Warrants
during the Tender Period may withdraw such IPO Warrants at anytime up
to and including June 12, 1996. Following the Tender Period, two IPO
Warrants will once again be required to purchase one share of Common
Stock. Also during the thirty day period, any holder who exercises one
IPO Warrant will receive one (1) Class B Warrant, exercisable for a
period of two (2) years from the date the Tender Period commences,
subject to the effectiveness of an amendment (the "Amendment") to the
Company's Certificate of Incorporation to increase the number of
authorized shares of Common Stock of the Company.
In order to become effective, the Amendment must be approved by holders
of two thirds of the Company's issued and outstanding shares of Common
Stock, as to which no assurance can be given. If the Amendment becomes
effective, each Class B Warrant would enable the holder to purchase one
share of Common Stock at $5.00 per share.
To the Company's knowledge, none of its directors, officers or
affiliates own any IPO Warrants, other than Glenn J. Walters, its Chief
Executive Officer, President and a Director, who owns 20,000 IPO
Warrants.
(c) The Company's Common Stock and IPO Warrants are quoted on the National
Association of Securities Dealers Automated Quotation SmallCap Market
System ("NASDAQ") and on the Boston Stock Exchange.
For the fiscal quarters reported below, the following table sets forth
the range of high and low bid quotations for the Common Stock and IPO
Warrants for the relevant periods as reported by NASDAQ. Such
quotations represent interdealer quotations without adjustment for
retail markups, markdowns or commissions and may not represent actual
transactions.
-1-
<TABLE>
<CAPTION>
High Bid Low Bid
-------- -------
COMMON STOCK
<S> <C> <C>
Fiscal Year 1994
First Quarter $ 4.875 $ 4.375
Second Quarter 4.125 3.125
Third Quarter 7.125 2.315
Fourth Quarter 7.00 3.00
Fiscal Year 1995
First Quarter $ 3.875 $2.125
Second Quarter 3.125 1.75
Third Quarter 3.375 2.00
Fourth Quarter 3.375 2.375
Fiscal Year 1996
First Quarter $6.625 $2.375
Second Quarter (through May 7, 1996) 6.375 5.25
IPO WARRANTS
Fiscal Year 1994
First Quarter $0.71875 $0.4375
Second Quarter 0.50 0.4375
Third Quarter 0.875 0.4375
Fourth Quarter 0.9375 0.3125
Fiscal Year 1995
First Quarter $0.375 $0.25
Second Quarter 0.3125 0.125
Third Quarter 0.4375 0.1875
Fourth Quarter 0.46875 0.15625
Fiscal Year 1996
First Quarter $1.5625 $0.15625
Second Quarter (through May 7, 1996) 1.6875 0.9375
</TABLE>
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) During the Tender Period each IPO Warrant will entitle the registered
holder thereof to purchase one (1) share of Common Stock. The Company
has reserved an additional 575,000
-2-
shares of Common Stock for issuance upon the exercise of all of the IPO
Warrants. Also during the Tender Period, any IPO Warrant holder who
exercises an IPO Warrant will receive one Class B Warrant, exercisable
for a period of two (2) years, subject to the effectiveness of the
Amendment. See Item 1.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
ISSUER OR AFFILIATE
As none of the IPO Warrants have been exercised to date, the Company
intends to temporarily decrease the number of IPO Warrants required to receive a
share of Common Stock and to issue a Class B Warrant upon exercise of each IPO
Warrant during the Tender Period.
(a) Two (2) IPO Warrants currently entitle the registered holder thereof to
purchase one (1) share of Common Stock at a price of $5.00 per share.
During the Tender Period one (1) IPO Warrant will entitle the
registered holder thereof to purchase one (1) share of Common Stock at
a price of $5.00 per share. Following the Tender Period two IPO
Warrants will once again be required to purchase one share of Common
Stock at $5.00 per share. Also during the Tender Period, any holder who
exercises an IPO Warrant will receive a Class B Warrant exercisable for
a period of two (2) years, subject to the effectiveness of the
Amendment. See Item 1.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f) Not applicable.
(g) Not applicable.
(h) Not applicable.
(i) Not applicable.
(j) Not applicable.
-3-
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
Not applicable.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES
COMMON STOCK
The Company is authorized to issue up to 5,500,000 shares of Common
Stock, $.01 par value per share, of which 3,169,870 were issued and outstanding
on April 23, 1996. The Company's stockholders will vote to increase the
Company's number of authorized shares of Common Stock at the Annual
Stockholder's Meeting scheduled for May 31, 1996. The following summary
description of the Common Stock is qualified in its entirety by reference to the
Company's Certificate of Incorporation, as amended. As of April 22, 1996, the
Company had 68 holders of record of its Common Stock.
The holders of Common Stock are entitled to one vote for each share
held of record on each matter submitted to a vote of Securityholders. There is
no cumulative voting for election of directors. Subject to the prior rights of
any series of Preferred Stock which may from time to time be outstanding,
holders of Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor, and,
upon the liquidation, dissolution or winding up of the Company, are entitled to
share ratably in all assets remaining after payment of liabilities and payment
of accrued dividends and liquidation preference on the Preferred Stock, if any.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is,
and the Common Stock to be outstanding upon completion of the Offering will be,
validly issued, fully paid, and nonassessable.
Officers and directors of the Company currently own approximately 30%
of the outstanding Common Stock, exclusive of shares of Common Stock issuable
upon exercise of outstanding options or warrants. As a result they will be in a
position through their voting control to significantly influence the election of
the members of the Board of Directors and will continue to significantly
influence the control of the Company.
IPO WARRANTS
The following is a brief summary of certain provisions of the IPO
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Warrant Agreement, as
amended (the "Warrant Agreement"), between the Company and American Securities
Transfer, Incorporated (the "Transfer and Warrant Agent"), a copy of which is
attached hereto and incorporated herein by reference.
-4-
EXERCISE PRICE AND TERMS
During the Tender Period, each IPO Warrant will entitle the registered
holder thereof to purchase one share of Common Stock at an exercise price of
$5.00, subject to adjustment in accordance with the anti-dilution and other
provisions referred to below, and receive one Class B Warrant for no additional
consideration. Following the Tender Period, two IPO Warrants will enable the
registered holder thereof to purchase one share of Common Stock at a price of
$5.00 per share, subject to adjustment in accordance with the anti-dilution and
other provisions referred to below.
The holder of any IPO Warrant may exercise such IPO Warrant by
surrendering the certificate representing the IPO Warrant to the Company's
Transfer and Warrant Agent, with the subscription on the reverse side of such
certificate properly completed and executed, together with payment of the
exercise price. The IPO Warrants may be exercised at any time in whole or in
part at the applicable exercise price until expiration of the IPO Warrants on
March 8, 1997. No fractional shares will be issued upon the exercise of the IPO
Warrants.
REDEMPTION
The IPO Warrants are subject to redemption at $.10 per IPO Warrant on
30 days' prior written notice, provided that the market price of the Common
Stock equals or exceeds $7.00 per share (the "Call Price") for 10 consecutive
trading days ending within 20 days prior to the notice of redemption. For
purposes of the Warrant Agreement, "market price" is defined as the average of
the closing bid and ask prices on NASDAQ. In the event the Company exercises the
right to redeem the IPO Warrants, such IPO Warrants will be exercisable until
the close of business on the date fixed for redemption in such notice. If any
IPO Warrant called for redemption is not exercised by such time, it will cease
to be exercisable and the warrantholder will be entitled only to the redemption
price.
ADJUSTMENTS
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the IPO Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
or sale of all or substantially all of the assets of the Company in order to
enable holders of IPO Warrants to acquire the kind and number of shares of stock
or other securities or property receivable in such event by a holder of the
number of shares that might otherwise have been purchased upon the exercise of
the IPO Warrant. No adjustments will be made unless such adjustment would
require an increase or decrease of at least $.10 or more in such exercise price.
No adjustment to the exercise price of the shares subject to the IPO Warrants
will be made for dividends (other than stock dividends), if any, paid on the
Common Stock or for securities issued pursuant to exercise of the IPO Warrants,
the warrants issued to the representative (the "Representative") of the
underwriters in the Company's
-5-
initial public offering (the "Representative's Warrants"), currently outstanding
options or options which may be granted under the Company's Stock Option Plan
(the "Plan") or shares issued in connection with the acquisition of another
business by the Company. In addition, the Company's Board of Directors has the
discretion to change the exercise price and Call Price of the IPO Warrants.
TRANSFER, EXCHANGE AND EXERCISE
The IPO Warrants may be presented to the Transfer and Warrant Agent for
transfer, exchange or exercise at any time at or prior to the close of business
on March 8, 1997, at which time the IPO Warrants become wholly void and of no
value. If a market for the IPO Warrants is maintained and continues, the holder
may sell the IPO Warrants instead of exercising them. No assurance can be given,
however, that a market for the IPO Warrants will be maintained or will continue.
If the Company is unable to qualify for sale in particular states its Common
Stock underlying the IPO Warrants, holders of the IPO Warrants desiring to
exercise the IPO Warrants in those states will have no choice but to either sell
such IPO Warrants or let them expire.
WARRANTHOLDER NOT A STOCKHOLDER
The IPO Warrants do not confer upon holders any voting or other rights
as stockholders of the Company.
CLASS B WARRANTS
The following is a brief summary of certain provisions of the Class B
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Class B Warrant Agreement,
as amended, between the Company and the Transfer and Warrant Agent, a copy of
which is attached hereto and incorporated herein by reference. The Class B
Warrants will only be issued to holders of the IPO Warrants who exercise such
securities during the Tender Period. No Class B Warrants are currently
outstanding.
EXERCISE PRICE AND TERMS
If holders of two thirds of the Company's outstanding shares of Common
Stock approve the Amendment to increase the Company's number of authorized
shares of Common Stock, then, upon effectiveness of the Amendment, each Class B
Warrant will entitle the registered holder thereof to purchase one share of
Common Stock at a price of $5.00 per share, subject to adjustment in accordance
with the anti-dilution and other provisions referred to below. No assurance can
be given that the Amendment will be approved by holders of two-thirds of the
Company's outstanding shares of Common Stock or that the Amendment will become
effective.
Subject to the effectiveness of the Amendment, as to which no assurance
can be given, the holder of any Class B Warrant may exercise such Class B
Warrant by surrendering the certificate representing the Class B Warrant to the
Company's Transfer and Warrant Agent, with the
-6-
subscription on the reverse side of such certificate properly completed and
executed, together with payment of the exercise price. The Class B Warrants may
be exercised at any time following effectiveness of the Amendment in whole or in
part at the applicable exercise price until expiration of the Class B Warrants
on May 12, 1998. No fractional shares will be issued upon the exercise of the
Class B Warrants.
REDEMPTION
The Class B Warrants are subject to redemption at $.10 per Class B
Warrant on 30 days' prior written notice, provided that the average market price
of the Common Stock equals or exceeds $7.00 per share (the "Call Price") during
the 10 consecutive trading days ending within 20 days prior to the notice of
redemption. For purposes of the Warrant Agreement, "market price" is defined as
the average of the closing bid and ask prices on NASDAQ. In the event the
Company exercises the right to redeem the Class B Warrants, such Class B
Warrants will be exercisable until the close of business on the date fixed for
redemption in such notice. If any Class B Warrant called for redemption is not
exercised by such time, it will cease to be exercisable and the warrantholder
will be entitled only to the redemption price.
ADJUSTMENTS
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Class B Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
or sale of all or substantially all of the assets of the Company in order to
enable holders of Class B Warrants to acquire the kind and number of shares of
stock or other securities or property receivable in such event by a holder of
the number of shares that might otherwise have been purchased upon the exercise
of the Class B Warrant. No adjustments will be made unless such adjustment would
require an increase or decrease of at least $.10 or more in such exercise price.
No adjustment to the exercise price of the shares subject to the Class B
Warrants will be made for dividends (other than stock dividends), if any, paid
on the Common Stock or for securities issued pursuant to exercise of the Class B
Warrants, the Representative's Warrant, currently outstanding options or options
which may be granted under the Plan or shares issued in connection with the
acquisition of another business by the Company. In addition, the Company's Board
of Directors has the discretion to change the exercise price and Call Price of
the Class B Warrants.
-7-
TRANSFER, EXCHANGE AND EXERCISE
The Class B Warrants may be presented to the Transfer and Warrant Agent
for transfer, exchange or, following and subject to effectiveness of the
Amendment, as to which no assurance can be given, exercise at any time at or
prior to the close of business on May 12, 1998, at which time the Class B
Warrants become wholly void and of no value. No assurance can be given that
holders of two thirds of the Company's outstanding shares of Common Stock will
vote to approve the Amendment of authorized shares of Common Stock and such
increase becomes effective. If a market for the Class B Warrants develops, as to
which there can be no assurance, the holder may sell the Class B Warrants
instead of exercising them. No assurance can be given, however, that a market
for the Class B Warrants will develop or will continue. If the Company is unable
to qualify for sale in particular states its Common Stock underlying the Class B
Warrants, holders of the Class B Warrants desiring to exercise the IPO Warrants
in those states will have no choice but to either sell such Class B Warrants or
let them expire.
