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Filed Pursuant to Rule 424(B)(3)
Registration Statement No. 333-34536
Prospectus
MACE SECURITY INTERNATIONAL, INC.
UP TO 3,285,405 SHARES OF COMMON STOCK
On April 5, 2000, we entered into a master facility agreement with Fusion
Capital Fund II, LLC under which Fusion Capital agreed to enter into up to two
identical equity purchase agreements providing for the purchase by Fusion
Capital of up to $24.0 million of our common stock. Each equity purchase
agreement requires that Fusion Capital purchase up to $12.0 million worth of our
shares of common stock at a price based upon the future performance of our
common stock. On April 17, 2000, we entered into the first equity purchase
agreement with Fusion Capital. At our sole option, we can require Fusion
Capital to enter into the second equity purchase agreement and purchase up to an
additional $12.0 million of our common stock.
We estimate that the maximum number of shares we will sell to Fusion Capital
under the first equity purchase agreement is 2,948,025. If more than 2,948,025
shares are issuable to Fusion Capital under the first equity purchase agreement,
we have the right and presently intend to terminate the first equity purchase
agreement without any payment or liability to Fusion Capital. Under the terms
of the master facility agreement, in connection with the entering into of the
first equity purchase agreement, Fusion Capital received 337,380 shares of our
common stock as a commitment fee. This prospectus relates to the offer and sale
from time to time by Fusion Capital of up to 3,285,405 of such shares. Fusion
Capital is sometimes referred to in this prospectus as the selling shareholder.
We will not receive any of the proceeds from the sale of the shares being
offered by this prospectus.
Our common stock is currently traded on The Nasdaq National Market under the
symbol "MACE." The closing price of our common stock on The Nasdaq National
Market on April 18, 2000 was $3.125 per share. The shares of common stock
offered pursuant to this prospectus have been approved for trading on The Nasdaq
National Market.
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These securities involve a high degree of risk. See "Risk Factors" beginning
on page 3 of this prospectus.
The selling shareholder is an "underwriter" within the meaning of the
Securities Act of 1933.
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Our principal executive office is located at 1000 Crawford Place, Suite 400,
Mt. Laurel, New Jersey 08054, and our telephone number is (856) 778-2300.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
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This prospectus is dated April 19, 2000.
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TABLE OF CONTENTS
Page
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RISK FACTORS .............................................................. 3
THE COMPANY ............................................................... 9
THE FINANCING TRANSACTION ................................................. 9
USE OF PROCEEDS .......................................................... 12
SELLING SHAREHOLDER ...................................................... 13
CAUTIONARY STATEMENT ..................................................... 14
PLAN OF DISTRIBUTION ..................................................... 14
LEGAL OPINION ............................................................ 16
EXPERTS .................................................................. 16
WHERE YOU CAN FIND MORE INFORMATION ...................................... 16
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RISK FACTORS
Before you decide to invest, you should consider carefully the risks
described below, together with the information provided in the other parts of
this prospectus. Any or all of these factors or others not mentioned below
could affect our prospects as a whole.
General Risks
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We need to raise additional capital
At December 31, 1999, we had negative working capital of approximately $1.4
million. Our business plan will require significant additional capital to fund
acquisitions and internal development and growth. The aggregate of $24 million
made available by the selling shareholder under the two equity purchase
agreements may be inadequate to meet our needs.
Under the terms of each equity purchase agreement with Fusion Capital, we
have the right to sell at least $1.5 million per month of our common stock to
Fusion Capital. We have the option to require Fusion Capital to purchase
additional amounts of the common stock each month up to $12 million under each
equity purchase agreement. If we receive all $24 million available under the
two equity purchase agreements from Fusion Capital, our immediate and near term
needs for working capital would be satisfied. We could in the future need
working capital beyond the $24 million as we continue to fully implement our
business, operating and development plans, to fund acquisitions and internal
development and growth. Our capital requirements also include working capital
for daily operations and significant capital for equipment purchases. To the
extent that we lack cash to meet our further capital needs, we will be required
to raise additional funds through bank borrowings and significant additional
equity and/or debt financings, which may result in significant increases in
leverage and interest expense and/or substantial dilution. We cannot assure you
that we will obtain the necessary financing. If we are unable to raise
additional capital, we will need to substantially reduce the scale of our
operations and curtail our business plan.
We have a history of losses, we have working capital deficits and we may incur
continuing charges
We have reported net losses and working capital deficits in prior fiscal
years and we have recently expended substantial funds for acquisitions and
equipment. In connection with financing acquisitions and business growth, we
anticipate that we will continue to incur significant debt and interest charges.
In addition, we will recognize goodwill amortization charges in connection with
our acquisitions that are accounted for under the "purchase" method of
accounting. The amount of goodwill recognized is the amount by which the
purchase price of a business exceeds the fair market value of the assets
acquired. Goodwill is amortized over a period not to exceed 25 years depending
on the business acquired, resulting in an annual non-cash charge to our earnings
during that period. As we continue to acquire additional businesses, our
financial position and results of operations may fluctuate significantly from
period to period.
