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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 13, 1997
REGISTRATION NO. 333-_______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_____________
CANMAX INC.
(Exact name of Registrant as specified in its charter)
WYOMING 75-2461665
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
150 WEST CARPENTER FREEWAY
IRVING, TEXAS 75039
(972) 541-1600
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
PHILIP M. PARSONS COPY TO:
EXECUTIVE VICE PRESIDENT WILLIAM L. RIVERS, ESQ.
AND CHIEF FINANCIAL OFFICER ARTER & HADDEN
CANMAX INC. 1717 MAIN STREET, SUITE 4100
150 WEST CARPENTER FREEWAY DALLAS, TEXAS 75201-4605
IRVING, TEXAS 75039 (214) 761-4779
(972) 541-1600
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date
of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
=================================================================================================================================
Proposed Proposed
Title of Each Class of Amount to be Maximum Offering Maximum Aggregate Amount of
Securities to be Registered Registered(1) Price Per Share(1) Offering Price(1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value per share . . . . 863,364 shares $2.41 $2,080,707 $630
=================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee based
upon the average of the high and low prices of the Common Stock on the
Nasdaq Stock Market's SmallCap Market on August 7, 1997, in accordance
with Rule 457(c).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY STATE.
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SUBJECT TO COMPLETION - DATED AUGUST 13, 1997
PROSPECTUS
863,364 SHARES
CANMAX INC.
COMMON STOCK
The 863,364 shares (the "Shares") of common stock, no par value per
share (the "Common Stock"), of Canmax Inc. ("Canmax") to which this
Prospectus relates are being offered on behalf of and for the account of a
certain stockholder (the "Selling Stockholder") of Canmax. Canmax
anticipates that the Shares will be offered for sale until the earlier of (i)
the sale of all of the Shares, or (ii) 180 days after the effectiveness of
this Registration Statement. Canmax has agreed to pay all expenses of
registration in connection with this offering, but will not receive any of
the proceeds from the sale of the Shares being offered hereby. All fees and
disbursements of counsel for the Selling Stockholder, and all brokerage
commissions and other similar expenses incurred by the Selling Stockholder
will be borne by the Selling Stockholder. The aggregate proceeds to the
Selling Stockholder from the sale of the Shares will be the purchase price of
the Shares sold, less the aggregate brokerage commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne
by Canmax. See "Use of Proceeds," "Plan of Distribution" and "Selling
Stockholder."
The Common Stock is included in the Nasdaq Stock Market's SmallCap
Market (the "Nasdaq SmallCap Market") under the symbol "CNMX." On August 8,
1997, the last reported sales price for the Common Stock was $2.375 per share.
This offering of the Shares is currently not being underwritten.
However, the Selling Stockholder, brokers, dealers or underwriters that
participate with the Selling Stockholder in the distribution of the Shares
may be deemed "underwriters," as that term is defined in the Securities Act
of 1933, as amended (the "Securities Act"), and any commissions received by
broker-dealers, agents or underwriters and any profit on the resale of the
Shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Although neither Canmax nor the Selling
Stockholder have entered into any arrangement or underwriting agreement with
any underwriter, broker-dealer or agent, the Shares being offered hereby,
when sales thereof are made, may be made in one or more transactions (which
may involve one or more block transactions) through customary brokerage
channels, either through brokers acting as brokers or agents for the sellers,
or through dealers or underwriters acting as principals who may resell the
Shares in the Nasdaq SmallCap Market or in privately negotiated sales, or
otherwise, or by a combination of such methods of offering. Each sale may be
made either at market prices prevailing at the time of the sale or at
negotiated prices.
If and to the extent required, the specific number of Shares to be sold,
the name of the Selling Stockholder, the purchase price, the public offering
price, the names of any such agents, dealers or underwriters and any
applicable commissions or discounts with respect to a particular offer will
be set forth in an accompanying Prospectus Supplement.
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT
IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
AUGUST ___, 1997
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AVAILABLE INFORMATION
Canmax is subject to the informational reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information filed by Canmax with the Commission
may be inspected and copied at the Public Reference Section of the Commission
at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the following Regional Offices of the Commission: Chicago Regional
Office, Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such materials also may be
obtained by mail at prescribed rates from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such materials filed electronically by Canmax with the
Commission are available at the Commission's World Wide Web site at
http://www.sec.gov.
The Common Stock is listed on the Nasdaq SmallCap Market, and reports
and other information concerning Canmax may be inspected and copied at the
offices of the Nasdaq SmallCap Market at 1735 K Street, N.W., Washington,
D.C. 20006.
Canmax has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Shares of Common Stock
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information contained in the Registration
Statement. For further information with respect to Canmax and the Shares
offered hereby, reference is hereby made to the Registration Statement and
its exhibits and schedules. The Registration Statement may be inspected
without charge at the Public Reference Section of the Commission at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies
may be obtained therefrom at prescribed rates. Statements contained herein
concerning provisions of documents are necessarily summaries of such
documents, and each statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Canmax with the Commission under the
Exchange Act are hereby incorporated by reference in this Prospectus: (i)
Canmax's Annual Report on Form 10-K for the fiscal year ended October 31,
1996, (ii) Canmax's Proxy Statement for the Annual Meeting of Stockholders
held April 21, 1997, and (iii) Canmax's Quarterly Reports on Form 10-Q for
the quarters ended January 31, 1997 and April 30, 1997.