WARRANTHOLDER NOT A STOCKHOLDER
The Class B Warrants do not confer upon holders any voting or other
rights as stockholders of the Company.
REPRESENTATIVE'S WARRANTS
In connection with the IPO, the Company issued to the Representative,
for nominal consideration, the Representative's Warrants to purchase up to
100,000 shares of Common Stock and/or 100,000 redeemable warrants (the
"Redeemable Warrants"). The Representative's Warrants are exercisable at $6.43
per share of Common Stock and $.14 per Redeemable Warrant through September 9,
1998. The Redeemable Warrants issuable upon exercise of the Representative's
Warrants are identical to the IPO Warrants except that they are exercisable at
$8.65 per share. The exercise price of the Representative's Warrants contain
provisions for adjustment of the exercise price and the number and type of
securities issuable upon the exercise thereof upon the occurrence of certain
events. The Representative's Warrants grant to the holders thereof certain
rights of registration of the securities issuable upon the exercise thereof.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $.01 par value (the "Preferred Stock"). The Preferred Stock may be issued
in one or more series, the terms of which may be determined at the time of
issuance by the Board of Directors, without further action by the Company's
stockholders, and may include voting rights (including the right to vote as a
series on particular matters), preferences as to dividends and liquidation,
conversion, redemption rights, and sinking fund provisions.
-8-
No shares of Preferred Stock will be outstanding at the end of the
Tender Period and the Company has no present plans for the issuance thereof. The
issuance of any such Preferred Stock could reduce the rights, including voting
rights, of the holders of Common Stock, and, therefore, reduce the value of the
Common Stock. In particular, specific rights granted to future holders of
Preferred Stock could be used to restrict the Company's ability to merge with or
sell its assets to a third party, thereby preserving control of the Company by
existing management.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company may, from time, to time, pay a solicitation fee not to
exceed five percent (5%) of the aggregate exercise price of the IPO Warrants. As
of May 6, 1996, none of the IPO Warrants have been exercised.
ITEM 7. FINANCIAL INFORMATION
(a) (1) Attached hereto and incorporated by reference herein are the
Company's financial statements filed as part of the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1995, as follows:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Auditors' Report - Arthur Andersen LLP F-1
Consolidated Balance Sheets as of December 31, 1995 and
December 31, 1994 F-2
Consolidated Statements of Operations for the years ended December
31, 1995 and December 31, 1994 F-3
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1995 and December 31, 1994 F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and December 31, 1994 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
(2) Not applicable.
(3) Attached hereto as Schedule 7 and made a part hereof.
(4) Attached hereto as Schedule 7 and made a part hereof.
(b) (1) Attached hereto as Schedule 7 and made a part hereof.
(2) Not applicable.
-9-
(3) Attached hereto as Schedule 7 and made a part hereof.
ITEM 8. ADDITIONAL INFORMATION
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits are filed herewith:
(1) The Company's Prospectus contained in Pre-Effective Amendment
No. 4 to the Company's Registration Statement on Form S-3 (No.
33-98400).
(2) Notice to Holders of Redeemable Common Stock Purchase
Warrants.
(3) Letter of Transmittal to Accompany Exercise of IPO Warrants.
(4) Consent of Arthur Andersen LLP.
The following exhibit was filed as part of the Company's Form S-3
Registration Statement (No. 33-98400) declared effective by the Commission on
May 13, 1996 and is incorporated herein by reference:
Exhibit
No. Title
- ------- -----
4a Form of Warrant Agreement between the Company and American
Securities Transfer, Incorporated (Description of Specimen
Warrant Certificate included).
-10-
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
ADVANCED DEPOSITION TECHNOLOGIES, INC.
Date: May 13, 1996 By: /s/Glenn J. Walters
-------------------
Glenn J. Walters
President
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
ADVANCED DEPOSITION TECHNOLOGIES, INC.:
We have audited the accompanying consolidated balance sheets of Advanced
Deposition Technologies, Inc. and subsidiary (a Delaware corporation) as of
December 31, 1995 and 1994 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
procedures. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for an opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Advanced
Deposition Technologies, Inc. and subsidiary as of December 31, 1995, 1994 and
1993, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
The Company has a working capital deficiency of $1,381,000 at December 31,
1995 which is primarily due to the classification of certain obligations to a
bank as short-term. The Company's banking arrangement expired on December 31,
1995. The bank has agreed to extend the arrangement to June 30, 1996. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Management's plans to resolve this uncertainty are discussed in Note 1.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
March 26, 1996 (except with respect
to the matters discussed in Note 3, as
to which the date is April 12, 1996)
F-1
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................................... $ 98 $ 177
Restricted cash (Note 2) ...................................................... 500 --
Investment in marketable securities ........................................... -- 1,133
Amounts receivable from Printpack Enterprises, Inc. (Note 6) .................. 1,321 160
Accounts receivable, net of allowance for doubtful accounts of $137 and $100 in
1995 and 1994, respectively ................................................. 1,451 1,594
Inventories ................................................................... 1,492 1,104
Prepaid expenses .............................................................. 16 23
-- --
Total current assets ........................................................ 4,878 4,191
----- -----
PROPERTY AND EQUIPMENT, AT COST:
Machinery and equipment ....................................................... 5,419 5,124
Furniture and fixtures ........................................................ 338 327
Equipment under capital lease obligations ..................................... 1,526 1,526
Leasehold improvements ........................................................ 257 236
--- ---
7,540 7,213
Less -- Accumulated depreciation and amortization ............................. 2,261 1,784
----- -----
5,279 5,429
----- -----
OTHER ASSETS, NET OF ACCUMULATED AMORTIZATION .................................... 177 128
--- ---
Total assets ................................................................. $ 10,334 $ 9,748
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving line of credit (Note 3) ............................................. $ 1,499 $ 1,369
Current maturities of long-term obligations (Note 3) .......................... 1,069 321
Amount due Printpack Enterprises, Inc. (Note 6) ............................... 1,225 --
Accounts payable .............................................................. 2,366 1,431
Accrued expenses .............................................................. 100 120
--- ---
Total current liabilities ................................................... 6,259 3,241
----- -----
LONG-TERM OBLIGATIONS, NET OF CURRENT MATURITIES (NOTE 4) ........................ 17 2,429
-- -----
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -- Authorized -- 1,000,000 shares Issued and
outstanding -- none ......................................................... -- --
Common stock, $.01 par value -- Authorized -- 5,500,000 shares, Issued --
3,152,828 shares, outstanding -- 3,142,828 and 3,131,589 outstanding in 1995
and 1994, respectively ...................................................... 32 31
Common stock purchase warrants ................................................ 78 78
Additional paid-in capital ....................................................... 6,068 6,063
Retained deficit ................................................................. (2,088) (2,094)
------ ------
4,090 4,078
Less Treasury stock, 10,000 shares at cost ....................................... 32 --
--
Total stockholders' equity ................................................... 4,058 4,078
----- -----
Total liabilities and stockholders' equity ................................... $ 10,334 $ 9,748
======== ========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-2
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
SALES:
Product sales .................................................... $ 8,208 $ 6,142 $ 5,649
Royalties, license and other ..................................... 25 172 250
Billable costs under Printpack agreements (Note 6) ............... 1,308 -- --
----- ----- -----
Net sales ...................................................... 9,541 6,314 5,899
COST OF PRODUCTS SOLD ............................................... 7,857 5,861 4,661
----- ----- -----
Gross profit ................................................. 1,684 453 1,238
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ........................ 1,196 1,369 674
ACCUCRISP DEVELOPMENT EXPENSES ...................................... 46 519 --
RESEARCH AND DEVELOPMENT EXPENSES ................................... 185 450 150
--- --- ---
Operating income (loss) ........................................ 257 (1,885) 414
INTEREST INCOME ..................................................... 14 100 28
INTEREST EXPENSE .................................................... (265) (257) (139)
---- ---- ----
Income (loss) before benefit from (provision for) income taxes
and extraordinary item ...................................... 6 (2,042) 303
BENEFIT FROM (PROVISION FOR) INCOME TAXES ........................... -- 233 (104)
----- --- ----
Income (loss) before extraordinary item ......................... 6 (1,809) 199
EXTRAORDINARY ITEM:
Gain on restructuring of debt, net of related income taxes of
$104 in 1993 ................................................... -- -- 197
----- ----- ---
Net income (loss) .............................................. $ 6 $ (1,809) $ 396
=========== =========== ===========
INCOME (LOSS) PER COMMON SHARE (Note 2(i)):
Income (loss) before extraordinary item .......................... $ 0.00 $ (0.59) $ 0.08
Extraordinary item ............................................... -- -- 0.08
----- ----- ----
Net income (loss) .............................................. $ 0.00 $ (0.59) $ 0.16
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .......................... 3,205,566 3,071,530 2,468,060
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
------------
COMMON
STOCK ADDITIONAL TOTAL
NUMBER OF $.01 PURCHASE PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES PAR VALUE WARRANTS CAPITAL DEFICIT STOCK EQUITY
------ --------- -------- ------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 ........ 2,000,000 $ 20 $ -- $ 2,157 $ (681) $ -- $ 1,496
Issuance of common stock and
common stock purchase warrants
in connection with an initial
public offering, net of issuance
costs $591 ..................... 1,050,000 11 78 3,905 -- -- 3,994
Exercise of stock options ....... 1,874 -- -- 1 -- -- 1
Net income ...................... -- -- -- -- 396 -- 396
--------- --------- --------- --------- --------- -------- ---------
BALANCE, DECEMBER 31, 1993 ........ 3,051,874 31 78 6,063 (285) -- 5,887
Exercise of stock options ....... 79,715 -- -- -- -- -- --
Net loss ........................ -- -- -- -- (1,809) -- (1,809)
--------- --------- --------- --------- --------- -------- ---------
BALANCE, DECEMBER 31, 1994 ........ 3,131,589 31 78 6,063 (2,094) -- 4,078
Exercise of stock options ....... 21,239 1 -- 5 -- -- 6
Purchase of treasury stock ...... (10,000) -- -- -- -- (32) (32)
Net income ...................... -- -- -- -- 6 -- 6
--------- --------- --------- --------- --------- -------- ---------
BALANCE, DECEMBER 31, 1995 ........ 3,142,828 $ 32 $ 78 $ 6,068 $ (2,088) $ (32) $ 4,058
========= ====== ======= ========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-4
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..................................................................... $ 6 $ (1,809) $ 396
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities --
Billable costs under Printpack Agreements ......................................... (1,308) -- --
Depreciation and amortization ..................................................... 501 405 269
Extraordinary gain on forgiveness of debt ......................................... -- -- (197)
Deferred income taxes ............................................................. -- (233) 208
Changes in assets and liabilities --
Accounts receivable ............................................................ 43 (347) (529)
Inventories .................................................................... (388) (466) (67)
Prepaid expenses ............................................................... 7 (23) --
Accounts payable ............................................................... 935 255 343
Accrued expenses ............................................................... (20) 65 (36)
--- -- ---
Net cash provided by (used in) operating activities ......................... (224) (2,153) 387
---- ------ ---
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................................... (327) (700) (1,056)
(Increase) decrease in investment in marketable securities ............................ 1,133 1,770 (2,903)
(Increase) decreade in other assets ................................................... (73) 63 (33)
--- -- ---
Net cash provided by (used in) investing activities ......................... 733 1,133 (3,992)
--- ----- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds (payments) under demand note payable to a bank ........................... 130 1,119 (212)
Borrowing (repayments) of long-term obligations ....................................... (192) (192) 67
Proceeds from issuance of common stock and common stock purchase warrants
in connection with an initial public offering ....................................... -- -- 3,994
Proceeds from exercise of common stock options ........................................ 6 -- 1
Purchase of treasury stock ............................................................ (32) -- --
---
Net cash provided by (used in) financing activities ......................... (88) 927 3,850
--- --- -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..................................... 421 (93) 245
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ............................................. 177 270 25
--- --- --
CASH AND CASH EQUIVALENTS, END OF YEAR ................................................... $ 598 $ 177 $ 270
======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for --
Interest .............................................................................. $ 255 $ 172 $ 139
======= ======= =======
Income taxes .......................................................................... $ -- $ 10 $ 15
======= ======= =======
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
F-5
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) OPERATIONS
Advanced Deposition Technologies, Inc. (the Company) is engaged in the
business of manufacturing metalized films primarily for the electronics and food
packaging industries.
The Company is subject to risks common among companies in similar stages of
development. Principal among these risks are dependence on key individuals;
dependence on major customers; competition from substitute products and larger
companies; and the successful development, marketing and manufacturing of
products.