Our business plan poses risks for us
Our business objective is to develop and grow a full service, integrated
car care business through acquisitions of car washes and through the internal
development of our car wash facilities by adding gasoline pumps, oil change
facilities and convenience stores to our locations. We have repositioned our
company from a company involved primarily in the production of consumer defense
products to a company
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that also offers car wash and car care services. This strategy involves a
number of risks, including:
. Risks associated with growth;
. Risks associated with acquisitions;
. Risks associated with the recruitment and development of management and
operating personnel; and
. Risks associated with lack of experience in the car service industries.
If we are unable to manage one or more of these associated risks effectively, we
may not realize our business plan.
We have a limited operating history regarding our car wash and car service
businesses
Since July 1999, our main business has been the acquisition and operation
of car wash and car service facilities, which now account for more than half of
our revenues. Because of our relatively limited operating history with respect
to these businesses, we cannot assure you that we will be able to operate them
successfully.
We may not be able to manage growth
If we succeed in growing, growth will place significant burdens on our
management and on our operational and other resources. We will need to attract,
train, motivate, retain and supervise our senior managers and other employees
and develop a managerial infrastructure. If we are unable to do this, we will
not be able to realize our business objectives.
Risks of Acquisitions
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In General. Our strategy to grow in part through acquisitions depends upon
our ability to identify suitable acquisition candidates, and to consummate
acquisitions on financially favorable terms. This strategy involves risks
inherent in assessing acquisition candidates' values, strengths, weaknesses,
risks and profitability and risks related to the financing, integration and
operation of acquired businesses, including:
. adverse short-term effects on our reported operating results;
. diversion of management's attention;
. dependence on hiring, training and retaining key personnel; and
. risks associated with unanticipated problems or latent liabilities.
We cannot assure you that acquisition opportunities will be available, that we
will have access to the capital required to finance potential acquisitions, that
we will continue to acquire businesses, or that any acquired business will be
profitable.
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We may not be able to integrate businesses we acquire and achieve operating
efficiencies
We are in the process of combining the businesses and assets that we have
acquired recently into an integrated operating structure. Our future growth and
profitability depend substantially on our ability to operate and integrate
acquired businesses. Our strategy is to achieve economies of scale and brand-
name recognition in part through acquisitions that increase our size. We cannot
assure you that our efforts to integrate acquired operations will be effective
or that we will realize expected results. Our failure to achieve any of these
results could have a material adverse effect on our business and results of
operations.
We face potential liabilities associated with acquisitions of businesses
The businesses we acquire may have liabilities that we do not discover or
may be unable to discover during our preacquisition investigations, including
liabilities arising from environmental contamination or prior owners' non-
compliance with environmental laws or other regulatory requirements, and for
which we, as a successor owner or operator, may be responsible.
Risks of this Offering
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Our stock price is volatile
Our common stock's market price has been and is likely to continue to be
highly volatile. Factors like fluctuations in our quarterly revenues and
operating results, our ongoing acquisition program, market conditions and
economic conditions generally may impact significantly our common stock's market
price. In addition, as we continue to acquire additional car wash businesses,
we may agree to issue common stock that will become available generally for
resale and may have an impact on our common stock's market price.
The sale of the shares registered in this offering could cause our stock price
to decline
All shares registered in this offering are freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to eight months from the date of this prospectus. We may require the
selling shareholder to purchase a significant number of shares of common stock
under the equity purchase agreement at one time. The sale of a significant
amount of shares registered in this offering at any given time could cause the
trading price of our common stock to decline. Even if our stock price
decreases, we may elect to sell more shares under the first equity purchase
agreement, causing more shares to be outstanding and resulting in substantial
dilution. The purchase price under the equity purchase agreement will fluctuate
based on the price of our common stock. See "The Financing Transaction -
Purchase of Shares Under the First Equity Purchase Agreement" for a detailed
description of the purchase price.
Notwithstanding the limitations set forth in the first equity purchase
agreement, if on April 18, 2000, the entire first equity purchase agreement was
converted into the full 2,948,025 shares of our common stock, together with the
337,380 additional shares issued to Fusion Capital as a commitment fee, Fusion
Capital would beneficially own 12.05% of our outstanding common stock as of
April 18, 2000. Therefore, the sale of shares under the first equity purchase
agreement may result in substantial dilution to the interests of other holders
of our common stock. Although we have the right to prohibit sales under the
first equity purchase agreement while our stock price is below $7.00, we may
still elect to sell shares under the equity purchase agreement. This would
result in more shares being outstanding and could cause substantial dilution.
We currently intend to exercise this right to protect our shareholders from
substantial dilution. However, to the extent we need to use the cash proceeds
of the first equity purchase agreement for
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working capital or other business purposes, we do not intend to restrict sales
to Fusion Capital under the first equity purchase agreement.
Risks of Particular Business Lines
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We face risks associated with our consumer safety products
We face claims of injury allegedly resulting from our defense sprays. We
cannot assure you that our insurance coverage will be sufficient to cover any
judgments won against us in these lawsuits. If our insurance coverage is
exceeded, we will have to pay the excess liability directly. We are also aware
of several claims that defense sprays used by law enforcement personnel resulted
in deaths of prisoners and of suspects in custody. While we no longer sell
defense sprays to law enforcement agencies, it is possible that the increasing
use of defense sprays by the public could, in the future, lead to additional
product liability claims.