All reports and other documents filed by Canmax with the Commission
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the
date of this Prospectus and prior to the termination of the offering of the
Shares made hereby shall be deemed to be incorporated by reference herein and
to be a part hereof from the date of filing of such reports and documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a
statement contained herein or in a subsequently filed document modifies or
supersedes such statement. Any statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or the Registration Statement.
Upon written or oral request, Canmax will provide without charge to each
person to whom a copy of this Prospectus is delivered, a copy of any and all
of the documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Canmax Inc.,
150 West Carpenter Freeway, Irving, Texas 75039, Attention: Philip M. Parsons
(972) 541-1600.
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"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
With the exception of historical information, the matters discussed in
this Prospectus include forward looking statements that involve risks and
uncertainties. Among the risks and uncertainties to which Canmax is subject
are (i) user acceptance of Windows NT as an operating system, (ii)
concentration of revenues between two customers and Canmax's relationship
with such customers, (iii) the ability of Canmax to manage its growth, (iv)
Canmax's need for additional financing to fund product development, marketing
and related support services, (v) future technological developments and
product acceptance, (vi) intense price and product competition within the
industry, (vii) acquisition integration and (viii) other risks indicated
herein and in filings with the Commission. As a result, the actual results
realized by Canmax could differ materially from the statements made herein.
Recipients of this Prospectus are cautioned not to place undue reliance on
the forward looking statements made in this Prospectus.
3
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE.
THE COMPANY
Canmax Inc. ("Canmax") through its wholly owned subsidiary Canmax Retail
Systems, Inc. ("CRSI"), develops and provides enterprise wide technology
solutions to the convenience store and retail petroleum industries. Canmax
offers fully integrated retail automation solutions, including "C-Serve,"
which includes point of sale ("POS") systems, credit/debit network
authorization systems, pump control systems, and other back office management
systems, and "Vista," its headquarters-based management system. Canmax's
products and services enable retailers and operators to interact
electronically with customers, capture data at the point of sale, manage site
operations and logistics and communicate electronically with their sites,
vendors and credit/debit networks. Canmax also provides (a) software
development, customization and enhancements, (b) systems integration,
installation and training services, and (c) 24 hour a day, 365 day per year
help desk services. These additional services enable Canmax to tailor the
solutions to each customer's specifications and provide successful system
implementation, installation, training and after sales support.
Canmax's objective is to be a leading provider of enterprise wide
technology solutions to the convenience store and retail petroleum market.
Canmax is developing an enhanced version of its C-Serve product to run on the
Windows NT operating system in conjunction with a development project with
NCR Corporation ("NCR") and The Southland Corporation ("Southland"). As of
July 31, 1997, Canmax's products have been installed in over 5,900 locations
and Canmax has customers including Southland, ARCO and the Army and Air
Force Exchange.
Canmax was incorporated on July 10, 1986 under Canmax Act of the
Province of British Columbia, Canada, and subsequently changed its name to
"International Retail Systems Inc." On August 7, 1992, Canmax renounced its
original province of incorporation and elected to continue its domicile under
the laws of the State of Wyoming, and on November 30, 1994 its name was
changed to "Canmax Inc." Canmax's principal executive offices are located at
150 West Carpenter Freeway, Irving, Texas 75039 and its telephone number is
(972) 541-1600.
4
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THE OFFERING
Common Stock Offered by the Selling Stockholder.... 863,364 shares
Percent of Outstanding Common Stock of the
Company held by the Selling Stockholder.......... 13.1%(1)
Nasdaq SmallCap Market Symbol...................... CNMX
Use of Proceeds.................................... Canmax will not receive
any of the proceeds from
the sale of the Shares
being offered hereby
- -------------------
(1) Percentage indicated is based upon 6,611,005 shares of Common Stock
outstanding as of August 8, 1997.
THE PROPOSED AUTO-GAS MERGER
Canmax has entered into an Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement") dated as of June 16, 1997 among Canmax,
Canmax Retail Systems, Inc., a Texas corporation and a wholly-owned
subsidiary of Canmax ("CRSI") and Auto-Gas Systems, Inc., a Delaware
corporation ("AGSI"), pursuant to which AGSI will be merged (the "Merger")
with and into CRSI. Consummation of the Merger is subject to approval of the
Merger by the stockholders of AGSI and Canmax, certain due diligence matters,
the absence of material changes in Canmax or AGSI and other matters. The
Merger is anticipated to close on or before October 31, 1997. Upon the
consummation of the Merger, the separate corporate existence of AGSI will
cease to exist and the business operations of AGSI and CRSI will be conducted
through CRSI. Pursuant to the terms of the Merger Agreement, Canmax has
agreed to issue up to 6.7 million shares of its common stock, no par value
per share ("Common Stock"). In addition, Canmax has agreed to grant to G.