On September 17, 1993, the Company completed the sale of 1,000,000 shares of
its common stock and 1,000,000 redeemable common stock purchase warrants in an
initial public offering resulting in net proceeds to the Company of
approximately $3,774,000. On September 29, 1993 and October 6, 1993, the Company
sold an additional 150,000 redeemable common stock purchase warrants and 50,000
shares of common stock, respectively, pursuant to the partial exercise of the
underwriters' overallotment option, resulting in net proceeds to the Company of
approximately $220,000.
As of December 31, 1995, the Company has a working capital defect of
$1,381,000, which includes a short-term bank obligation on a revolving line of
credit ("line of credit") and a term note of $1,499,000 and $1,062,500 (see Note
3) respectively, against which the Company has pledged $500,000 in cash (see
Note 2). The Company also has $1,000,000 due Printpack Enterprises, Inc.
("Printpack") (see Note 6). The Company's banking arrangement expired on
December 31, 1995 although the bank has agreed to extend the due date of the
amounts due to June 30, 1996. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The accompanying consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
The Company has been seeking to obtain new debt and equity financing in an
amount sufficient to repay all the amounts due to the bank and to Printpack and
provide working capital to fund operations through 1996 (see Note 6). Although
the Company has received preliminary proposals for debt and equity financings,
no assurance can be given that the Company will consummate any such financing on
commercially reasonable terms, or at all.
(2) SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies, including those described below.
(a) Principles of Consolidation
The accompanying consolidated financial statements include the Company and
its wholly owned subsidiary. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) Revenue Recognition
The Company recognizes revenues on its product sales upon shipment and on
royalties and license fees as earned. Revenues were recognized for cost recovery
billings under the Printpack Agreements in 1995 when Printpack agreed in
principle to compensate the Company for these billings (Note 6).
F-6
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(2) SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(c) Cash Equivalents and Investment in Marketable Securities
Effective in 1994, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity
Securities, which was issued in May 1993. This standard, which addresses the
accounting and reporting requirements for investments, did not materially impact
the Company's consolidated financial statements for the year ended December 31,
1994.
Cash equivalents are short-term, highly liquid investments with original
maturities of less than three months. Marketable securities, consisting
primarily of US. government and corporate bond obligations, are carried at
amortized cost. The Company presently does not hold any of these types of
investments.
As of December 31, 1995 and 1994, investments in marketable securities
consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
U.S. Treasury obligations.............. $ -- $ 351
Corporate bonds........................ -- 760
Mutual funds........................... -- 22
----- ------
$ -- $1,133
===== ======
</TABLE>
(d) Restricted Cash
At December 31, 1995, the Company has pledged $500,000 of cash as collateral
against its revolving line of credit (see Note 3).
(e) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
and consist of the following at December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Raw materials........................... $1,234 $ 877
Work in process and finished goods...... 258 227
--- ---
Total................................... $1,492 $ 1,104
====== =======
</TABLE>
Work in process and finished goods include materials, labor and
manufacturing overhead.
(f) Depreciation and Amortization
The Company provides for depreciation and amortization by charges to operations
over the estimated useful lives of property and equipment using the
straight-line and units-of-production methods as follows:
<TABLE>
<CAPTION>
ESTIMATED
CLASSIFICATION USEFUL LIFE
-------------- -----------
<S> <C>
Machinery and equipment...................... 15 years
Furniture and fixtures....................... 5 years
Equipment under capital lease obligations.... Term of lease
Leasehold improvements....................... Term of lease
</TABLE>
F-7
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(2) SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
(g) Research and Development Expenses
The Company charges research and development expenses to operations as
incurred.
(h) Patents and Trademarks
The Company capitalizes the costs of obtaining patents and trademarks and is
amortizing such costs over a five-year period. Patent and trademark costs, net
of accumulated amortization, of $132 and $118 are included in other assets in
the accompanying consolidated balance sheets at December 31, 1995 and 1994,
respectively.
(i) Income Taxes
The Company provides for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under the liability method specified by SFAS No.
109, a deferred tax asset or liability is determined based on the difference
between the financial statement and tax bases of assets and liabilities, as
measured by the enacted rates assumed to be in effect when these differences
reverse.
(j) Income (Loss) Per Common Share
Income (loss) per common share has been determined by dividing net income
(loss) by the weighted average common shares outstanding during the year. Common
stock equivalents have been calculated in accordance with the treasury stock
method and are included for all periods where their effect is dilutive.
(k) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(l) Postretirement Benefits
The Company does not have any obligations for postretirement benefits under
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, as it does not currently offer such benefits.
(3) SHORT-TERM OBLIGATIONS
The Company's revolving line of credit facility (the "line of credit")
expired on December 31, 1995. Under the terms of the line of credit agreement,
the Company's term note with the same bank also became due. The bank has agreed
to allow the Company until June 30, 1996 to repay its indebtedness to the bank.
The balances outstanding on December 31, 1995 on the line of credit and term
note were $1,499,000 and $1,062,500, respectively, and are classified as current
liabilities on the accompanying consolidated balance sheet. The Company has
$500,000 of cash pledged as collateral against the line of credit. The Company
has been seeking new debt and equity financing to provide sufficient funds to
repay all amounts due to the bank and to Printpack (see Note 6). Although the
Company has received preliminary proposals for debt and equity financings, no
assurance can be given that the Company will consummate any such financing on
commercially reasonable terms, or at all.
F-8
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(4) LONG-TERM OBLIGATIONS
The Company has leased certain equipment under a capital lease. As of
December 31, 1995, the Company's outstanding obligation under the lease is
$23,000, of which $6,000 is classified as short term.
(5) COMMITMENTS
The Company leases its facilities, vehicles and other equipment under
operating leases that expire through March 2004. The Company has an option to
purchase the land and facility at fair market value should the lessor offer the
facility for sale. Future minimum lease payments as of December 31, 1995 were as
follows (in thousands):
<TABLE>
<CAPTION>
CALENDAR YEAR AMOUNT
------------- ------
<S> <C>
1996........................... $ 231
1997........................... 222
1998........................... 217
1999........................... 214
2000........................... 207
Thereafter..................... 671
---
Total........................ $ 1,762
=======
</TABLE>
The rent expense included in the accompanying consolidated statements of
operations is approximately $220, $168 and $121 for 1995, 1994 and 1993,
respectively.
(6) AGREEMENTS WITH PRINTPACK ENTERPRISES, INC.
In September 1992, the Company entered into three agreements (collectively "the
Agreements") with Printpack, a flexible packaging supplier to food companies.
Under the Securities Purchase Agreement, the Company sold 297,610 shares of its
common stock to Printpack for $250,000. Under the Purchase and Tolling
Agreement, the Company granted Printpack the exclusive right to purchase and
sell certain flexible microwave packaging products within North America for five
years. The Purchase and Tolling Agreement also set forth specified minimum
purchase requirements and pricing terms for product sales. Under the Equipment
Lease Agreement, Printpack leased a vacuum metallizer to the Company. The
Company accounted for this lease as a capital lease. Printpack did not meet the
specified minimum purchase requirements called for under the Agreements, and as
a result, in 1995, the Company billed Printpack $1,308,000 for overhead and
other costs incurred to support of the specified minimum purchases from
Printpack called for under the Agreements. In 1995, the Company and Printpack
agreed in principle to terminate the Agreements. On March 25, 1996, the Company
and Printpack entered into a written agreement setting forth the terms of the
termination of the Agreements. The new agreement calls for Printpack to
relinquish its exclusive purchase rights to certain of the Company's patented
products for microwave applications; to transfer to the Company title to the new
metallizer it had been leasing to the Company; and to return to the Company
297,610 shares of the Company's common stock it had purchased as part of the
Agreements. The Company will pay to Printpack $1,000,000; grant 200,000 options
to Printpack to purchase the Company's stock at $4.00 per share; and agree not
to pursue any claims the Company may have had pursuant to the terms of the
Agreement, including the $1,308,000 of cost recovery billings for overhead and
other expenses incurred by the Company to support of the specified minimum
purchases requirements from Printpack called for under the Agreements.
F-9
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(7) STOCK OPTIONS AND WARRANTS
The Company has a stock option plan (the Plan) under which employees,
including Directors who are employees, may be granted options to purchase shares
of the Company's common stock at not less than fair market value on the date of
the grant, as determined by the Board of Directors. The Plan also allows for the
issuance of nonqualified stock options to employees and nonemployees at prices
that are less than fair market value. Options granted under the Plan are
exercisable for up to a 10-year period from the date of grant. The Company has
reserved 300,000 shares of common stock for issuance under the Plan.
Stock option activity of the Company, including activity under the Plan, for
the years ended December 31, 1993, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE PRICE
SHARES PER SHARE
------ ---------
<S> <C> <C>
Outstanding at December 31, 1992................ 148,091 $0.27-0.80
Granted........................................ 127,000 3.00-5.00
Exercised...................................... (1,874) 0.27
------ ---------
Outstanding at December 31, 1993................ 273,217 0.27-5.00
Granted........................................ 141,500 3.50-5.44
Exercised...................................... (90,000) 0.80
Canceled....................................... (37,000) 3.00-5.00
------- ---------
Outstanding at December 31, 1994................ 287,717 0.27-5.44
Granted........................................ 68,000 2.00-2.75
Exercised...................................... (21,239) 0.27-0.53
Canceled....................................... (54,300) 2.00-4.07
======= =========
Outstanding at December 31, 1995................ 280,178 $0.27-5.44
======= ==========
</TABLE>
On October 31, 1994, the president of the Company exercised options to
purchase 90,000 shares of common stock by tendering 10,285 previously purchased
shares of common stock to the Company. The 10,285 shares were retired by the
Company.
The Company currently has 1,150,000 redeemable common stock purchase
warrants outstanding. On March 29, 1996, the Company filed a Registration
Statement on Form S-3 with the Securities and Exchange Commission to register
the underlying shares and provide a 30-day period for warrant holders to receive
one share of the Company's common stock upon the exercise of one warrant. After
this 30-day period, the exercise of two warrants will be required to obtain one
share of common stock. In addition, the Company's Board of Directors has
authorized the Company to issue an additional warrant to holders that exercise
their Redeemable Warrants during the 30-day period.
(8) PROVISION FOR (BENEFIT FROM) INCOME TAXES
The provision for income taxes for the years ended December 31, 1995, 1994
and 1993 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Deferred tax (benefit) expense --
Federal..................................... $ -- $(139) $114
State....................................... -- (94) 94
------ --- --
$ -- $(233) $208
====== ===== ====
</TABLE>
F-10
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(8) PROVISION FOR (BENEFIT FROM) INCOME TAXES -- (CONTINUED)
Income tax of $104 was allocated to extraordinary income item in 1993.
The approximate tax effect of each type of temporary difference and
carryforward which gives rise to the Company's deferred tax (liability) asset as
of December 31, 1995 and 1994 is as follows (in thousands):
<TABLE>
<CAPTION>
DEFERRED (LIABILITY) ASSET
--------------------------
1995 1994
---- ----
<S> <C> <C>
Depreciation.................................... $ (1,053) $ (919)
Net operating loss and tax credit carryforwards. 1,437 409
Inventory and other reserves.................... 159 142
Other........................................... 46 34
Valuation reserve............................... (589) (666)
---- ----
$ -- $ --
==== ====
</TABLE>
At December 31, 1995, the Company had the federal and state income tax
carryforwards for income tax purposes of $3,314,000 and $1,895,000,
respectively. The Company also has tax credit carryforwards of $118,000,
expiring at various dates through 2009. The tax reform Act of 1986 contains
provisions that limit the net ownership loss carryforwards available to be used
in any given year in the event of certain changes in ownership.
(9) TECHNOLOGY LICENSE AGREEMENT WITH A RELATED PARTY
The Company has licensed the design specifications and operational technology of
certain machinery to a stockholder for the purpose of manufacturing and selling
the machinery to authorized purchasers, as defined. The agreement has automatic
one-year renewal periods until terminated by either party. There were no
recognized revenues under this agreement in 1995, 1994 or 1993.