Our car wash business may suffer under certain weather conditions
Seasonal trends in some periods may affect our car wash business. In
particular, long periods of rain can affect adversely our car wash business as
people typically do not wash their cars during such periods. Conversely,
extended periods of warm, dry weather may encourage customers to wash their own
cars which can affect adversely our car wash business.
Consumer demand for our car wash services is unpredictable
Our financial condition and results of operations will depend substantially
on consumer demand for car wash services. Our business depends on consumers
choosing to employ professional services to wash their cars rather than washing
their cars themselves or not washing their cars at all. We cannot assure you
that consumer demand for car wash services will increase as our business
expands. Nor can we assure you that consumer demand will maintain its current
level.
We must maintain our car wash equipment
Although we undertake to keep our car washing equipment in proper operating
condition, the operating environment found in car washes results in frequent
mechanical problems. If we fail to properly maintain the equipment, the car
wash could become inoperable resulting in a loss of revenue to us from the
inoperable location.
Our car wash and car services and consumer safety product businesses face
governmental regulation
Car Wash and Car Service Businesses. We are governed by federal, state and
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local laws and regulations, including environmental regulations, that regulate
the operation of our car wash centers and other car services businesses. Car
wash centers utilize cleaning agents and waxes in the washing process that are
then discharged in waste water along with oils and fluids washed off of
vehicles. Other car services, such as gasoline and lubrication, use a number of
oil derivatives and other regulated hazardous substances. As a result, we are
governed by environmental laws and regulations dealing with, among other things:
. transportation, storage, presence, use, disposal and handling of
hazardous materials and hazardous wastes;
. discharge of stormwater; and
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. underground storage tanks.
If any of the previously mentioned substances were found on our property,
however, including leased properties, or if we were found to be in violation of
applicable laws and regulations, we could be responsible for clean-up costs,
property damage and fines or other penalties, any one of which could have a
material adverse effect on our financial condition and results of operations.
Consumer Safety Products. The distribution, sale, ownership and use
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of consumer defense sprays are legal in some form in all 50 states and the
District of Columbia. We cannot assure you, however, that restrictions on the
manufacture or use of consumer defense sprays will not be enacted that would
have an adverse impact on our financial condition. Some of our consumer defense
spray manufacturing operations currently incorporate hazardous materials, the
use and emission of which are regulated by various state and federal
environmental protection agencies, including the Environmental Protection
Agency. We believe that we are in compliance currently with all state and local
statutes governing our disposal of these hazardous materials, but if there are
any changes in environmental permit or regulatory requirements, or if we fail to
comply with any environmental requirements, these changes or failures may have a
material adverse effect on our business and financial condition.
Additional Risks
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We face significant competition
The extent and kind of competition that we face varies. The car wash industry
is highly competitive. Competition is based primarily on location, facilities,
customer service, available services and rates. Because barriers to entry into
the car wash industry are relatively low, competition may be expected to
continually arise from new sources not currently competing with us. In this
sector of our business we also face competition from outside the car wash
industry, such as gas stations and convenience stores, that offer automated car
wash services. In some cases, these competitors may have significantly greater
financial and operating resources than we do. In our car service businesses, we
face competition from a number of sources, including regional and national
chains, gasoline stations and companies and automotive companies and specialty
stores, both regional and national.
Our operations are dependent substantially on the services of our executive
officers, particularly Louis D. Paolino, Jr.
Our operations are dependent substantially on the services of our executive
officers, particularly Louis D. Paolino, Jr., our Chairman of the Board, Chief
Executive Officer and President. If we lose Mr. Paolino's services or that of
one or more of our other executive officers, the loss could have a material
adverse effect on our business and results of operations. We do not maintain
key-man life insurance policies on our executive officers.
We are controlled by Louis D. Paolino, Jr., giving him a great deal of influence
over our affairs.
Louis D. Paolino, Jr., our President, Chief Executive Officer and Chairman of
our Board of Directors, owns or has the right to vote approximately 32 percent
of our outstanding stock, giving him a great deal of influence over our affairs.
Mr. Paolino's influence could affect important functions, including the election
of our Board members and our ability to enter into transactions with affiliates
and related parties and the approval or prevention of any proposed merger, sale
of assets or other business combination. Mr. Paolino's influence, thus, could
prevent us from doing things that would increase our common stock's price, or
force us to do things that could lower our common stock's price.
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Our Preferred Stock may effect the rights of the holders of our common stock and
it may also discourage another person to acquire control of Mace
Our Certificate of Incorporation authorizes the issuance of up to
50,000,000 shares of Preferred Stock. No shares of Preferred Stock are
currently outstanding. It is not possible to state the precise effect of
Preferred Stock upon the rights of the holders of our common stock until the
Board of Directors determines the respective preferences, limitations and
relative rights of the holders of one or more series or classes of the Preferred
Stock. However, such effect might include: (i) reduction of the amount
otherwise available for payment of dividends on Common Stock, to the extent
dividends are payable on any issued shares of Preferred Stock, and restrictions
on dividends on Common Stock if dividends on the Preferred Stock are in arrears,
(ii) dilution of the voting power of the Common Stock to the extent that the
Preferred Stock has voting rights, and (iii) the holders of Common Stock not
being entitled to share in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to the Preferred Stock.