Randy Nicholson, the Chief Executive Officer and President of AGSI, and
Jeffrey F. Upp, the Vice President of Finance and Chief Financial Officer of
AGSI, warrants to purchase 285,000 shares and 120,000 shares, respectively,
of Common Stock at an exercise price of $0.58 per share, in each case as
additional compensation for certain non-competition covenants by such
persons. Based upon the current number of shares of common stock of AGSI
outstanding as of the date hereof, Canmax anticipates issuing approximately
5.2 million shares of Canmax stock to current AGSI stockholders upon
consummation of the Merger, and an additional 1.5 million shares will be
reserved for issuance upon the exercise of outstanding options and warrants
to purchase shares of AGSI common stock, which options and warrants are to be
assumed by Canmax in the Merger. For a description of the anticipated
combined business of Canmax and AGSI and Pro Forma Financial Information
relating to the Merger, see "The Combined Company."
5
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RISK FACTORS
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND ITEMS
DISCUSSED IN THIS PROSPECTUS ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. CANMAX'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. IN ADDITION TO
OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE FOLLOWING FACTORS COULD
CONTRIBUTE TO SUCH DIFFERENCES. PROSPECTIVE INVESTORS SHOULD CAREFULLY
CONSIDER THE FOLLOWING FACTORS AND CAUTIONARY STATEMENTS IN DETERMINING
WHETHER TO PURCHASE SHARES OF COMMON STOCK IN THE OFFERING MADE HEREBY. ALL
FACTORS SHOULD BE CONSIDERED IN CONJUNCTION WITH THE OTHER INFORMATION AND
FINANCIAL DATA APPEARING ELSEWHERE IN THIS PROSPECTUS AND IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. SEE "SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
CONCENTRATION OF REVENUES; CUSTOMER CONCENTRATION
Canmax's revenues are currently concentrated in The Southland
Corporation ("Southland"), which accounted for approximately 94% and 77% of
Canmax's total revenue for the six month periods ended April 30, 1997 and
1996, respectively. Canmax's revenues derived from its relationship with
Southland include products and services provided directly by Canmax to
Southland and indirectly through NCR Corporation ("NCR") to Southland
pursuant to NCR's contract with Southland. For the fiscal years ended
October 31, 1994, 1995 and 1996, Southland accounted for approximately 50%,
73% and 86%, respectively, of Canmax's total revenues for such fiscal years.
During those same periods, Electronic Data Systems ("EDS") accounted for 38%,
10% and 7%, respectively, of Canmax's revenues for such fiscal years. No
other customer accounted for over 10% of Canmax's total revenues. On April
29, 1997, Canmax and EDS agreed to terminate substantially all of their
business arrangements. Canmax does not anticipate any significant future
revenues from EDS.
By the end of calendar 1997, Canmax will have completed its previously
announced $9.5 million project development contract with NCR/Southland, and
Canmax's help desk services and production support agreements with Southland
expire in December 1998. Canmax is in discussions with Southland regarding
future projects and services, but no definitive agreement has been reached to
date. Any termination or significant disruption of Canmax's relationships
with Southland could have a material adverse effect on Canmax's business,
financial condition and results of operations. In addition, a deterioration
in the financial condition of any of its principal customers could expose
Canmax to the possibility of large accounts receivable write-offs, which
would materially adversely affect Canmax's financial condition and results of
operations.
PRODUCT CONCENTRATION
Canmax's primary product is C-Serve, which was designed by Canmax
exclusively for the retail petroleum and convenience store marketplace to
provide POS transaction processing including a comprehensive range of
management tools. For the fiscal years ended October 31, 1994, 1995 and
1996, C-Serve accounted for approximately 55%, 57% and 34%, respectively, of
Canmax's revenues for such fiscal periods. Canmax has allocated significant
capital resources to the development and completion of an enhanced version of
C-Serve to run on the Microsoft Windows family of operating systems
("Windows"). Canmax anticipates that C-Serve and its related enhancements
and versions will continue to account for a substantial portion of Canmax's
revenue for the foreseeable future. Accordingly, to the extent that Canmax
experiences any decline in demand for these products and services as a result
of competition, product obsolescence or otherwise, Canmax's operating results
and business prospects could be adversely affected.
HISTORY OF LOSSES
From inception through the fiscal year ended October 31, 1995, Canmax
experienced losses from continuing operations of approximately $6,042,000 and
$3,734,000 for the fiscal years ended October 31, 1994 and 1995,
respectively. For the fiscal year ended October 31, 1996, Canmax reported its
first full year of net income of approximately $143,000. For the six months
ended April 30, 1997, Canmax reported net income of approximately $659,000.
There can be no assurance that Canmax will continue to report net income in
the future as it pursues its plans to expand its product offerings and
customer base and to enhance the capabilities of its state-of-the art help
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desk.
The development of Canmax's business and the expansion of its product
offerings and customer base will require significant expenditures. Certain
of these expenditures, including marketing, sales and general and
administrative costs, are expensed as incurred while other expenditures,
including software design costs, are expensed over a period of time. Canmax
will continue to incur significant expenditures with the growth of its
business, including capital costs associated with expanding Canmax's product
offerings and sales, marketing and other expenses associated with expanding
Canmax's customer base. In light of Canmax's history of losses and its
expectation that it will continue to incur significant expenses in the
foreseeable future, there can be no assurance that Canmax will be able to
implement its growth strategy, sustain profitability or generate sufficient
cash flow to service its growth expectations.