(10) SIGNIFICANT CUSTOMERS AND DOMESTIC AND EXPORT SALES
(a) Significant Customers
Sales to significant customers for the years ended December 31, 1995, 1994
and 1993 were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF SALES
-------------------
CUSTOMER 1995 1994 1993
-------- ---- ---- ----
<S> <C> <C> <C>
Printpack......................... 34% 20% --%
B................................. 11 -- --
C................................. 7 16 28
D................................. 4 14 32
</TABLE>
(b) Export Sales
Export sales as a percentage of revenues were made to the following
geographic regions in 1995, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Europe............................ 11% -- 2%
Central America................... 4 6% --
Far East.......................... 4 -- --
South America..................... 3 8 4
</TABLE>
F-11
ADVANCED DEPOSITION TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
(11) SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES
The accompanying consolidated financial statements include the following
noncash financing activities (in thousands):
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Purchase of equipment under capital
lease obligation............................. $ -- $ -- $ 1,442
====== ====== =======
Product credits and accounts receivable
applied against capital lease obligations.... $247 $ -- $ --
====== ====== =======
</TABLE>
(12) VALUATION ACCOUNTS
The following table sets forth the activity in the Company's valuation
accounts for the years 1995, 1994 and 1993 (in thousands):
<TABLE>
<CAPTION>
BALANCE AT CHARGES TO
BEGINNING COSTS AND BALANCE AT
OF YEAR EXPENSES DEDUCTIONS END OF YEAR
------- -------- ---------- -----------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1993:
Allowances for doubtful accounts.............. $ 3 $ -- $ -- $ 3
Reserve for inventory excess and obsolescence. 86 131 (90) 127
FOR THE YEAR ENDED DECEMBER 31, 1994:
Allowances for doubtful accounts.............. 3 97 -- 100
Reserve for inventory excess and obsolescence. 127 176 -- 303
FOR THE YEAR ENDED DECEMBER 31, 1995:
Allowances for doubtful accounts.............. 100 83 (46) 137
Reserve for inventory excess and obsolescence. 303 -- (36) 267
</TABLE>
(13) SUMMARY OF QUARTERLY DATA (UNAUDITED)
A summary of quarterly data follows (in thousands, except per share data):
<TABLE>
<CAPTION>
1995 QUARTER ENDED
------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Sales.......................................... $1,915 $2,044 $2,831 $2,751
Cost of sales.................................. 1,759 1,821 2,298 1,979
----- ----- ----- -----
Gross profit................................... 156 223 533 772
Selling, general and administrative expense.... 240 291 372 294
Accucrisp development expense.................. 16 16 10 4
Research and development expense............... 27 55 54 49
-- -- -- --
Operating income (loss)........................ (127) (139) 97 426
---- ---- -- ---
Interest and other expense, net................ 62 85 42 62
-- -- -- --
Net income (loss).............................. (189) (224) 55 364
==== ==== == ===
Net income (loss) per share.................... $ (0.06) $ (0.07) $ 0.02 $ 0.12
======= ======= ======= ======
</TABLE>
F-12
SCHEDULE 7
ADVANCED DEPOSITION TECHNOLOGIES, INC.
(in thousands except share and per share data)
Fiscal Year Ended Fiscal Year Ended
December 31, 1995 December 31, 1994
Ratio of earnings
to fixed charges: 1.01 -2.45
Book value $4,058 $4,078
Shares outstanding 3,142,828 3,131,589
Book value per share $1.29 $1.30
Pro forma for warrant exercise:
Book value $9,400 $9,420
Share outstanding 4,292,828 4,281,589
Book value per share $2.19 $2.20
Pro Forma Balance Sheet at December 31, 1995
Upon Exercise of Warrants
At December 31, 1995
Actual Adjusted(A)
Balance Sheet Data:
Cash $ 598 $ 5,961
Current liabilities 6,259 6,259
Working capital (1,381) 3,982
Total assets 10,334 15,676
Total liabilities 6,276 6,276
Stockholder's equity 4,058 9,400
(A) Adjusted to reflect the issuance of 1,150,000 shares of Common Stock upon
the assumed exercise of all of the outstanding Warrants at $5.00 per
share, after deducting solicitation fees of up to 5% of the aggregate net
proceeds and estimated expenses of the self-tender offer of approximately
$100,000.
Subject to Completion: Dated May 8, 1996
PROSPECTUS
ADVANCED DEPOSITION TECHNOLOGIES, INC.
2,600,000 SHARES OF COMMON STOCK
1,250,000 CLASS B REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to (i) 1,150,000 shares of Common Stock, $.01
par value per share (the "Common Stock"), of Advanced Deposition Technologies,
Inc., a Delaware corporation (the "Company"), issuable upon the exercise of
redeemable common stock purchase warrants (the "IPO Warrants") issued in
connection with the Company's initial public offering completed on September 17,
1993 (the "IPO"), (ii) 200,000 shares of Common Stock issuable upon exercise of
warrants issued to the representative of the underwriters of the IPO (the
"Representative's Warrants"), (iii) 1,250,000 Class B Redeemable Common Stock
Purchase Warrants (the "Class B Warrants") and (iv) 1,250,000 shares of Common
Stock underlying the Class B Warrants. For a period of 30 days following the
effective date of this Prospectus (the "30-day Period"), each IPO Warrant will
entitle the holder to purchase one share of Common Stock at an exercise price of
$5.00 per share and receive one Class B Warrant for no additional consideration.
After the 30-Day Period through March 8, 1997, two IPO Warrants will entitle the
holder to purchase one share of Common Stock at an exercise price of $5.00 per
share. No Class B Warrants will be issued following the 30-Day Period, unless
such period is extended by the Board of Directors of the Company. The Common
Stock and Class B Warrants are sometimes referred to herein as the "Securities."
Each Class B Warrant will entitle the holder to purchase one share of
Common Stock at an exercise price of $5.00 per share through May __, 1998. The
Class B Warrants will only become exercisable if the Company increases its
authorized number of shares of Common Stock. The IPO Warrants and Class B
Warrants are redeemable by the Company at a redemption price of $.10 per warrant
at any time on 30 days' prior written notice, provided that the market price of
the Common Stock equals or exceeds $7.00 per share for 10 consecutive trading
days ending within 20 days prior to the notice of redemption. The IPO Warrants
and Class B Warrants are sometimes collectively referred to herein as the
"Warrants." The Representative's Warrants are exercisable to purchase Common
Stock and/or redeemable warrants at $6.43 per share and $.14 per warrant,
respectively. The redeemable warrants underlying the Representative's Warrants
are exercisable at a price of $8.65 per share. During the 30-Day Period, persons
who exercise the redeemable warrants underlying the Representative's Warrants
will receive one Class B Warrant. See "DESCRIPTION OF SECURITIES."
The Company will receive the exercise price upon the exercise, if any,
of the IPO Warrants and/or the Representative's Warrants.
The Company's Common Stock and IPO Warrants are traded on the NASDAQ
Small-Cap Market ("NASDAQ") under the symbols "ADTC" and "ADTCW," respectively.
On April 24, 1996, the closing bid and ask prices of the Company's Common Stock
on NASDAQ were $5 3/8 and $5 3/4 per share, respectively. The closing bid and
ask prices for the IPO Warrants on NASDAQ were $17/16 and $19/16, respectively.
No market exists for the Class B Warrants and no assurance can be given that a
market for such securities will develop or, if developed, be sustained.
An investment in the Common Stock and Warrants involves a high degree
of risk. See "Risk Factors" contained elsewhere in this Prospectus.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
-------------
THE DATE OF THIS PROSPECTUS IS ___________, 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copies thereof may be
obtained, at prescribed rates, at the public reference facilities maintained by
the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices located at 7 World Trade Center, 13th
Floor, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained at prescribed
rates by writing to the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Company has filed a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Act"), covering the Common Stock
included in this Prospectus. This Prospectus does not contain all the
information set forth in or annexed to exhibits to the Registration Statement
filed by the Company with the Commission and reference is made to such
Registration Statement and the exhibits thereto for the complete text thereof.
For further information with respect to the Company and the securities offered
hereby, reference is made to the Registration Statement, including the exhibits
filed as part thereof, copies of which may be obtained at prescribed rates upon
request to the Commission in Washington, D.C. Any statements contained herein
concerning the provisions of any documents are not necessarily complete, and, in
each instance, such statements are qualified in their entirety by reference to
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission.
INCORPORATION BY REFERENCE
The following documents, which have been filed by the Company with the
Commission under the Act and the Exchange Act, are incorporated by reference in
this Prospectus:
(1) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1995, as amended and filed with the Commission
on April 29, 1996, file number 1-12230;
(2) The Company's Definitive Proxy Statement for its 1995 Annual
Meeting of Stockholders filed with the Commission on May 6,
1996 file number 1-12230;
(3) The Company's Amendment No. 2 to its Form SB-2 Registration
Statement filed with the Commission on September 3, 1993, file
number 33-66324-B; and
(4) Description of the Company's Common Stock in the Company's
Form 8-A/A Registration Statement, dated August 27, 1993, as
amended, file number 1-12230.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering described herein shall be deemed to be
incorporated by reference into this Prospectus from the respective dates those
documents are filed. If any statement in this Prospectus or any document
incorporated by reference in this Prospectus is modified or superseded by a
statement in this Prospectus, the earlier statement will be deemed, for the
purposes of this Prospectus, to have been modified or superseded by the
subsequent statement, and the earlier statement is incorporated by reference
only as modified or to the extent it is not superseded.
The Company will furnish its stockholders with annual reports containing
audited financial statements and such interim reports as it deems appropriate.
IN CONNECTION WITH THIS OFFERING, CERTAIN SELLING GROUP MEMBERS MAY ENGAGE
IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON THE OVER THE
COUNTER MARKET ON NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. SEE "PLAN OF DISTRIBUTION."
3
THE COMPANY
OVERVIEW
Advanced Deposition Technologies, Inc. (the "Company") develops,
manufactures, markets and sells patented and proprietary metallized films for
energy management applications, primarily within the electronics and food
packaging industries. The Company produces metallized films by applying an
ultra-thin layer or layers of vaporized metal onto different types of polymer
films. From 1993 through 1995, the Company developed several new products based
on its proprietary method for metallizing film in high-resolutions patterns. The
Company markets and sells many of its new products to the food packaging
industry and actively pursues other applications for its patterned, metallized
films.
The primary source of the Company's revenues to date has been from sales to
the electronic capacitor market. During the years ended December 31, 1995, 1994
and 1993 the Company's sales to the food packaging market totalled approximately
$2,737,000 (28.7% revenues), $1,763,000 (27.9% of revenues) and $92,000 (1.6% of
revenues), respectively. While the Company expects that its sales to the
electronic capacitor market will continue to account for a significant part of
its business, the Company believes the market for its food packaging products
and other potential applications for its metallized films will generate much of
its anticipated future growth in revenues.
The Company began operations in 1985 as a supplier of metallized film to
the electronic capacitor industry. In 1989, the Company developed and introduced
its first metallized films for use in microwave food packaging applications. The
Company's metallized films for microwavable foods create heat fields within the
package, resulting in more uniformly cooked food than conventional microwave
food packaging. The Company generally sells metallized film packed in rolls to
converters, who incorporate the film into a final food package.
In 1994, the Company introduced a microwave browning and crisping bag (the
"ACCU-CRISP(R) Bag"), made witH a patented fuse susceptor metallized film. The
Company has sold the ACCU-CRISP(R) Bags through retail channels. The Company has
also developed, and manufactured on a limited basis for evaluation purposes,
authentication holograms, electronic article surveillance tags, electrostatic
discharge materials, microwave sterilization devices and solar protective films
using the Company's metallization process.
The Company's executive offices and manufacturing operations are located at
580 Myles Standish Industrial Park, Taunton, Massachusetts 02780. Its telephone
number is (508) 823-0707.
RISK FACTORS
The Securities offered hereby involves a high degree of risk, including
risks associated with the Company's recent history of losses; working capital
deficit; intense competition; expansion into new markets and need for additional
financing, among others. Purchasers should carefully consider the information
presented under "Risk Factors" beginning on page 6.
4
RISK FACTORS
The Securities offered hereby involves a high degree of risk. The
Securities should not be purchased by persons who cannot afford the loss of
their entire investment. Purchasers should carefully consider the information
presented below.
RECENT HISTORY OF LOSSES; WORKING CAPITAL DEFICIT; AUDITORS' REPORT CONTAINS
EXPLANATORY PARAGRAPH
The Company reported net income of approximately $6,000 for the year ended
December 31, 1995 and net losses of approximately $1,809,000 for the year ended
December 31, 1994. As of December 31, 1995, the Company had a working capital
deficiency of approximately $1,381,000 and an accumulated deficit of
approximately $2,088,000. The report of the Company's independent accountants
upon the Company's financial statements incorporated herein by reference
contains an explanatory paragraph, which states that the Company has working
capital deficiency, primarily due to the classification of certain obligations
to a bank, described below, as short term. These conditions raise substantial
doubt as to the Company's ability to continue as a going concern. The Company
must refinance its existing bank obligation, as well as an obligation to
Printpack in order to continue operating in its current form. In addition, in
order to operate profitably in the future, the Company must successfully market
its new products to new industries, sell these products to existing and new
customers, increase gross margins through higher volumes and manufacturing
efficiencies, and control its operating expenses. There can be no assurance that
the Company will operate on a profitable basis in the future.