The Preferred Stock may be viewed as having the effect of discouraging an
unsolicited attempt by another person to acquire control of Mace and may
therefore have an anti-takeover effect. Issuances of authorized preferred
shares can be implemented, and have been implemented by some companies in recent
years with voting or conversion privileges intended to make an acquisition of
the company more difficult or costly. Such an issuance could discourage or
limit the stockholders' participation in certain types of transactions that
might be proposed (such as a tender offer), whether or not such transactions
were favored by the majority of the stockholders, and could enhance the ability
of officers and directors to retain their positions.
Some provisions of Delaware law may prevent us from being acquired
We are governed by Section 203 of the Delaware General Corporation Law,
which prohibits a publicly held Delaware corporation from engaging in a
"business combination" with a person who is an "interested stockholder" for a
period of three (3) years, unless approved in a prescribed manner. This
provision of Delaware law may affect our ability to merge with, or to engage in
other similar activities with, some other companies. This means that we may be
a less attractive target to a potential acquirer who otherwise may be willing to
pay a price for our common stock above its market price.
We face Year 2000 risks
The Company has completed its Year 2000 remediation plan. Although we
believe our Year 2000 remediation plan was adequate to address the Year 2000
issue and we expect to have no material exposure with respect to information
technology-related systems, the Company is continually acquiring new businesses
and locations, which may require an on-going process to convert, assess and, if
necessary, remediate newly acquired systems. With respect to non-information
technology areas, it is uncertain what risks are associated with the Year 2000
issue and any risks that may be identified could have a material, adverse effect
on the Company's business, financial condition, and results of operations and
cash flows. There can be no assurances that the systems of customers and
vendors on which the Company relies will be converted in a timely manner and
will not have an adverse effect on the Company's systems or operations.
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Additionally, the Company's Computer Products and Services operations
develop specialty point of sale and control software for principally the car
care industry. Based on our current assessment, we believe the current versions
of our software products are Year 2000 compliant - that is, they are capable of
adequately distinguishing 21st century dates from 20th century dates. However,
our products are generally integrated into other third party company systems
involving hardware and software products that we cannot adequately evaluate for
Year 2000 compliance. Although we have not been a party to any claims involving
our products or services related to Year 2000 compliance issues, we may in the
future be required to defend our products or services in such claims
proceedings, or to negotiate resolutions of claims based on Year 2000 issues.
We do not expect to pay cash dividends on our common stock
We do not expect to pay any cash dividends on our common stock in the
foreseeable future. We will reinvest any cash otherwise available for dividends
in our business.
THE COMPANY
We were incorporated in Delaware on September 1, 1993, and before July,
1999, our main business was the production and sale of less-than-lethal defense
sprays and other consumer safety and security products. On July 1, 1999, we
merged American Wash Services Inc., a company that was engaged in the business
of acquiring and operating car wash facilities, into a wholly-owned subsidiary
of Mace. On July 9, 1999, we acquired all the outstanding common stock of
Innovative Control Systems, Inc., a developer of point of sale systems for the
car wash and oil lubrication industries.
Since July 1999, our main business has been the ownership and operation of
full service car wash facilities. Through a separate division, we continue to
produce and sell, both in our car wash facilities and elsewhere, our consumer
safety and personal security products. Through our wholly owned subsidiary,
Innovative Control Systems, Inc., we continue to develop and sell car wash and
oil lubrication point of sale systems.
THE FINANCING TRANSACTION
General
On April 5, 2000 Mace entered into a master facility agreement with Fusion
Capital Fund II, LLC pursuant to which Fusion Capital agreed to enter into up to
two identical equity purchase agreements. Each equity purchase agreement grants
Fusion Capital the right to purchase from us shares of common stock up to $12.0
million at a price equal to the lesser of (1) 140% of the average of the closing
bid prices for our common stock during the 10 trading days prior to the date of
the applicable equity purchase agreement or $7.00, whichever is greater or (2) a
price based upon the future performance of the common stock, in each case
without any fixed discount to the market price. Each equity purchase agreement
requires that at the beginning of each monthly period, Fusion Capital will pay
$1.0 million to Mace as partial prepayment of the $1.5 million worth of common
stock to be purchased by Fusion Capital during such monthly period. Once the
$1.0 million has been applied to purchase shares of our common stock, Fusion
Capital will pay the remaining purchase price upon receipt of our common stock.
The first equity purchase agreement was entered into by and Fusion Capital
on April 17, 2000. The second equity purchase agreement will be executed after
delivery of an irrevocable written notice by us to Fusion Capital stating that
we elect to enter into such purchase agreement with Fusion Capital. The second
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equity purchase agreement may be entered into only after all of the shares of
our common stock purchasable under the first equity purchase agreement have been
purchased by Fusion Capital. The obligation of Fusion Capital to enter into the
second equity purchase agreements is subject only to customary closing
conditions, all of which are outside the control of Fusion Capital.