LIQUIDITY NEEDS; DILUTION
Canmax generally maintains liquidity through cash generated by
operations, the issuance of equity securities, and the exercise of stock
options. Canmax has no line of credit or other lending facility. Canmax
continues to utilize the majority of its development resources to complete
the NCR/Southland Windows NT based project currently in progress. Canmax is
also developing its next generation Windows-based product to market to
potential customers other than Southland, the completion of which will not be
funded by work currently being performed for Southland. Canmax estimates
that the costs necessary to complete the development of this product and
bring the new product to market will range from $1.5 million to $2.0 million.
The failure to complete the development of such product could materially and
adversely affect the business prospects of Canmax.
Canmax believes that it may be necessary to raise additional capital to
complete development of its next generation products within the critical
window of opportunity and to provide vital marketing and other support
services. If cash generated from operations is insufficient to satisfy
Canmax's liquidity requirements, Canmax may be required to sell additional
debt or equity securities or obtain lines of credit, delay new product
development or restructure operations to reduce costs. No financing
arrangements to support this development project have been entered into by
Canmax at this time and there can be no assurances that such arrangements
will be available in the future, or, if available, that such arrangements
will be on terms satisfactory to Canmax.
Canmax is reviewing an acquisition strategy within its current industry
and other vertical markets. From time to time Canmax will review acquisition
candidates with products, technologies or other services that could enhance
Canmax's product offerings or services. Any material acquisitions could
result in Canmax issuing or selling additional debt or equity securities,
obtaining additional debt or other lines of credit. These activities may
also result in a decrease in Canmax's working capital depending, on the
amount, timing and nature of the consideration to be paid.
If the proposed merger ("Merger") between Auto-Gas Systems, Inc. ("AGSI")
and Canmax Retail Systems, Inc., a wholly-owned subsidiary of Canmax ("CRSI")
is not consummated or if the cash resources of AGSI at the consummation of
the Merger ("Effective Time") are insufficient to meet Canmax's current
liquidity needs, Canmax may immediately seek other sources of capital, which
may include public or private debt and/or equity financing or obtaining lines
of credit. No assurance can be given that such resources would be available
to Canmax on acceptable terms, if at all. Such financings could have a
dilutive effect on the stockholders of Canmax.
SIGNIFICANT FLUCTUATIONS IN REVENUES AND OPERATING RESULTS
Canmax's quarterly and annual revenues and operating results have varied
significantly in the past and are likely to continue to do so in the future.
Revenues and operating results may fluctuate as a result of several factors,
including the demand for Canmax's products and services, the timing and
acceptance of the introduction of new hardware and software products,
competitive conditions and economic conditions. In particular, Canmax's
operating results are highly sensitive to changes in the mix of Canmax's
product and service revenues and product margins. Further, the purchase of
Canmax's products and services generally involves a significant commitment of
capital, with the attendant delays frequently associated with large capital
expenditures and authorization procedures
7
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within an organization. For these and other reasons, Canmax's operating
results are subject to a number of significant risks over which Canmax has
little or no control, including customers' technology needs, budgetary
constraints and internal authorization reviews. Canmax may be unable to
adjust spending sufficiently in a timely manner to compensate for any
unexpected revenue shortfall, which could adversely affect operating results.
Accordingly, Canmax believes that period-to-period comparisons of its
operating results should not be relied upon as an indication of future
performance. In addition, the results of any quarterly period are not
necessarily indicative of results to be expected for a full fiscal year. It
is possible that in certain future periods, Canmax's operating results may be
below the expectations of public market analysts and investors. In such
event, the price of Canmax's Common Stock would likely be materially
adversely affected.
NEED FOR ADDITIONAL FINANCING FOR GROWTH
The growth of Canmax's business will require substantial investment on a
continuing basis to finance capital expenditures and expenses related to
product development and customer base growth. However, although the majority
of Canmax's new product development expenses are currently funded through
revenues derived under agreements with NCR and Southland, Canmax anticipates
that it will require an additional $1.5 to $2.0 million to develop and bring
its next generation Windows-based product to market. Canmax has historically
utilized capital leases to fund its larger capital expenditures, and cash
flow from operations and trade credit for its working capital requirements.
There can be no assurance that any such required additional funds would be
available on satisfactory terms and conditions, if at all. The markets for
Canmax's product and service offerings are characterized by rapidly changing
technology and frequent new product and service offerings. As a result,
Canmax's success will depend on its ability to enhance existing products and
services and to develop and introduce, on a timely and cost-effective basis,
new products and services that keep pace with technological developments and
address increasingly sophisticated customer requirements. This continued
product development may utilize capital currently expected to be available
for Canmax's present operations. The amount and timing of Canmax's future
capital requirements, if any, will depend upon a number of factors, including
product development expenses, marketing support service expenses, and
competitive conditions, many of which are not within Canmax's control.
Failure to obtain any required additional financing could materially
adversely affect the growth, cash flow and earnings of Canmax.