NEED FOR ADDITIONAL FINANCING
Based on the Company's operating plan, the Company anticipates that it will
require additional financing to meet its on-going obligations and current plans
for expansion. No assurance can be given that the Company will be successful in
obtaining such financing on favorable terms, or at all. The Company currently
has line of credit and term loan facilities with a bank, pursuant to which it
has pledged substantially all of its assets. The Company's line of credit
facility expired on December 31, 1995. The bank has agreed to allow the Company
until June 30, 1996 to find alternative financing arrangements. However, no
assurance can be given that a refinancing will be completed on a timely basis on
commercially reasonable terms, or at all. If the Company's current bank requires
the Company to repay its loans before replacement financing is obtained, it
would have a material adverse effect on the Company's ability to continue its
operations as presently conducted. See "Use of Proceeds," "Plan of Distribution"
and "Description of Securities"
5
COMPETITION
The food packaging industry is highly competitive and subject to changes in
the types of food products requiring packaging and food preparation. The Company
will depend on its abilities to provide high quality, cost-effective metallized
film for the food packaging industry, to establish continuing relationships with
microwave and non-microwave food packaging companies, and to respond to the
changing needs of the marketplace in order to compete successfully in this
industry. The Company competes with numerous providers of food packaging and
food packaging supplies, many of which have a longer history of operations and
substantially greater financial, marketing, technical and other resources than
the Company, all of which may give them numerous competitive advantages. No
assurance can be given that current and future competitors will not develop new
or enhanced technologies or products perceived to be superior to those sold or
developed by the Company. No assurance can be given that the Company can
successfully compete or operate profitably in such a competitive environment.
The electronic capacitor market in which the Company competes is also
highly competitive. The Company competes with competitors in this market which
have substantially greater financial, marketing, technical and other resources
than the Company. No assurance can be given that current and future competitors
will not develop new or enhanced technologies perceived to be superior to those
sold or developed by the Company. In recent years, there has been increasing
price competition in this market, resulting in reduced margins. No assurance can
be given that the Company will continue to compete successfully in this market.
RISK OF EXPANSION INTO NEW MARKETS; RELIANCE ON DISTRIBUTION PARTNERS
The Company recently developed products for, and began to focus much of its
marketing efforts on, the microwave food packaging and other industries. The
Company has only recently begun to generate revenues from these markets, and no
assurances can be given that such revenues will continue or will economically
justify the Company's development and marketing efforts in these areas. In
addition, the Company's initial expansion into certain new markets may be
dependent on relationships with potential marketing and distribution partners,
and on new partners' success in these markets with products supplied by the
Company. The Company's expansion plans into new markets will subject the Company
to all of the risks incident to the expansion of a small business, particularly
the possible adverse impact associated with the integration of new lines of
products into the Company's existing operations and the potential diversion of
management time and attention from the Company's traditional line of business.
In addition, no assurance can be given that new products can be effectively
marketed and sold by the Company on a profitable basis. Companies that establish
new product lines directed toward new markets frequently encounter unforeseen
expenses, difficulties, complications and delays.
6
DEPENDENCE ON MAJOR CUSTOMERS
Two customers accounted for approximately 34% and 11%, respectively, of the
Company's revenues in the year ended December 31, 1995. Substantially all of the
Company's sales of food packaging material, not including sales of ACCU-CRISP(R)
Bags which are ordinarily made through retail channels, were made to Printpack
Enterprises, Inc. ("Printpack") the customer that accounted for 34% of the
Company's revenues in 1995. The Company has entered into a letter agreement with
Printpack that involves, among other things, terminating a purchase agreement
and lease agreement between the parties. The Company cannot currently predict
the effect the termination of these agreements will have on the Company. No
assurance can be given that the Company will continue to recognize revenue from
Printpack in the future. If the Company were to substantially reduce doing
business with any of its major customers, the Company's business and results of
operations could be materially and adversely effected.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company has been granted eight patents and has filed eight patent
applications with the U.S. Patent and Trademark Office. Most of the patent
applications pertain to products, such as the Company's ACCU-CRISP(R) Bags and
proposed security hologram products, made with vaporized metals deposited onto
substrates. In addition, the Company has pending patent applications in Europe
and Japan. The Company's patent and trade secret rights are of material
importance to the Company and its future prospects. No assurance can be given
that the patents will be held valid if subsequently challenged, that any
additional patents will be issued or that the scope of any patent protection
will exclude competitors. No assurance can be given that any patents will
provide competitive advantages for the Company's products. Even if a
competitor's products were to infringe patents owned by the Company, it would be
costly for the Company to enforce its rights in an infringement action and would
divert funds and management resources from the Company's operations.
Furthermore, no assurance can be given that the Company's products will not
infringe any patents of others. If valid patents are infringed upon by the
Company, the patent owners might be able to prevent the future use, sale and
manufacture of the Company's products. Also, the Company may be required to pay
damages for past infringement, or to pay license fees or royalties on future
sales of any infringing products, if a license could be obtained. To date, no
legal action has been initiated against the Company for infringement of any
patents.
The Company also relies on trade secrets that it seeks to protect, in part,
through confidentiality agreements with employees, consultants and other
parties. No assurance can be given that these agreements will not be breached,
that the Company will have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known to or independently
developed by existing or potential competitors of the Company. As the Company
intends to enforce its patents, trademarks and copyrights and protect its trade
secrets, it may be involved from time to time in litigation to determine the
enforceability, scope and validity of these rights. Any such
7
litigation could result in substantial cost to the Company and diversion of
effort by the Company's management and technical personnel.
LIMITED PRODUCT LINES; TECHNOLOGICAL CHANGE
The Company's metallized films developed for the electronic capacitor and
food packaging markets are presently the Company's primary commercial products.
Although the Company is expanding its product line sold within these markets and
is currently developing additional applications for its products, no assurance
can be given that any proposed application or product can be successfully
developed, marketed or sold on a profitable basis.
The electronic capacitor and microwave food packaging markets in which the
Company operates are undergoing rapid technological change. No assurance can be
given that the development of new technology by others will not render the
Company's products obsolete or commercially unmarketable.
NO DIVIDENDS
The Company has not paid dividends on its Common Stock since its inception
and does not intend to pay any dividends to its stockholders in the foreseeable
future. The Company currently intends to reinvest earnings, if any, in the
development and expansion of its business. The Company's bank lender prohibits
payment of dividends without the bank's prior consent.
CONTROL BY CURRENT MANAGEMENT
Assuming no exercise of the IPO Warrants and the Representative's Warrant,
the current Directors and Executive Officers of the Company will own
approximately 30% of the outstanding Common Stock. As a result, the current
management will be able to exert substantial influence over the election of all
of the members of the Board of Directors and the outcome of any issues which may
be subject to a vote of the Company's stockholders.
POTENTIAL SALES PURSUANT TO RULE 144
The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to this offering pursuant to Rule 144 under the
Act ("Rule 144") or otherwise could adversely affect the market price of the
Common Stock and could impair the Company's ability to raise additional capital
through the sale of its equity securities or debt financing. The availability of
Rule 144 to the holder of restricted securities of the Company would be
conditioned on, among other factors, the availability of certain public
information concerning the Company. Of the Company's 3,169,870 shares of Common
Stock issued and outstanding as of April 22, 1996 Prospectus, 1,522,818 shares
of Common Stock are "restricted securities" as that term is defined in Rule 144
promulgated under the Act and may, under certain circumstances, be sold
immediately
8
without registration pursuant to Rule 144. See "DESCRIPTION OF SECURITIES -
Shares Eligible for Future Sale."
ABSENCE OF ACTIVE PUBLIC MARKET; NO PUBLIC MARKET FOR CLASS B WARRANTS; POSSIBLE
VOLATILITY IN PRICE OF SECURITIES
The level of trading in the Company's Common Stock on NASDAQ has been
volatile and no assurance can be given that a sustained, active market will
develop. Accordingly, purchasers of the Common Stock may experience difficulty
selling or otherwise disposing of such Common Stock. In addition, there is no
established public market for the Class B Warrants and no assurance can be given
that a public market for such securities will ever develop or, if developed, be
sustained.
The stock market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of any
particular company. In addition, the market prices of the securities of many
publicly traded emerging companies, including the Company, have in the past
been, and can in the future be expected to be, especially volatile. Various
factors and events, including future announcements of technological innovations
or new products by the Company or its competitors, developments or disputes
concerning, among other things, patents or proprietary rights, publicity
regarding actual or potential results relating to products under development by
the Company or its competitors, and economic and other external factors, as well
as period-to-period fluctuations in the Company's financial results, may have a
significant impact on the market price of the securities and the Company's
business.
SUBSTANTIAL OPTIONS, WARRANTS AND SHARES RESERVED
Under the Company's 1993 Stock Option Plan (the "1993 Plan"), the Company
may issue options to purchase 300,000 shares of Common Stock to employees,
officers, directors and consultants, of which options to purchase 234,500 shares
of Common Stock were outstanding on March 25, 1996 at a weighted average
exercise price of $2.10 per share. The 1993 Plan allows the Board of Directors
to grant options with an exercise price that is less than, but reasonably
related to, the fair market value of the Common Stock on the date of the grant
without stockholder approval. Other options to purchase 60,922 shares of Common
Stock remained outstanding as of March 25, 1996 at a weighted average exercise
price of approximately $2.19 per share. In addition, the Company has reserved
50,000 shares of Common Stock for issuance upon exercise of stock options that
may be granted under its 1994 Formula Stock Option Plan (the "Formula Plan"), of
which options to purchase 6,000 shares of Common Stock at a weighted average
exercise price of $3.15 per share are outstanding as of March 25, 1996. Under
the Formula Plan, any non-employee who becomes a member of the Company's Board
of Directors receives an option to purchase 1,500 shares of Common Stock, which
vests annually in thirds beginning on the date of the grant subject to the
individual continuing to serve on the Board of Directors. In addition, each
non-employee who has served on the Board of Directors for at least one full year
receives an option to purchase 1,000 shares of Common Stock to vest one year
from the date of the grant. The exercise price of all options
9
granted under the Formula Plan is equal to the fair market value of the Common
Stock on the date of the grant. The 1993 Plan and Formula Plan are sometimes
referred to herein as the "Plans."
The IPO Warrants and Class B Warrants will be exercisable to purchase
shares of Common Stock until March 8, 1997 and May __, 1998, respectively, and
the Representative's Warrants grant the holders thereof the right to purchase up
to 100,000 shares of Common Stock and up to 100,000 redeemable warrants through
September 9, 1998. See "DESCRIPTION OF SECURITIES."
The existence of the IPO Warrants, Class B Warrants and the
Representative's Warrant and the Options may prove to be a hindrance to future
financing by the Company. In addition, the exercise of any such options or
warrants may further dilute the net tangible book value of the Common Stock.
Further, the holders of such options and warrants may exercise them at a time
when the Company would otherwise be able to obtain additional equity capital on
terms more favorable to the Company.
UNCERTAIN TERMS OF CLASS B WARRANTS
The Class B Warrants are exercisable only if holders of two-thirds of the
Company's outstanding shares of Common Stock approve an amendment (the
"Amendment") to the Company's Certificate of Incorporation to increase the
Company's number of authorized shares of Common Stock. The Company's
stockholders will vote on the Amendment at the Company's 1995 Annual Meeting of
Stockholders (the "Annual Meeting"), currently scheduled to be held on May 31,
1996. If the Amendment is not approved by holders of two-thirds of the
outstanding shares of the Company's Common Stock at the Annual Meeting or
otherwise, the Class B Warrants will not become exercisable and would therefore
not have any value.
POSSIBLE ABEYANCE OF MARKET MAKING ACTIVITIES
In connection with any solicitation by the Representative, unless granted
an exemption by the Securities and Exchange Commission (the "Commission") from
its Rule 10b-6, promulgated under the Exchange Act, the Representative and any
other soliciting broker-dealer will be prohibited from engaging in any market
making activities with respect to the Company's securities for the period
commencing either two or nine business days (depending on the market price of
the Common Stock) prior to any solicitation of the exercise of the Warrants
until the later of (i) the termination of such solicitation activity or (ii) the
termination (by waiver or otherwise) of any right which the Representative or
any other soliciting broker-dealer may have to receive a fee for the exercise of
Warrants following such solicitation. As a result, the Representative or any
other soliciting broker-dealer may be unable to provide a market for the
Company's securities, should they desire to do so, during certain periods while
the Warrants are exercisable. Such solicitations and reduction in the number of
market makers could adversely affect the market price of the securities.