Purchase of Shares Under the First Equity Purchase Agreement
Under the first equity purchase agreement Fusion Capital will purchase
shares of our common stock by "converting" from time to time a specified dollar
amount of the outstanding principal balance into common stock. Subject to the
limits on conversion and the termination rights described below, each month
during the eight-month term of the first equity purchase agreement Fusion
Capital has the right to convert up to $1.5 million of the principal amount of
the equity purchase agreement, plus any amounts for any prior month that have
not yet been converted, into shares of our common stock at the applicable
conversion price. The conversion price per share is equal to the lesser of:
. the lowest sale price of our common stock on the day of submission of
a conversion notice by Fusion Capital; or
. the average of the two lowest closing bid prices of our common stock
during the 12 trading days prior to the submission of a conversion
notice by Fusion Capital; or
. $7.00, the "Fixed Conversion Price."
The conversion price will be adjusted for any reorganization, recapitalization,
non-cash dividend, stock split or other similar transaction occurring during the
ten trading days in which the closing bid price is used to compute the
conversion price. Notwithstanding the foregoing, no conversion of the equity
purchase agreement will be permitted if it would result in Fusion Capital or its
affiliates beneficially owning more than 4.99% of our then aggregate outstanding
common stock immediately after the proposed conversion. The following table
sets forth the number of shares of our common stock that would be purchased by
Fusion Capital upon conversion of the first equity purchase agreement at varying
conversion prices:
<TABLE>
<CAPTION>
Number of Shares to be Issued
Upon a Full Conversion of the Percent of our Common Stock
Assumed Conversion Price First Equity Purchase Agreement Outstanding as of April 18, 2000 (1)
- ----------------------------------------------- -------------------------------- -------------------------------------
<S> <C> <C>
$ 3.00 2,948,025 (2) 10.81%
$3.00, the conversion price on April 18, 2000 2,948,025 (2) 10.81%
$ 4.00 2,948,025 (2) 10.81%
$ 5.00 2,400,000 8.80%
$7.00, the fixed conversion price 1,714,286 6.29%
$ 10.00 1,200,000 4.40%
</TABLE>
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(1) As the date of this prospectus there were 24,321,698 shares
of our common stock outstanding.
(2) We estimate that we will issue no more than 2,948,025 shares
to Fusion Capital upon conversion of the equity purchase
agreement, all of which are included in this offering. If
more than 2,948,025 shares are issuable to Fusion Capital
under the equity purchase agreement, we currently intend to
terminate the equity purchase agreement without any payment
or liability to Fusion Capital.
Mace's Right to Prevent Conversions
If the closing sale price of our common stock is below the Fixed Conversion
Price for any three consecutive trading days, we have the unconditional right to
suspend conversions until the earlier of (1) our
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revocation of such suspension and (2) when the sale price of our common stock is
above the Fixed Conversion Price. We currently intend to so restrict conversion
to the extent practicable, so that our shareholders would be protected from
substantial dilution. However, to the extent we need to use the cash proceeds of
the first equity purchase agreement for working capital or other business
purposes, we do not intend to restrict conversion of the first equity purchase
agreement.
Mace's Mandatory Conversion Rights
We have the right to require that Fusion Capital convert all or a portion
of the principal amount of the equity purchase agreement during any month. We
may revoke, in our sole discretion, our written request with respect to any
conversions in excess of the amount that Fusion Capital is otherwise permitted
to convert.
Termination Rights of Mace
If the closing price of our common stock is below the Fixed Conversion
Price for any 10 consecutive trading days, then we may elect to terminate the
equity purchase agreement without any liability or payment to Fusion Capital.
If more than 2,948,025 shares are issuable to Fusion Capital under the equity
purchase agreement, we presently intend to terminate the equity purchase
agreement without any payment or liability to Fusion Capital.
Effect of Performance of the First Equity Purchase Agreement on Mace and Our
Shareholders
All shares registered in this offering are freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to eight months from the date of this prospectus. The sale of a
significant amount of shares registered in this offering at any given time could
cause the trading price of our common stock to decline and to be highly
volatile. Fusion Capital may ultimately convert the entire first equity purchase
agreement into common stock, and it may sell all of the shares of common stock
it acquires upon conversion. Therefore, the conversion of the first equity
purchase agreement may result in substantial dilution to the interests of other
holders of our common stock. However, we have the right to block conversions of
the equity purchase agreement and to require termination of the equity purchase
agreement. We currently intend to exercise these rights to protect our
shareholders from substantial dilution.
Change in Control
Upon a change in control of Mace, we may require mandatory conversion of
the equity purchase agreement or, if the market price is below the Fixed
Conversion Price, we may exercise our termination right.
No Short-Selling or Hedging by Fusion Capital
Fusion Capital has agreed that neither it nor any of its affiliates will
engage in any direct or indirect short-selling or hedging of our common stock
during any time prior to the termination of the master facility agreement.