MANAGEMENT OF GROWTH; INTEGRATION OF ACQUIRED BUSINESSES
The consummation of the Merger will result in a significant growth of
Canmax's operations. To manage this growth effectively, Canmax will be
required to implement and improve its operating and financial systems and
controls. In addition, Canmax will be required to integrate its business
operations with those of AGSI. To the extent that Canmax's existing
management and management personnel of AGSI retained following the Merger are
unable to assume or adequately perform these combined duties, Canmax would be
adversely affected. There can be no assurance that the management, systems
and controls currently in place or any steps taken to improve such
management, systems and controls will be adequate in the future.
Achieving the benefits that Canmax believes will result from the Merger
will depend in part upon the integration of the businesses of Canmax and AGSI
in an efficient and effective manner, and there can be no assurance that this
will occur. The transition to a combined company will require substantial
attention from management. The diversion of management attention and any
difficulties encountered in the transition process could have an adverse
effect on the revenues and operating results of Canmax. In addition, there
can be no assurance that management of the two companies will be compatible,
and the process of combining the two organizations could cause the
interruption of, or the disruption in, the activities of either or both the
companies' businesses, which could have an adverse effect on their combined
operations.
RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL CHANGE
The markets for Canmax's product and service offerings are characterized
by rapidly changing technology and frequent new product and service
offerings. The introduction of new technologies can render existing products
and services obsolete and unmarketable. Canmax's primary software product is
C-Serve which runs under MS-DOS and UNIX operating systems. With the
emerging growth of the Windows family of operating systems, customers
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are preferring that their systems, solutions and software run under a
Windows-based system. As a result, Canmax believes it is critical that it
develop a Windows based product to remain competitive in today's changing
marketplace. Further, Canmax's continued success will depend on its ability
to enhance existing products and services, to develop and introduce, on a
timely and cost-effective basis, new products and services that keep pace
with technological developments, and to address increasingly sophisticated
customer requirements. There can be no assurance that Canmax will be
successful in identifying, developing and marketing product and service
enhancements or new products and services that respond to technological
change, that Canmax will not experience difficulties that could delay or
prevent the successful development, introduction and marketing of product and
service enhancements or new products and services, or that its product and
service enhancements and new products and services will adequately meet the
requirements of the marketplace and achieve market acceptance. Canmax's
business, financial condition and results of operations could be materially
adversely affected if Canmax were to incur delays in sourcing and developing
product and service enhancements or new products and services or if such
product and service enhancements or new products and services did not gain
market acceptance.
DEPENDENCE ON AND NEED TO RECRUIT AND RETAIN KEY MANAGEMENT AND TECHNICAL
PERSONNEL
Canmax's success depends to a significant extent on its ability to
attract and retain key personnel. In particular, Canmax is dependent on its
senior management and technical personnel. As of April 30, 1997, Canmax
employed approximately 49 technical professionals. Canmax anticipates
further growth in its technical staff. In the past, Canmax has experienced
difficulty in attracting qualified technical personnel. Competition for such
technical personnel is intense and no assurance can be given that Canmax will
be able to recruit and retain such personnel. The failure to recruit and to
retain management and technical personnel could have a material adverse
effect on Canmax's anticipated growth, revenues and results of operations.
INTENSE COMPETITION
The markets in which Canmax operates are characterized by intense
competition from several types of technical service providers, including POS
equipment manufactures, specialized application software companies and pump
manufacturers. Canmax expects to face further competition from new market
entrants and possible alliances between competitors in the future. Certain
of Canmax's current and potential competitors have greater financial,
technical, marketing and other resources than Canmax. As a result, they may
be able to respond more quickly to new or emerging technologies and changes
in customer requirements or to devote greater resources to the development,
promotion and sale of their products and services than Canmax. No assurance
can be given that Canmax will be able to compete successfully against current
and future competitors.
PROTECTION OF INTELLECTUAL PROPERTY
Canmax seeks to protect its proprietary software, systems and processes
through copyright, trademark and trade secret laws and contractual
restrictions on disclosure and copying. Despite such measures, it may be
possible for unauthorized third parties to copy aspects of Canmax's software,
systems and processes or to obtain and use information that Canmax regards as
proprietary. In addition, no assurance can be given that the protective
measures taken by Canmax will be sufficient to preclude competitors from
developing competing or similar proprietary software, systems and processes.
ABSENCE OF DIVIDENDS
Canmax has never declared or paid any cash dividends on its common
stock, no par value per share ("Common Stock"), and does not presently intend
to pay cash dividends on the Canmax Common Stock in the foreseeable future.
Canmax intends to retain future earnings for reinvestment in its business.
MARKET FOR COMMON STOCK; VOLATILITY OF STOCK PRICE
Canmax cannot ensure that an active trading market for the Common Stock
on the Nasdaq SmallCap Market will be sustained subsequent to the Merger.
After completion of the Merger, the market for the Common
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Stock may be influenced by many factors, including the depth and liquidity of
the market for the Canmax Common Stock, investor perceptions of Canmax and
general economic and other similar conditions. The market price for shares of
the Canmax Common Stock has varied significantly and may be volatile
depending on news announcements or changes in general market conditions. In
particular, news announcements, quarterly results of operations, competitive
developments, litigation or governmental regulatory action impacting Canmax
may adversely affect the Canmax Common Stock price.