10
NON-REGISTRATION IN CERTAIN JURISDICTIONS OF SHARES UNDERLYING THE WARRANTS;
REQUIREMENT TO MAINTAIN CURRENT PROSPECTUS; POSSIBLE REDEMPTION OF WARRANTS
Purchasers of the Warrants will have the right to exercise them to purchase
shares of Common Stock only if a current prospectus relating to such shares is
then in effect and only if the shares are qualified for sale under the
securities laws of the state or states in which the purchaser resides. The
Company has undertaken and intends to maintain a current prospectus which will
permit the purchase and sale of the Common Stock underlying the Warrants, but
there can be no assurance that the Company will be able to do so. The Company
will not call the Warrants for redemption at any time a current prospectus is
not effective. The Company intends to seek to qualify the shares of Common Stock
underlying the Warrants for sale in those states in which the Warrants were
originally offered. The Warrants may be deprived of any value if a current
prospectus covering the shares issuable upon the exercise thereof is not filed
and kept effective or if such underlying shares are not, or cannot be,
registered in the applicable states. The IPO Warrants may be subject to
redemption at $.10 per IPO Warrant on 30 days' prior written notice, provided
that the market price of the Common Stock equals or exceeds $7.00 per share (the
"Call Price") for 10 consecutive trading days ending within 20 days prior to the
notice of redemption. The Class B Warrants may be subject to redemption at $.10
per Warrant on 30 days prior written notice, provided that the average market
price equals or exceeds $7.00 per share during the 10 consecutive trading days
ending within 20 days prior to the notice of redemption. The Company's Board of
Directors has the discretion to reduce the exercise price and the Call Price of
the Warrants. In the event the Company exercises the right to redeem the
Warrants, such Warrants will be exercisable until the close of business on the
date fixed for redemption in such notice. If any Warrant called for redemption
is not exercised by such time it will cease to be exercisable and the holder
will be entitled only to the redemption price. See "DESCRIPTION OF SECURITIES."
POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS
The Company's Certificate of Incorporation authorizes the Board of
Directors to issue up to 1,000,000 shares of preferred stock, $.01 par value per
share. The preferred stock may be issued in one or more series, the terms of
which may be determined at the time of issuance by the Board of Directors,
without further action by stockholders, and may include voting rights (including
the right to vote as a series on particular matters), preferences as to
dividends and liquidation, conversion and redemption rights and sinking fund
provisions. No preferred stock is currently outstanding, and the Company has no
present plans for the issuance thereof. However, the issuance of any such
preferred stock could adversely affect the rights of holders of Common Stock
and, therefore, could reduce the value of the Common Stock. See "DESCRIPTION OF
SECURITIES."
The Bylaws of the Company provide for a Board of Directors divided into
three classes serving for staggered three-year terms.
The ability of the Board of Directors to issue preferred stock and the
classification of the Board into three classes with staggered three-year terms
could discourage, delay or prevent a takeover of the Company.
11
In addition, the Company, as 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 restricts the ability of
a public Delaware corporation to engage 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. As a result of
the application of Section 203 and certain provisions in the Company's
Certificate of Incorporation and Bylaws, as amended, potential acquirors of the
Company may find it more difficult or be discouraged from attempting to acquire
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.
12
USE OF PROCEEDS
The Company will receive the exercise price of the IPO Warrants and
Representative's Warrants upon the exercise, if any, of such securities. For a
period of 30 days following the effectiveness of this Prospectus (the "30-Day
Period"), each IPO Warrant and each redeemable warrant ("Redeemable Warrant")
underlying the Representative's Warrant will be exercisable at $5.00 and $8.65,
respectively, to purchase one share of Common Stock and one Class B Warrant.
Following the 30-day Period, two IPO Warrants and two Redeemable Warrants will
entitle the holder to purchase one share of Common Stock at the respective
exercise prices listed in the preceding sentence. During the 30-Day Period, the
aggregate exercise price of the IPO Warrants and the Representative's Warrants
(including the aggregate exercise price of the Redeemable Warrants) will be
$5,750,000 and $1,522,000, respectively. If all of the IPO Warrants and
Redeemable Warrants are exercised during the 30-Day Period, the Company would
issue 1,250,000 Class B Warrants, which would have an aggregate exercise price
of $6,250,000. Following the 30-Day Period, the aggregate exercise price of the
IPO Warrants and Representative's Warrants (including the aggregate exercise
price of the Redeemable Warrants) will be $2,875,000 and $1,089,500,
respectively.
Proceeds, if any, from any such exercises would be used for working capital
and general corporate purposes. The Company may a portion of such proceeds to
repay its bank indebtedness, which currently consists of a revolving line of
credit facility that bears interest at 8.5% per annum and has a outstanding
balance of approximately $1,500,000, and a term note that bears interest at 8.5%
per annum and has an outstanding balance of approximately $1,000,000. The
revolving line of credit and term note became due on December 31, 1995. The bank
has agreed to allow the Company until June 30, 1996 to refinance this
indebtedness. The Company used the proceeds from its bank indebtedness for
working capital purposes and facilities expansion. The Company may also use up
to $1,000,000 of the proceeds resulting from exercises of the Warrants, if any,
to pay Printpack under the terms of a settlement arrangement under which
Printpack would (i) relinquish its exclusive purchase rights for certain of the
Company's proprietary products, (ii) transfer to the Company title to a
high-speed vacuum metallizer, and (iii) return to the Company 297,610 shares of
the Company's Common Stock. Under the terms of the settlement arrangement, in
addition to the $1,000,000 payment to Printpack, the Company will grant
Printpack options to purchase 200,000 shares of Common Stock at $4.00 per share
and will release Printpack from any claims the Company may have under the terms
of a purchase agreement between the parties. The Company may pay, from time to
time, certain brokerage firms up to a 5% solicitation fee in connection with
solicitations of exercises of the IPO Warrants and Class B Warrants, which fee
would reduce the amount of proceeds received by the Company upon exercise of
such securities, if any. See "RISK FACTORS - Recent History of Losses; Working
Capital Deficit; Auditors' Report Contains Explanatory Paragraph; - Need for
Additional Financing; - Dependence on Major Customers" and "PLAN OF
DISTRIBUTION."
13
The Company has agreed to assume all of the costs and fees relating to the
registration of the shares of Common Stock covered by this Prospectus, except
for any discounts, concessions or commissions payable to underwriters or dealers
or agent brokerage fees incident to the offering of the shares of Common Stock
covered by this Prospectus and any fees or disbursements of counsel to the
selling securityholders. In addition to any such solicitation fee, the Company
estimates the expenses associated with this Offering will be approximately
$100,000.
14
PLAN OF DISTRIBUTION
The shares of Common Stock covered hereby will be issued by the Company
upon exercise of the IPO Warrants, the Class B Warrants and Representative's
Warrants. If all of the IPO Warrants and Redeemable Warrants areexercised during
the 30-Day Period, the Company will issue 1,250,000 Class B Warrants. The
holders of the Securities will act independently of the Company in making
decisions with respect to the timing of such exercises, if any.
The IPO Warrants were originally issued by the Company in connection with
its initial public offering completed on September 17, 1993. In September 1995,
the Board of Directors of the Company approved a modification of the terms of
the IPO Warrants such that (i) the exercise price was reduced from $7.00 per
share to $5.00 per share, and (ii) the expiration date was extended from March
8, 1996 to March 8, 1997. In addition, effective March 8, 1996, the Call Price
of the IPO Warrants was reduced from $9.00 per share to $7.00 per share.
The Representative's Warrants were originally issued to the representative
(the "Representative") of several underwriters of the IPO and are currently held
by certain officers or affiliates of the Representative. The Representative's
Warrants enable the holders to purchase an aggregate of 100,000 shares of Common
Stock at $6.43 per share and 100,000 Redeemable Warrants at $.14 per warrant.
The exercise price of the Redeemable Warrants is $8.65 per share.
The shares of Common Stock underlying the Warrants and Representative's
Warrants may be resold from time to time by the holders thereof, or by pledgees,
donees, transferees or other successors in interest. The shares of Common Stock
covered by this Prospectus may be resold in one or more transactions on NASDAQ,
or otherwise at prices and at terms then prevailing or at prices related to the
then current market price, or in negotiated transactions. The shares of Common
Stock may be resold by one or more of the following: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the shares of Common Stock
or Warrants 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; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. The Company is paying all of the other expenses
of registering the securities offered hereby under the Act estimated to be
$100,000 for filing, legal, accounting and miscellaneous fees and expenses.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid in connection with resales of securities covered by this Prospectus. The
Company will not receive any proceeds from any sales of the Common Stock, but
will receive the proceeds generated upon exercise of any of the IPO Warrants
and/or the Representative's Warrants.
In offering the securities for resale, holders of the Warrants and the
Representative's Warrants and any broker-dealers who execute sales of Common
Stock issuable upon exercise of such securities may be deemed to be
"underwriters" within the meaning of the Act in connection with such sales, and
any profits realized, including the compensation of such broker-dealer, may be
deemed to be underwriting discounts and commissions.
15
This Offering will terminate on the date on which all shares offered hereby
have been issued by the Company.
16
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue up to 5,500,000 shares of Common Stock,
$.01 par value, of which 3,169,870 were issued and outstanding on April 23,
1996. The following summary description of the Common Stock is qualified in its
entirety by reference to the Company's Certificate of Incorporation, as amended.
As of April 22, 1996, the Company had 68 holders of record of its Common Stock.
The holders of Common Stock are entitled to one vote for each share held of
record on each matter submitted to a vote of Securityholders. There is no
cumulative voting for election of directors. Subject to the prior rights of any
series of Preferred Stock which may from time to time be outstanding, holders of
Common Stock are entitled to receive ratably such dividends as may be declared
by the Board of Directors out of funds legally available therefor, and, upon the
liquidation, dissolution or winding up of the Company, are entitled to share
ratably in all assets remaining after payment of liabilities and payment of
accrued dividends and liquidation preference on the Preferred Stock, if any.
Holders of Common Stock have no preemptive rights and have no rights to convert
their Common Stock into any other securities. The outstanding Common Stock is,
and the Common Stock to be outstanding upon completion of the Offering will be,
validly issued, fully paid, and nonassessable.
Officers and directors of the Company will own approximately 30% of the
outstanding Common Stock, exclusive of shares of Common Stock issuable upon
exercise of outstanding options or warrants. As a result they will be in a
position through their voting control to likely elect all of the members of the
Board of Directors and will continue to effectively control the Company.
IPO WARRANTS
The following is a brief summary of certain provisions of the IPO Warrants,
but such summary does not purport to be complete and is qualified in all
respects by reference to the actual text of the Warrant Agreement, as amended,
between the Company and American Securities Transfer, Incorporated (the
"Transfer and Warrant Agent").
EXERCISE PRICE AND TERMS
During the 30-Day Period, each IPO Warrant will entitle the registered
holder thereof to purchase one share of Common Stock at an exercise price of
$5.00, subject to adjustment in accordance with the anti-dilution and other
provisions referred to below, and receive one Class B Warrant for no additional
consideration. Following the 30-Day Period, two IPO Warrants will enable the
registered holder thereof to purchase one share of Common Stock at a price of
$5.00 per share, subject to adjustment in accordance with the anti-dilution and
other provisions referred to below.
The holder of any IPO Warrant may exercise such IPO Warrant by surrendering
the certificate representing the IPO Warrant to the Company's Transfer and
Warrant Agent, with the subscription on the reverse side of such certificate
properly completed and executed, together with payment of the
17
exercise price. The IPO Warrants may beexercised at any time in whole or in part
at the applicable exercise price until expiration of the IPO Warrants on March
8, 1997. No fractional shares will be issued upon the exercise of the IPO
Warrants.
REDEMPTION
The IPO Warrants are subject to redemption at $.10 per IPO Warrant on 30
days' prior written notice, provided that the market price of the Common Stock
equals or exceeds $7.00 per share (the "Call Price") for 10 consecutive trading
days ending within 20 days prior to the notice of redemption. For purposes of
the Warrant Agreement, "market price" is defined as the average of the closing
bid and ask prices on NASDAQ. In the event the Company exercises the right to
redeem the IPO Warrants, such IPO Warrants will be exercisable until the close
of business on the date fixed for redemption in such notice. If any IPO Warrant
called for redemption is not exercised by such time, it will cease to be
exercisable and the warrantholder will be entitled only to the redemption price.
ADJUSTMENTS
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the IPO Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
or sale of all or substantially all of the assets of the Company in order to
enable holders of Redeemable Warrants to acquire the kind and number of shares
of stock or other securities or property receivable in such event by a holder of
the number of shares that might otherwise have been purchased upon the exercise
of the IPO Warrant. No adjustments will be made unless such adjustment would
require an increase or decrease of at least $.10 or more in such exercise price.
No adjustment to the exercise price of the shares subject to the IPO Warrants
will be made for dividends (other than stock dividends), if any, paid on the
Common Stock or for securities issued pursuant to exercise of the IPO Warrants,
the Representative's Warrant, currently outstanding options or options which may
be granted under the Plan or shares issued in connection with the acquisition of
another business by the Company. In addition, the Company's Board of Directors
has the discretion to change the exercise price and Call Price of the IPO
Warrants.