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Events of Default
Generally, Fusion Capital may terminate the equity purchase agreement
without any liability or payment to Mace upon the occurrence of any of the
following events of default:
. if for any reason the shares offered by this prospectus cannot be sold
pursuant to this prospectus for a period of five consecutive trading
days or for more than an aggregate of 10 trading days in any 365-day
period;
. suspension by The Nasdaq National Market of our common stock from
trading for a period of five consecutive trading days or for more than
an aggregate of 10 trading days in any 365-day period;
. our failure to satisfy any listing criteria of our principal
securities exchange or market for a period of five consecutive trading
days or for more than an aggregate of 45 trading days in any 365-day
period;
. (1) notice from us or our transfer agent to the effect that either of
us intends not to comply with a proper request for conversion of the
equity purchase agreement into shares of common stock or (2) our
failure to confirm to the transfer agent Fusion Capital's conversion
notice or (3) the failure of the transfer agent to issue shares of our
common stock upon delivery of a conversion notice;
. if at any time more than 4,845,773 shares of our common stock
(representing 19.99% of our outstanding common stock as of April 5,
2000, the date of the master facility agreement) are issuable to
Fusion Capital upon conversion of the equity purchase agreement;
. any material breach of the representations or warranties or covenants
contained in the master facility agreement or any related agreements
which has or which could have a material adverse affect on Mace or the
value of the equity purchase agreement, subject to a cure period of
five trading days;
. a default of any payment obligation of Mace in excess of $1.0 million;
or
. our participation in insolvency or bankruptcy proceedings by or
against Mace.
Additional Shares Issued to Fusion Capital
Under the terms of the master facility agreement, in connection with the
entering into of the first equity purchase agreement, Fusion Capital received
337,380 shares of our common stock as a commitment fee. Unless an event of
default occurs, these shares must be held by Fusion Capital until the first
equity purchase agreement has been terminated. On the date that the second
equity purchase agreement is entered into, Fusion Capital will be entitled to
receive an additional commitment fee, payable in shares of our common stock,
equal to 5% of $12.0 million, or $600,000, divided by the lower of (1) the
average of the closing price of our common stock for the five consecutive
trading days immediately preceding the trading day which is two trading days
prior to the closing date for the second equity purchase agreement and (2) the
average of the closing price of our common stock for the five consecutive
trading days immediately preceding the date we deliver notice of our election to
enter into the second equity purchase agreement.
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No Variable Priced Financings by Mace
Until the termination of the master facility agreement, Mace has agreed not
to issue, or enter into any agreement with respect to the issuance of, any
variable priced equity or variable priced equity like securities unless it has
obtained Fusion Capital's prior written consent.
USE OF PROCEEDS
We will not receive any of the proceeds from the shares sold by the
selling shareholders nor will any of the proceeds be available for our use or
otherwise for our benefit. We are registering the shares for sale to provide
the selling shareholder with freely tradable securities, but the registration of
these shares does not necessarily mean that any of these shares will be offered
or sold by the selling shareholder.
SELLING SHAREHOLDER
The selling shareholder is Fusion Capital Fund II, LLC. Fusion Capital has
had no business or financial relationship with Mace prior to entering into the
master facility agreement on April 5, 2000. Under the master facility
agreement, Fusion Capital agreed to enter into up to two identical equity
purchase agreements providing for the purchase by Fusion Capital of up to $24.0
million of our common stock. Each equity purchase agreement requires that
Fusion Capital purchase up to $12.0 million worth of our shares of common stock
at a price based upon the future performance of our common stock. On the date
of this prospectus, we entered into the first equity purchase agreement with
Fusion Capital. At our sole option, we can require Fusion Capital to enter into
the second equity purchase agreement and purchase up to an additional $12.0
million of our common stock.
On April 17, 2000, pursuant to the master facility agreement, Fusion
Capital entered into the first equity purchase agreement with respect to the
purchase by Fusion Capital of up to $12.0 million worth of our common stock.
Prior to entering into the first equity purchase agreement, Fusion Capital did
not own or have any interest in any shares of our common stock. We estimate
that the maximum number of shares we will sell to Fusion Capital under the first
equity purchase agreement will be 2,948,025. If more than 2,948,025 shares are
issuable to Fusion Capital under the first equity purchase agreement, we have
the right and presently intend to terminate the first equity purchase agreement
without any payment or liability to Fusion Capital. We have also agreed to
issue an estimated 337,380 additional shares to Fusion Capital as a commitment
fee for entering into the master facility agreement. Unless an event of default
occurs, these 337,380 shares must be held by Fusion Capital until the first
equity purchase agreement has been terminated. This prospectus relates to the
offer and sale from time to time by Fusion Capital of up to 3,285,405 of such
shares. The first equity purchase agreement is described in detail under the
heading "The Financing Transaction."
Notwithstanding the limitations set forth in the first equity purchase
agreement, if on April 18, 2000, the entire first equity purchase agreement was
converted into the full 2,948,025 shares of our common stock, together with the
337,380 additional shares issued to Fusion Capital as a commitment fee, Fusion
Capital would beneficially own 12.05% of our outstanding common stock as of
April 18, 2000.
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Effect of Performance of the First Equity Purchase Agreement on Mace and Our
Shareholders
All shares registered in this offering are freely tradable. It is
anticipated that shares registered in this offering will be sold over a period
of up to eight months from the date of this prospectus. The sale of a
significant amount of shares registered in this offering at any given time could
cause the trading price of our common stock to decline and to be highly
volatile. Fusion Capital may ultimately convert the entire first equity purchase
agreement into common stock, and it may sell all of the shares of common stock
it acquires upon conversion. Therefore, the conversion of the first equity
purchase agreement may result in substantial dilution to the interests of other
holders of our common stock. However, we have the right to block conversions of
the equity purchase agreement and to require termination of the equity purchase
agreement. We currently intend to exercise these rights to protect our
shareholders from substantial dilution. See "The Financing Transaction."