PROPOSED INCREASED LISTING STANDARDS
On January 28, 1997, the National Association of Securities Dealers,
Inc. and The Nasdaq Stock Market approved increases in the listing and
maintenance standards governing the Nasdaq SmallCap Market that are awaiting
final approval by the Commission. If the new standards are approved by the
Commission and Canmax fails to meet the increased maintenance standards,
Canmax could be subject to being delisted from the Nasdaq SmallCap Market.
The delisting of Canmax would materially adversely affect the liquidity of
the Canmax Common Stock.
SHARES AVAILABLE FOR FUTURE SALE
Canmax will issue up to an additional 6.7 million shares of Canmax
Common Stock in connection with the Merger. Following the consummation of the
Merger, certain former stockholders of AGSI may seek to dispose of the shares
of Canmax Common Stock received in connection with the Merger. Canmax has
agreed to register the resale of shares of Canmax Common Stock received by
certain affiliates of AGSI (to be designated at closing) following the
consummation of the Merger, which registration will enable such persons to
resell their shares of Canmax Common Stock received in the Merger without
restriction. There can be no assurance, given the moderately low volume of
trading typically exhibited in the Canmax Common Stock, that all holders
seeking to dispose of Canmax Common Stock will be able to do so or at what
price such shares will be sold if dispositions are made. Further, the sale
of a significant number of shares of Canmax Common Stock could adversely
affect the market price thereof.
THE COMPANY
OTHER THAN HISTORICAL AND FACTUAL STATEMENTS, THE MATTERS AND ITEMS
DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS OF CANMAX MAY DIFFER MATERIALLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. CERTAIN FACTORS THAT
COULD CONTRIBUTE TO SUCH DIFFERENCES ARE DISCUSSED IN "RISK FACTORS," WITH
THE FORWARD-LOOKING STATEMENTS THROUGHOUT THIS PROSPECTUS AND IN "SAFE HARBOR
STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995."
BUSINESS
GENERAL. Canmax Inc. through its wholly owned subsidiary CRSI, develops
and provides enterprise wide technology solutions to the convenience store
and retail petroleum industries. Canmax offers fully integrated retail
automation solutions, including "C-Serve," which includes point of sale
("POS") systems, credit/debit network authorization systems, pump control
systems, and other back office management systems, and "Vista," its
headquarters-based management system. Canmax's products and services enable
retailers and operators to interact electronically with customers, capture
data at the point of sale, manage site operations and logistics and
communicate electronically with their sites, vendors and credit/debit
networks. Canmax also provides (a) software development, customization and
enhancements, (b) systems integration, installation and training services,
and (c) 24 hour a day, 365 day per year help desk services. These additional
services enable Canmax to tailor the solutions to each customer's
specifications and provide successful system implementation, installation,
training and after sales support.
Canmax's objective is to become a leading provider of enterprise wide
technology solutions to the convenience store and retail petroleum market.
Canmax is developing an enhanced version of its C-Serve product to run on the
Windows NT operating system in conjunction with a development project with
NCR and Southland scheduled for release in the fourth calendar quarter of
1997. As of July 31, 1997 Canmax's products have been
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installed in over 5,900 locations and its customers include, among others,
Southland, ARCO and the Army and Air Force Exchange.
BUSINESS STRATEGY. In the United States, there are currently
approximately 200,000 locations which derive revenues from the operations of
convenience stores and/or retail gasoline sites. Canmax believes that the
industry is currently under automated and under invested in automation and
technology solutions. The National Association of Convenience Stores (NACS)
1995 Future Study: Convenience 2000 confirms that the convenience store
environment requires information derived from automation solutions to compete
efficiently and effectively. Convenience stores lag the rest of the retail
industry in store automation. For example, approximately 16% of all
convenience stores utilize scanning technology, while grocery stores have
implemented scanning technology in approximately 90% of their locations.
Recent studies indicated that convenience store operators recognize the
significance of automation of their operations to their future success.
Canmax believes that the industry is prepared to increase its investment in
automation and technology solutions. This belief is supported by recent
surveys which reveal that the majority of convenience store operators plan to
increase their spending for technology solutions. Canmax therefore believes
that there will be demand in the marketplace for the Canmax's products,
solutions and services. Canmax believes that international markets also
represent substantial marketing opportunities for its solutions.
Canmax's marketing strategy includes (i) providing solutions based
products and services for the automation and management of convenience stores
and gasoline stations, (ii) maintaining a high level of customer service
through its help desk services and account managers, (iii) seeking strategic
partnerships to provide Canmax visibility to buying audiences worldwide, and
(iv) continuing to invest in product development initiatives.
Canmax identifies potential customers by size and geographic location
and directs its marketing efforts along these segments. In general, Canmax
allocates its sales and marketing efforts to "corporate accounts" with global
operations, "national accounts" with operations primarily in the U.S. and
"regional accounts" with operations on a local or regional basis. Canmax
estimates that corporate accounts represent approximately 20% of its target
locations, national accounts represent 60% of its target locations, and
regional accounts represent the remaining 20% of its target locations.
Canmax utilizes concurrent efforts by both sales representatives and account
managers in analyzing, selecting and implementing an automation system.