TRANSFER, EXCHANGE AND EXERCISE
The IPO Warrants may be presented to the Transfer and Warrant Agent for
transfer, exchange or exercise at any time at or prior to the close of business
on March 8, 1997, at which time the IPO Warrants become wholly void and of no
value. If a market for the IPO Warrants is maintained and continues, the holder
may sell the IPO Warrants instead of exercising them. There can be no assurance,
however, that a market for the IPO Warrants will be maintained or will continue.
If the Company is unable to qualify for sale in particular states its Common
Stock underlying the IPO Warrants, holders of the IPO Warrants desiring to
exercise the IPO Warrants in those states will have no choice but to either sell
such IPO Warrants or let them expire. See "RISK FACTORS - Non- Registration in
Certain Jurisdictions of Shares Underlying the IPO Warrants; Requirement to
Maintain Current Prospectus; Possible Redemption of IPO Warrants."
18
WARRANTHOLDER NOT A STOCKHOLDER
The IPO Warrants do not confer upon holders any voting or other rights as
stockholders of the Company.
CLASS B WARRANTS
The following is a brief summary of certain provisions of the Class B
Warrants, but such summary does not purport to be complete and is qualified in
all respects by reference to the actual text of the Class B Warrant Agreement,
as amended, between the Company and American Securities Transfer, Incorporated
(the "Transfer and Warrant Agent"). The Class B Warrants will only be issued to
holders of the IPO Warrants and Redeemable Warrants who exercise such securities
during the 30-Day Period. No Class B Warrants are outstanding as of the date of
this Prospectus.
EXERCISE PRICE AND TERMS
If holders of two thirds of the Company's outstanding shares of Common
Stock approve an amendment (the "Amendment") to increase the Company's number of
authorized shares of Common Stock, then, upon effectiveness of the Amendment,
each Class B Warrant will entitle the registered holder thereof to purchase one
share of Common Stock at a price of $5.00 per share, subject to adjustment in
accordance with the anti-dilution and other provisions referred to below. No
assurance can be given that the Amendment will be approved by holders of
two-thirds of the Company's outstanding shares of Common Stock or that the
Amendment will become effective.
Subject to the effectiveness of the Amendment, as to which no assurance can
be given, the holder of any Class B Warrant may exercise such Class B Warrant by
surrendering the certificate representing the Class B Warrant to the Company's
Transfer and Warrant Agent, with the subscription on the reverse side of such
certificate properly completed and executed, together with payment of the
exercise price. The Class B Warrants may be exercised at any time following
effectiveness of the Amendment in whole or in part at the applicable exercise
price until expiration of the Class B Warrants on May __, 1998. No fractional
shares will be issued upon the exercise of the Class B Warrants.
REDEMPTION
The Class B Warrants are subject to redemption at $.10 per Class B Warrant
on 30 days' prior written notice, provided that the average market price of the
Common Stock equals or exceeds $7.00 per share (the "Call Price") during the 10
consecutive trading days ending within 20 days prior to the notice of
redemption. For purposes of the Warrant Agreement, "market price" is defined as
the average of the closing bid and ask prices on NASDAQ. In the event the
Company exercises the right to redeem the Class B Warrants, such Class B
Warrants will be exercisable until the close of business on the date fixed for
redemption in such notice. If any Class B Warrant called for redemption is not
exercised by such time, it will cease to be exercisable and the warrantholder
will be entitled only to the redemption price.
ADJUSTMENTS
19
The exercise price and the number of shares of Common Stock purchasable
upon the exercise of the Class B Warrants are subject to adjustment upon the
occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. Additionally, an
adjustment would be made in the case of a reclassification or exchange of Common
Stock, consolidation or merger of the Company with or into another corporation
or sale of all or substantially all of the assets of the Company in order to
enable holders of Redeemable Warrants to acquire the kind and number of shares
of stock or other securities or property receivable in such event by a holder of
the number of shares that might otherwise have been purchased upon the exercise
of the Class B Warrant. No adjustments will be made unless such adjustment would
require an increase or decrease of at least $.10 or more in such exercise price.
No adjustment to the exercise price of the shares subject to the Class B
Warrants will be made for dividends (other than stock dividends), if any, paid
on the Common Stock or for securities issued pursuant to exercise of the Class B
Warrants, the Representative's Warrant, currently outstanding options or options
which may be granted under the Plan or shares issued in connection with the
acquisition of another business by the Company. In addition, the Company's Board
of Directors has the discretion to change the exercise price and Call Price of
the Class B Warrants.
TRANSFER, EXCHANGE AND EXERCISE
The Class B Warrants may be presented to the Transfer and Warrant Agent for
transfer, exchange or, following and subject to effectiveness of the Amendment,
as to which no assurance can be given, exercise at any time at or prior to the
close of business on May __, 1998, at which time the Class B Warrants become
wholly void and of no value. No assurance can be given that holders of two
thirds of the Company's outstanding shares of Common Stock will vote to approve
the Amendment of authorized shares of Common Stock and such increase becomes
effective. If a market for the Class B develops, as to which there can be no
assurance, the holder may sell the Class B Warrants instead of exercising them.
There can be no assurance, however, that a market for the Class B Warrants will
develop or will continue. If the Company is unable to qualify for sale in
particular states its Common Stock underlying the Class B Warrants, holders of
the Class B Warrants desiring to exercise the IPO Warrants in those states will
have no choice but to either sell such Class B Warrants or let them expire. See
"RISK FACTORS - Uncertain Terms of Class B Warrants." "RISK FACTORS -
Non-Registration in Certain Jurisdictions of Shares Underlying the Warrants;
Requirement to Maintain Current Prospectus; Possible Redemption of Warrants."
WARRANTHOLDER NOT A STOCKHOLDER
The Class B Warrants do not confer upon holders any voting or other rights
as stockholders of the Company.
REPRESENTATIVE'S WARRANTS
In connection with the IPO, the Company issued to the Representative, for
nominal consideration, the Representative's Warrants to purchase up to 100,000
shares of Common Stock and/or 100,000 Redeemable Warrants. The Representative's
Warrants are exercisable at $6.43 per share of Common Stock and $.14 per
redeemable warrant through September 9, 1998. The Redeemable Warrants issuable
upon exercise of the Representative's Warrants are identical to the IPO
20
Warrants except that they are exercisable at $8.65 per share. The exercise price
of the Representative's Warrants contain provisions for adjustment of the
exercise price and the number and type of securities issuable upon the exercise
thereof upon the occurrence of certain events. The Representative's Warrants
grant to the holders thereof certain rights of registration of the securities
issuable upon the exercise thereof.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, $.01 par value (the "Preferred Stock"). The Preferred Stock may be issued
in one or more series, the terms of which may be determined at the time of
issuance by the Board of Directors, without further action by Securityholders,
and may include voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation, conversion,
redemption rights, and sinking fund provisions.
No shares of Preferred Stock will be outstanding as of the closing of the
Offering and the Company has no present plans for the issuance thereof. The
issuance of any such Preferred Stock could reduce the rights, including voting
rights, of the holders of Common Stock, and, therefore, reduce the value of the
Common Stock. In particular, specific rights granted to future holders of
Preferred Stock could be used to restrict the Company's ability to merge with or
sell its assets to a third party, thereby preserving control of the Company by
existing management.
TRANSFER AND WARRANT AGENT
The Company has appointed American Securities Transfer, Incorporated, Denver,
Colorado, as Transfer and Warrant Agent for its Common Stock and IPO Warrants.
SHARES ELIGIBLE FOR FUTURE SALE
As of April 22, 1996 the Company had 3,169,870 shares of Common Stock
outstanding. Of these shares, 1,647,052 were freely tradeable without further
registration under the Act. If all of the IPO Warrants, Representative's
Warrants and Redeemable Warrants were exercised during the 30-Day Period, the
Company would have 4,519,870 shares of Common Stock outstanding, of which
2,997,052 shares would be freely tradeable. In addition, there would be
1,250,000 outstanding Class B Warrants which, upon effectiveness of the
Amendment, would be exercisable into an additional 1,250,000 freely tradeable
shares of Common Stock. If all of the IPO Warrants, Representative's Warrants
and Redeemable Warrants were exercised after the 30-Day Period, the Company
would have 3,894,870 shares of Common Stock outstanding, of which 2,372,052
shares would be freely tradeable.
Of the shares of Common Stock outstanding on April 22, 1996, 1,522,818 were
"restricted securities" within the meaning of Rule 144 of the Securities Act and
are eligible for sale in the public market in reliance upon, and in accordance
with, the provisions of Rule 144. See "RISK FACTORS - Potential Sales Pursuant
to Rule 144."
21
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of the Company as that term is defined under the Securities Act,
will be entitled to sell within any three-month period a number of shares
beneficially owned for at least two years that does not exceed the greater of
(i) 1% of the then outstanding shares of Common Stock, or (ii)the average weekly
trading volume in the Common Stock during the four calendar weeks preceding such
sale. Sales under Rule 144 are also subject to certain requirements as to the
manner of sale, notice, and the availability of current public information about
the Company. However, a person who is not deemed to have been an affiliate of
the Company during the 90 days preceding a sale by such person, and who has
beneficially owned shares of Common Stock for at least three years, may sell
such shares without regard to the volume, manner of sale, or notice requirements
of Rule 144. The holders of 297,610 shares of Common Stock issued to Printpack
in September 1992 have certain registration rights with respect to such Common
Stock. See "RISK FACTORS - Potential Sales Pursuant to Rule 144."
Up to 100,000 shares of Common Stock and/or 100,000 redeemable warrants may
be purchased by the Representative through September 9, 1998. Any and all shares
of Common Stock and/or redeemable warrants purchased upon exercise of the
Representative's Warrants may be freely tradeable, provided that the Company
satisfies certain securities registration and qualification requirements in
accordance with the terms of the Representative's Warrants. In addition, under
the 1993 Plan, the Company may issue options to purchase up to 300,000 shares of
Common Stock to key employees, officers, directors and consultants, of which
options to purchase 234,500 shares of Common Stock were outstanding as of March
25, 1996. Under the Formula Plan, the Company may issue options to purchase up
to 50,000 shares of Common Stock, of which options to purchase 6,000 shares were
outstanding as of March 25, 1996. Options to purchase 60,922 shares of Common
Stock granted outside of 1993 Plan and Formula Plan were outstanding as of March
27, 1996.
The Company cannot predict the effect, if any, that sales of Common Stock
pursuant to Rule 144 or otherwise, or the availability of such shares for sale,
will have on the market price prevailing from time to time. Nevertheless, sales
by the current Securityholders of substantial amounts of Common Stock in the
public market could adversely affect prevailing market prices for the Common
Stock. In addition, the availability for sale of a substantial amount of Common
Stock acquired through the exercise of the Representative's Warrants and other
options or warrants could adversely affect prevailing market prices for the
Common Stock.
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITIES UNDER DELAWARE LAW
In accordance with Delaware law, the Company's Certificate of Incorporation
eliminates in certain circumstances the liability of directors of the Company
for monetary damages for breach of their fiduciary duty as directors. This
provision does not eliminate the liability of a director (i) for a breach of the
director's duty of loyalty to the Company or its Securityholders, (ii) for acts
or omissions by the director not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for a willful or negligent
declaration of an unlawful dividend, stock purchase or redemption, or (iv) for
transactions from which the director derived an improper personal benefit.
In addition, the Company's Bylaws include provisions to indemnify its
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement in connection
22
with threatened, pending or completed suits or proceedings against such persons
by reason of serving or having served as officers, directors or in other
capacities, except in relation to matters with respect to which such persons
shall be determined not to have acted in good faith, unlawfully or in the best
interests of the Company. With respect to matters as to which the Company's
officers and directors and others are determined to be liable for misconduct or
negligence in the performance of their duties, the Company's Bylaws provide for
indemnification only to the extent that the Company determines that such person
acted in good faith and in a manner not opposed to the best interests of the
Company.
However, insofar as indemnification for liabilities may be permitted to
directors, officers, or persons controlling the Company pursuant to Delaware
state law, as well as the foregoing charter and bylaw provisions, the Company
has been informed that in the opinion of the Commission, such indemnification as
it relates to federal securities laws is against public policy, and therefore,
unenforceable.
Further, insofar as limitation of liabilities may be so permitted pursuant
to Delaware state law, as well as the foregoing charter and bylaw provisions,
such limitation of liabilities does not apply to any liabilities arising under
federal securities laws.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock since its inception
and has no intention of paying any dividends to its Securityholders in the
foreseeable future. The Company intends to reinvest earnings, if any, in the
development and expansion of its business. Any declaration of dividends in the
future will be at the election of the Board of Directors and will depend upon
the earnings, capital requirements and financial position of the Company,
general economic conditions, requirements of any bank lending arrangements which
may then be in place and other pertinent factors. The Company's current bank
loan agreement prohibits the payment of any dividends without the bank's prior
written consent.