Mace's Ability to Restrict Conversions
The first equity purchase agreement provides that we may restrict
conversions under the first equity purchase agreement if the closing sale price
of our common stock is below the Fixed Conversion Price for any three
consecutive trading days. We currently intend to so restrict conversions to the
extent practicable, so that our shareholders would be protected from substantial
dilution. However, to the extent we need to use the cash proceeds of the first
equity purchase agreement for working capital or other business purposes, we do
not intend to restrict conversions under the first equity purchase agreement.
Holdings of Fusion Capital Upon Termination of This Offering
Because the selling shareholder may sell all, some or none of the common
stock offered by this prospectus, no estimate can be given as to the amount of
common stock that will be held by the selling shareholder upon termination of
the offering.
CAUTIONARY STATEMENT
In this prospectus and in reports we incorporate in this prospectus, we use
forward-looking terminology such as "may," "will," "should," "expect,"
"anticipate," "estimate," "plan," or "continue," or the negative of the terms or
other variations on the terms, or comparable terminology, which are referred to
under the securities laws as "forward-looking statements."
Our forward-looking statements are affected by known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to differ materially from the results, performance and
achievements that our forward-looking statements express or imply. We discuss
some, but not all, of these risks, uncertainties and factors in this prospectus.
We disclaim any obligation to update this discussion or to announce publicly the
result of any revisions to any of the forward-looking statements contained in
this prospectus, however, to reflect future events or developments.
PLAN OF DISTRIBUTION
The common stock offered by this prospectus is being offered by the selling
shareholder, Fusion Capital Fund II, LLC. The common stock may be sold or
distributed from time to time by the selling shareholder, or by donees or
transferees of, or other successors in interests to, the selling shareholder,
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directly to one or more purchasers or through brokers, dealers or underwriters
who may act solely as agents or may acquire such common stock as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at negotiated prices, or at fixed prices, which may be
changed. The sale of the common stock offered by this prospectus may be effected
in one or more of the following methods:
. ordinary brokers' transactions;
. transactions involving cross or block trades or otherwise on the
Nasdaq National Market;
. purchases by brokers, dealers or underwriters as principal and resale
by such purchasers for their own accounts pursuant to this prospectus;
. "at the market" to or through market makers or into an existing market
for the common stock;
. in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected
through agents;
. in privately negotiated transactions; or
. any combination of the foregoing.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold only through registered or licensed brokers
or dealers. In addition, in certain states, the shares may not be sold unless
they have been registered or qualified for sale in such state or an exemption
from such registration or qualification requirement is available and complied
with.
Brokers, dealers, underwriters or agents participating in the distribution of
the shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling shareholder and/or purchasers of the
common stock for whom such broker-dealers may act as agent, or to whom they may
sell as principal, or both. The compensation paid to a particular broker-dealer
may be less than or in excess of customary commissions.
The selling shareholder is an "underwriter" within the meaning of the
Securities Act of 1933. Any broker-dealers who act in connection with the sale
of the shares hereunder may be deemed to be "underwriters" within the meaning of
the Securities Act, and any commissions they receive and proceeds of any sale of
the shares may be deemed to be underwriting discounts and commissions under the
Securities Act.
Neither Mace nor the selling shareholder can presently estimate the amount
of compensation that any agent will receive. Mace knows of no existing
arrangements between any selling shareholder, any other shareholder, broker,
dealer, underwriter or agent relating to the sale or distribution of the shares.
At a time particular offer of shares is made, a prospectus supplement, if
required, will be distributed that will set forth the names of any agents,
underwriters or dealers and any compensation from the selling shareholder and
any other required information.
Mace will pay all of the expenses incident to the registration, offering
and sale of the shares to the public other than commissions or discounts of
underwriters, broker-dealers or agents. Mace has also agreed to indemnify the
selling shareholder and related persons against specified liabilities, including
liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Mace, Mace
has been advised that in the opinion of the SEC
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such indemnification is against public policy as expressed in the Securities Act
and is therefore, unenforceable.
FUSION CAPITAL AND ITS AFFILIATES HAVE AGREED NOT TO ENGAGE IN ANY DIRECT
OR INDIRECT SHORT SELLING OR HEDGING OF MACE'S COMMON STOCK DURING THE TERM OF
THE EQUITY PURCHASE AGREEMENT.
Mace has advised the selling shareholder that while they are engaged in a
distribution of the shares included in this prospectus they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934,
as amended. With certain exceptions, Regulation M precludes the selling
shareholder, any affiliated purchasers, and any broker-dealer or other person
who participates in such distribution from bidding for or purchasing, or
attempting to induce any person to bid for or purchase any security which is the
subject of the distribution until the entire distribution is complete.
Regulation M also prohibits any bids or purchases made in order to stabilize the
price of a security in connection with the distribution of that security. All of
the foregoing may affect the marketability of the shares offered hereby this
prospectus.
This offering will terminate on the earlier of (1) the date on which the
shares are eligible for resale without restrictions pursuant to Rule 144(k)
under the Securities Act or (2) the date on which all shares offered by this
prospectus have been sold by the selling shareholder.
LEGAL OPINION
Drinker Biddle & Reath LLP, Philadelphia, Pennsylvania, has issued for us
an opinion on the validity of the shares being offered by this prospectus.