PRODUCTS AND SERVICES
Canmax utilizes a process called "Pathmation" to analyze a customer's
needs, assess a customer's options, and implement the best resources
available to build a path leading a customer to its ultimate goal. The
Pathmation process includes (i) defining business goals, (ii) defining
business processes to support the business goals; (iii) determining
technology requirements to support defined business processes; (iv)
developing an implementation plan that encompasses business processes,
technology training and continuing support; (v) deploying modified business
processes, technology and support infrastructure; and (vi) continuously
validating results with business goals and changes in business practices.
In December of 1993, Canmax signed a five year agreement with Southland
to provide software licenses, development services, and provide hardware and
help desk services. Southland chose Canmax's proprietary convenience store
automation software, C-Serve, as the basis for its automation of store
functions and operations at its corporate and franchise operated 7-Eleven
convenience stores in the United States. Software licensing, product and
service revenue under this agreement during the fiscal years ended October
31, 1994, 1995, and 1996 totaled approximately $2,118,000, $3,733,000 and
$2,581,000, respectively, while development revenues recorded under the
Southland agreement during these same periods totaled approximately
$2,468,000, $1,792,000 and $971,000, respectively. In 1995, Canmax
contracted with NCR to successfully bid for two additional contracts with
Southland. These projects resulted in revenues to Canmax of approximately
$1,005,000 and $1,755,000 in the fiscal years ended October 31, 1995 and
1996, respectively. During fiscal 1996, Canmax reached an agreement with NCR
to develop for Southland a next generation Windows NT based version of the
Canmax C-Serve convenience store software for $9.5 million. NCR was chosen
by Southland to provide project management and other professional services
for the project. Approximately $3,920,000 of revenues under such agreement
was
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recognized by Canmax in fiscal 1996, and the remainder is expected to be
recognized in fiscal 1997. There are currently over 5,000 7-Eleven stores
using software developed by Canmax.
C-SERVE. The Canmax C-Serve is a comprehensive site-based store
automation software solution that provides, as its key features, debit/credit
card processing, pump control, POS and scanning capabilities, and significant
back office functions. Canmax's solutions are designed to allow retailers to
process transactions, manage pumps and credit/debit card processing and
capture data at the point of sale, as well as manage other front office and
back office operations. The key purpose of such systems is to provide the
store operator with information and tools to enable improved store operations
and profitability. C-Serve includes features such as touch screen, PC
keyboard or integrated third party POS terminals providing user friendly
applications and flexibility in set up and configuration to accommodate the
operational needs and differences of each site. Further, C-Serve has the
capability of supporting communications and data transfer to and from remote
corporate headquarters.
C-Serve was designed exclusively for the retail petroleum and
convenience store marketplace. C-Serve's features include:
- point-of-sale transaction processing, incorporating touch screens,
PC POS keyboards, or integrated POS terminals,
- fueling transactions,
- dispenser controls,
- settlement transactions for credit/debit cards,
- shift and day reporting,
- store maintenance,
- file maintenance,
- inventory controls,
- fuel inventory management,
- reporting capabilities,
- accounts receivable controls,
- island payment terminals,
- credit/debit card authorizations,
- communications to or from head office,
- security controls,
- shelf label generation,
- interface to handheld terminals and scanners,
- time and attendance records, and
- car wash interface.
Presently, C-Serve operates in a DOS/UNIX environment. Canmax is
currently developing its next generation of C-Serve software to run under the
Windows NT operating system. The next generation product is being developed
concurrently with the development project with NCR/Southland and is expected
to reflect state of the art technologies, features and functionality. Release
of this product is scheduled for the fourth calendar quarter of 1997.
VISTA. The Canmax "Vista" software provides a flexible automation
system that is able to conform to changing business needs. Vista is a
decision support, communications and remote store management system that
operates from corporate headquarters. Through a communications network,
Vista provides for the transmission of data messages from headquarters to the
remote store and from the store to headquarters. Vista's features include
fuel and retail pricebook maintenance, tax book maintenance, vendor
pricebook maintenance, and exception reporting for stores. Other features
of Vista include:
-batch or on-line communications
-remote on-line support
-sales analysis from store to store, zone to zone and region to region
-addition of new parameters at any time
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-decision support, and
-report writer
OTHER SERVICES AND PRODUCTS. In addition to revenues generated from the
licensing of C-Serve and Vista software and sale of proprietary communication
boards, revenues are generated from the following other services:
1) modification and custom development contracts,
2) installation and training services,
3) annual maintenance and support services contracts, and
4) the provision of third-party software and hardware.
Canmax's products are designed to provide a flexible generic system that
can be easily modified to meet most customer's individual needs and
preferences. Most customers, such as major oil companies, typically require
a certain degree of product customization and the development of unique
interfaces to communicate with their existing proprietary networks and host
systems. Canmax typically charges for customization and development costs.
Because Canmax retains ownership of the source code for such products (which
is essential to effect program changes), Canmax typically realizes service
revenues from such products throughout the duration of a relationship with
the customer.
To assist retailers and store operators in optimizing their use of
Canmax's software, Canmax also offers consulting, installation, training and
help desk support services. Canmax provides installation and training
services at each installed site, and back-up and technical support services
from a central location. Canmax has developed a proprietary help desk support
system known as "Sites." Sites provides efficient call handling, automatic
problem escalation, and customer reporting 24 hours a day, 7 days a week.