LEGAL OPINION
Certain legal matters relating to the Securities offered hereby will be
passed upon for the Company by O'Connor, Broude & Aronson, 950 Winter Street,
Waltham, Massachusetts 02154.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said reports. Reference is made to said report, which includes an
explanatory paragraph regarding the Company's ability to continue as a going
concern.
23
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH
THIS OFFERING TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN
WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUSNOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE CIRCUMSTANCES OF THE COMPANY OR
THE FACTS HEREIN SET FORTH SINCE THE DATE HEREOF.
TABLE OF CONTENTS
PAGE
Available Information ............................................2
Incorporation by Reference........................................2
The Company ......................................................4
Risk Factors .....................................................5
Use of Proceeds .................................................13
Plan of Distribution ............................................15
Description of Securities........................................17
Legal Opinion ...................................................23
Experts .........................................................23
2,600,000 SHARES OF COMMON STOCK
AND 1,250,000 CLASS B
COMMON STOCK PURCHASE WARRANTS
ADVANCED DEPOSITION
TECHNOLOGIES, INC.
COMMON STOCK AND CLASS B
COMMON STOCK PURCHASE WARRANTS
PROSPECTUS
____________, 1996
NOTICE TO HOLDERS
OF REDEEMABLE COMMON STOCK PURCHASE WARRANTS
OF
ADVANCED DEPOSITION TECHNOLOGIES, INC.
580 MYLES STANDISH BOULEVARD
TAUNTON, MASSACHUSETTS 02780
NOTICE is hereby given to holders of Redeemable Common Stock Purchase
Warrants (the "Warrants") of Advanced Deposition Technologies, Inc. (the
"Company") that the terms of the Warrants have been adjusted for the period from
May 13, 1996 through June 12, 1996 (the "Special Exercise Period"). During the
Special Exercise Period, each Warrant will entitle the holder to purchase one
share of Common Stock, $.01 par value per share, of the Company, at an exercise
price of $5.00 per share and to receive a Class B Redeemable Common Stock
Purchase Warrant (the "Class B Warrants") for no additional consideration.
Persons who exercise the Warrants during the Special Exercise Period may
withdraw such exercise at anytime up to and including June 12, 1996. After the
Special Exercise Period, two Warrants will once again entitle the holder to
purchase one share of Common Stock at $5.00 per share.
The Class B Warrants will entitle the holder to purchase one share of
Common Stock at an exercise price of $5.00 per share through May 12, 1998,
subject to the effectiveness of an amendment (an "Amendment") to the Company's
Certificate of Incorporation increasing the authorized number of shares of
Common Stock of the Company to no less than 10,000,000 shares. The Amendment
must be approved by holders of two-thirds of the issued and outstanding shares
of Common Stock of the Company. The stockholders of the Company will vote on the
Amendment at the Company's 1996 Annual Meeting of Stockholders (the "1996 Annual
Meeting") and any adjournment or adjournments thereof. The 1996 Annual Meeting
is scheduled for May 31, 1996. No assurance can be given that the Company's
stockholders will approve the Amendment or that it will become effective.
The Company may, from time to time, pay a solicitation fee, not to
exceed five percent (5%) of the aggregate exercise price of the Warrants, in
connection with the exercise of the Warrants.
The Company's Common Stock and Warrants are quoted on the National
Association of Securities Dealers Automated Quotation SmallCap Market System
("NASDAQ") under the symbols "ADTC" and "ADTCW," respectively, and on the Boston
Stock Exchange under the symbols "DTI" and "DTIW," respectively.
This announcement shall not constitute an offer to sell or the
solicitation of an offer to buy any securities of the Company, nor shall there
be any sale of these securities in any state in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such state. Offers may only be made through a prospectus
which is available from the Company.
In addition, the Company has filed an Issuer Tender Offer Statement on
Schedule 13E-4 (the "Statement") with the Securities and Exchange Commission.
Copies of the Statement may be obtained by contacting the Company at the address
above.
-1-
If you wish to exercise your Warrants during the Tender Period (as
defined below), your Warrant certificates must be received by American
Securities Transfer, Incorporated at the address below prior to the close of
business in New York on June 12, 1996. If you mail your certificates to American
Securities Transfer, Incorporated, you should do so well in advance of that
date.
LETTER OF TRANSMITTAL
TO ACCOMPANY CERTIFICATES OF
REDEEMABLE COMMON STOCK PURCHASE WARRANTS
OF
ADVANCED DEPOSITION TECHNOLOGIES, INC.
To: American Securities Transfer, Incorporated, Transfer and Warrant Agent (the
"Warrant Agent")
By Mail or Hand:
American Securities Transfer, Incorporated
938 Quail Street, Suite 101
Lakewood, Colorado 80215-5513
This Letter of Transmittal and accompanying certificate(s) must be
received by the Warrant Agent at the above address in order to constitute a good
delivery.
Reference is made to the Issuer Tender Offer Statement (the
"Statement") and the Company's Prospectus (the "Prospectus"), each of which is
dated May 13, 1996, receipt of which is hereby acknowledged, whereby Advanced
Deposition Technologies, Inc. (the "Company") modified the terms of all of its
Redeemable Common Stock Purchase Warrants (the "IPO Warrants") outstanding on
that date for the period from May 13, 1996 through June 12, 1996 (the "Tender
Period").
Ladies and Gentlemen:
Pursuant to the offer (the "Offer") of the Company to the holders of
its outstanding IPO Warrants as set forth in the Company's prospectus (the
"Prospectus"), the undersigned hereby elects to exercise IPO Warrants as
indicated below. Persons who exercise IPO Warrants pursuant to the Offer during
the Tender Period will receive one share of the Company's common stock, $.01 par
value per share (the "Common Stock"), for each Warrant exercised. The exercise
price is $5.00 per IPO Warrant. In addition, the Company will issue one Class B
Redeemable Common Stock Purchase Warrant (a "Class B Warrant") for each IPO
Warrant exercised during the Tender Period. After the Tender Period, two IPO
Warrants will once again be required to purchase one share of Common Stock at
$5.00 per share. No Class B Warrants will be issued following the Tender Period.
The Class B Warrants will be exercisable through May 12, 1998, subject
to the effectiveness of an amendment (the "Amendment") to the Company's
Certificate of Incorporation increasing the number of authorized shares of
Common Stock of the Company to no less than 10,000,000 shares. Holders of two
thirds of the Company's issued and outstanding shares of Common Stock must
approve the Amendment before it may become effective. The Company's stockholders
will vote on
-1-
the Amendment at the Company's 1996 Annual Stockholder's Meeting scheduled for
May 31, 1996, and any adjournment or adjournments thereof. The Class B Warrants
will be redeemable by the Company under certain circumstances. See "Risk
Factors" and "Description of Securities" in the Prospectus for additional
information concerning the Class B Warrants.
The undersigned hereby delivers to the Warrant Agent the IPO Warrant
certificates listed below representing the exercised IPO Warrants. The Warrant
Agent is hereby authorized and instructed to deliver the IPO Warrant
certificates and appropriate payment, together with all accompanying evidences
of exercise, transfer and authenticity, to or upon the order of the Company upon
receipt by the Warrant Agent of the shares of Common Stock issuable by the
Company in connection with the exercise thereof.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any obligations of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Holders of IPO Warrants exercising
the IPO Warrants may withdraw their exercise at any time through 5:00 p.m., New
York City time, on June 12, 1996.
EXERCISE OF WARRANTS
(See Instruction 1)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Name(s) and Address of Registered Exercised
Owner(s) as Shown on Certificate(s) Certificate Number of
Serial Warrants Amount
Number(s) Exercised* Enclosed**
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
Tax Identification
or Social Security -------------------------------------------------
Number(s) of present
registered owner(s) -------------------------------------------------
if such owner's name is
not listed above -------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
- --------------------------------------------------------------------------------
NOTE: If additional space is required, attach a separate sheet.
* If fewer than all of the IPO Warrants evidenced by any certificate listed
above are to be exercised, please indicate in this column the exact
number which are to be exercised. Otherwise, all the IPO Warrants
evidenced by such certificate shall be deemed to have been exercised.
** Payment must be made by wire transfer of U.S. currency, money order or
bank check drawn on a U.S. bank payable in U.S. currency to the order of
"American Securities Transfer, Incorporated for the account of Advanced
Deposition Technologies, Inc." in the total amount of the exercise price.
The exercise price is $5.00 per each IPO Warrant exercised. If payment is
to be made by wire transfer, please contact the Warrant Agent to obtain
wire instructions.
- --------------------------------------------------------------------------------
SPECIAL REPORT, ISSUANCE AND DELIVERY INSTRUCTIONS
To Be Used Only If Issuance or Delivery Is To Be Made
To Other Than the Undersigned
The certificates for the Common Stock to be issued upon exercise of the IPO
Warrants will be issued to the order of the undersigned and mailed to the
address shown under the signatures on this Letter of Transmittal unless
otherwise indicated below.
- --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
ISSUE SHARE AND NEW WARRANT DELIVER SHARE CERTIFICATES TO:
CERTIFICATES TO:
Name___________________________________ Name___________________________
(Type or print, use full given name, (Type or Print)
initial and last name)
___________________________________
Social Security Number
Address Address
___________________________________ _______________________________
(Number) (Street) (Number) (Street)
___________________________________ _______________________________
(City) (State) (Zip) (City) (State) (Zip)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR USE OF WARRANT AGENT ONLY
- -----------------------------------------------------------------------------------------------------------------------
WARRANTS
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Number of Number of Number of Warrant
Date Warrants Warrants Amount Warrants Certificate
Received Received Exercised Received Returned Number
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
-3-
The undersigned represents and warrants that the undersigned has full power
and authority to exercise the IPO Warrants in the amounts indicated above. The
undersigned will, upon request, execute any additional documents deemed
necessary or desirable by the Company to complete the exercise of the IPO
Warrants.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and any obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
- --------------------------------------------------------------------------------
SIGN HERE
____________________________________________________________________________
____________________________________________________________________________
Signature(s) of Owner(s)
Dated: _________________________________________________________________, 1995
(Must be signed by registered holders exactly as name(s) appear(s) on Warrant
certificate(s) or by person(s) authorized to become registered holder(s) by
certificates and documents transmitted herewith. If signature is by an agent,
attorney, administrator, executor, guardian, trustee or others acting in a
fiduciary or representative capacity, or by an officer of a corporation on
behalf of the corporation, please provide the following information and see
Instruction 6.)
Name(s):_______________________________________________________________
_______________________________________________________________________
(Please Print)
Capacity_______________________________________________________________
Address________________________________________________________________
(Including Zip Code)
Area Code and
Telephone No.__________________________________________________________
Tax Identification or
Social Security No.____________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTION 3)
Name of Firm___________________________________________________________
Authorized
Signature______________________________________________________________
Dated:________________________________________________________________, 1995
- --------------------------------------------------------------------------------
-4-
RISK FACTORS
An investment in the Company through the exercise of the IPO Warrants or
otherwise involves numerous risks. Prospective investors should review "Risk
Factors" set forth in the Prospectus before making an investment decision.
SOLICITED EXERCISES.
Subject to the rules and regulations of the National Association of
Securities Dealers, Inc., the Company may pay brokers who solicit the exercise
of IPO Warrants (the "Solicitation Agents") a five percent (5%) solicitation fee
for each IPO Warrant exercised through the solicitation efforts of the
Solicitation Agents; provided, however, that such a fee will be paid only with
respect to transactions in jurisdictions where such payment may legally be made.
NO RIGHT TO EXERCISE IN CERTAIN JURISDICTIONS
The IPO Warrants may be exercised in states where the shares of Common
Stock issuable upon exercise of the IPO Warrants are registered, or qualify for
an exemption from registration, under the securities or "blue-sky" laws of the
state in which a Warrant holder seeking to exercise an IPO Warrant resides. In
addition, if any registration approval or exemption from registration is
available for only a limited number of IPO Warrant exercises in any
jurisdiction, exercises may be permitted on a first-come, first-served basis in
the order that IPO Warrants are received by the Warrant Agent for exercise.
SUBSCRIPTION PROCEEDS
All fund received by the Warrant Agent from the exercise of the IPO
Warrants will be forwarded to the Company.
HOLDERS OF WARRANTS ARE ENCOURAGED TO CONTACT THEIR BROKERS
REGARDING THIS OFFER.
-5-
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Issue Tender Offer Statement of our reports dated March 26,
1996 (except with respect to the matters discussed in Note 3, as to which the
date is April 12, 1996) included in Advanced Deposition Technologies, Inc.'s
Form 10-KSB-A for the year ended December 31, 1995 and to all references to our
Firm included in this Issue Tender Offer Statement.
Arthur Andersen LLP
Boston, Massachusetts
May 3, 1996