EXPERTS
The consolidated financial statements of Mace Security International, Inc. as
of December 31, 1999, and for the year then ended appearing in Mace's annual
report on Form 10-KSB, which is incorporated by reference herein, have been
audited by Grant Thornton LLP, independent auditors, as set forth in their
report thereon included therein and incorporated by reference herein. Such
financial statements are incorporated by reference herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of Mace Security International, Inc. as
of December 31, 1998, and for the year then ended appearing in Mace's annual
report on Form 10-KSB, which is incorporated by reference herein, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated by reference herein which, as for the
year in the period ended December 31, 1998, is based in part on the reports of
D. Williams & Co., P.C., Daniel P. Irwin and Associates, P.C. and Urbach Kahn &
Werlin PC, independent auditors. The financial statements referred to above are
incorporated by reference in reliance upon such reports given on the authority
of such firms as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
The Securities Exchange Act of 1934 requires us to file reports, proxy
statements and other information with the Securities and Exchange Commission.
Our reports, proxy statements and other information may be copied and inspected
at the Securities and Exchange Commission's Public Reference Facilities, which
are in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and the
Securities and Exchange Commission's following regional offices: 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and Seven World Trade
Center, 13th Floor, New York, New York 10048. Copies of the material can be
obtained from the Securities and Exchange Commission's Public Reference Section,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates, by calling
1-800-SEC-0300. The Securities and Exchange Commission also maintains an
Internet web site at http://www.sec.gov that contains reports, proxy statements
and other information.
We filed with the Securities and Exchange Commission a registration
statement on Form S-3 under the Securities Act which registered the shares
covered by this prospectus for resale by the Registered Stockholders. This
prospectus is a part of the registration statement. This prospectus does not
contain all of the information shown in the registration statement because we
have omitted some portions of the prospectus as permitted by the Securities and
Exchange Commission's rules and regulations. Statements contained in this
prospectus as to any contract or other documents' contents are not necessarily
complete. In each instance, if the contract or document is filed as an exhibit
to the registration statement, the affected statement is qualified, in all
respects, by reference to the applicable exhibit to the registration statement.
For further information about us and our shares, we refer you to the
registration statement and the exhibits and schedules that you may obtain from
the Securities and Exchange Commission at its principal office in Washington,
D.C. after you pay the Securities and Exchange Commission's prescribed fees.
The Securities and Exchange Commission allows us to "incorporate by
reference" the information we file with them, which means that we can disclose
important information to you by referring you to these documents. The
information we have incorporated by reference is an important part of this
prospectus, and information that we file later with the Securities and Exchange
Commission will update and supersede automatically this information. We
incorporate by reference the following documents, which we have filed already
with the Securities and Exchange Commission, and any future filings we make with
the Securities and Exchange Commission under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act until the Registered Stockholders sell all of the shares:
1. Our Annual Report on Form 10-KSB for the year ended December 31,
1999.
2. Our following Current Reports on Form 8-K:
(a) Form 8-K dated December 29, 1999, as amended on March 9, 2000;
(b) Form 8-K dated January 10, 2000, as amended on February 11,
2000; and
(c) Form 8-K dated March 24, 2000.
3. The description of Mace's common stock contained in the Registration
Statement on Form 8-A (File No. 0-22810) filed by Mace to register
such securities under the Securities Exchange Act of 1934, including
all amendments and reports filed to update such description.
You should rely only on the information we include or incorporate by
reference in this prospectus and any applicable prospectus supplement. We have
not authorized anyone to provide you with information different from that
contained in this prospectus. The information contained in this prospectus or
the applicable prospectus supplement is accurate only as of the date on the
front of those documents,
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regardless of the time of delivery of this prospectus or the applicable
prospectus supplement or of any sale of our securities.
Any statement contained in this prospectus or in a document incorporated or
deemed to be incorporated by reference in this prospectus is deemed to be
modified or superseded for purposes of this prospectus to the extent that any of
the following modifies or supersedes a statement in this prospectus or
incorporated by reference in this prospectus:
. the case of a statement in a previously filed document incorporated or
deemed to be incorporated by reference in this prospectus, a statement
contained in this prospectus;
. a statement contained in any accompanying prospectus supplement
relating to a specific offering of shares; or
. a statement contained in any other subsequently filed document that is
also incorporated or deemed to be incorporated by reference in this
prospectus.
Any modified or superseded statement will not be deemed to constitute a
part of this prospectus or any accompanying prospectus supplement, except as
modified or superseded. Except as provided by the above mentioned exceptions,
all information appearing in this prospectus and each accompanying prospectus
supplement is qualified in its entirety by the information appearing in the
documents incorporated by reference.
We will provide without charge to each person to whom a copy of this
prospectus is delivered, after their written or oral request, a copy of any or
all of the documents incorporated in this prospectus by reference, other than
exhibits to the documents, unless the exhibits are incorporated specifically by
reference in the documents. Written requests for copies should be addressed to
Louis D. Paolino, Jr., Chief Executive Officer, Mace Security International,
Inc., 1000 Crawford Place, Suite 400, Mt. Laurel, New Jersey 08054.
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MACE SECURITY INTERNATIONAL, INC.
UP TO 3,285,405 SHARES
OF
COMMON STOCK
----------------------------------------
PROSPECTUS
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