Trained support technicians handle everything from "how do I..." questions to
dispatching field service for hardware problems. Support services also
include free software and user guide updates as well as ensuring that
technicians respond to all problems in a timely manner. Sites management
reports help identify and resolve recurring issues, such as the need for
additional training at the store or potential hardware failures. Sites also
supports remote dial in capability to the Canmax help desk Sites database,
which provides customers managing a number of locations access to data and
reporting functions to better manage their operations.
Canmax does not usually directly sell hardware, such as personal
computers and POS terminals, although it does provide a small amount of
related equipment which may not be readily available from the principal
hardware vendor. The majority of hardware products supplied to customers is
provided by hardware vendors such as NCR, Ultimate Technologies and Compaq
Computers. Third party software and hardware products such as operating
systems, local and wide area network software and modems are also packaged
with Canmax's software and firmware products and sold in accordance with
distribution agreements entered into with such suppliers.
PRODUCT DEVELOPMENT. Due to the rapid pace of technological change in
its industry, Canmax believes that its future success will depend, in part,
on its ability to enhance and develop its software products to meet customer
needs.
C-Serve is being enhanced to be operating system independent through the
use of sophisticated software tools. Canmax believes that this independence
will be a competitive advantage. Canmax currently provides C-Serve in a Unix
environment and a Windows NT based version of C-Serve is scheduled for
release in fourth calendar quarter of 1997. Canmax has developed Vista
(commonly referred to as a "host system") which enables operators of chains
of gas stations/convenience stores to monitor and control activities at
stores. Operators are able to obtain "real time" store level information
(from all stores or any number of selected stores) at headquarters over
communications lines to provide timely information for decision making.
During the fiscal years ended October 31, 1994, 1995 and 1996, Canmax
expensed approximately $2,609,000, $2,401,000 and $1,477,000, respectively,
on product development activities. Canmax incurred approximately $3,127,000,
$0 and $129,000 during the fiscal years ended October 31, 1994, 1995 and
1996, respectively, in software development costs, which were initially
capitalized. Because of the uncertainty of future
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revenue in the near term from certain products, Canmax recorded a write down
of approximately $4,127,000 of capitalized software costs in fiscal 1994.
SALES AND MARKETING. Canmax markets C-Serve and ancillary products and
services from its offices in Irving, Texas. Virtually all sales efforts are
focused on the U.S., Canada and Mexico at this time. However, Canmax plans to
expand its international marketing efforts in the future. More than 99% of
1996 revenue was derived from U.S. based customers.
BACKLOG. Product is generally delivered to customers when ordered.
There is no backlog of orders; however Canmax has signed contracts with
customers for the future delivery of products and services. Revenue from
these contracts may be affected by changes in customer requirements,
competition, technology and economic factors. There can be no assurance that
the Canmax's expectation of revenue will be realized in full.
COMPETITION
Canmax believes its competition can be categorized as follows:
- pump manufacturers,
- point-of-sale equipment manufacturers, and
- specialized application software companies.
Pump manufacturers supply the majority of point-of-sale devices used by
gas stations and convenience stores. They supply specialized equipment with
proprietary interfaces specific to their pump control consoles. The
proprietary nature of their products limits the technology used and the
ability to interface to other devices. Their primary intent, however, is to
provide a complementary service to the sale of their "core" product - pumps.
Canmax faces competition from manufacturers such as Dresser Industries Inc.,
Gilbarco Inc. and Tokheim Corporation.
Software firms, such as Canmax, specializing in gas and convenience
store applications enjoy the advantage of bringing specialized knowledge and
applications to customers. The industry, however, does not enjoy a strong
reputation as service consultants who deliver solutions that meet/exceed
customer expectations. Canmax faces competition from software firms such as
Radiant Systems, Inc., MSI, Pinnacle, Inc., and Stores Automated Software,
Inc. Canmax's service strategy is designed to employ "Pathmation," a
consultative servicing process, to understand customer needs, while guiding
and delivering appropriate products better than other marketplace
alternatives.
Specialized POS manufacturers traditionally have developed solutions
based on their proprietary hardware. POS manufacturers, such as Verifone,
Ltd., NCR and IBM, also compete with Canmax.
Many of Canmax's current and prospective competitors have substantially
greater financial, technical and marketing resources than Canmax. The most
significant threat is the possibility of some consolidation or alliance of
major suppliers creating a larger, stronger presence in the marketplace.
Canmax also anticipates that additional competitors may enter certain of
Canmax's markets, resulting in even greater competition. There can be no
assurance that Canmax will be able to compete with existing or new
competitors. Increased competition could result in significant price
reductions with negative effects upon Canmax's gross margins and a loss of
market share, which could materially and adversely affect Canmax's business,
financial condition and operating results.
EMPLOYEES
As at April 30, 1997, Canmax had 115 full time employees. The
functional distribution of the employees was 9 in sales and marketing and
professional services, 49 in product development and advanced research, 11 in
general and administration, and 46 in service, support and education. All are
located in Irving, Texas with the exception of two sales employees located
outside Texas. None of its employees is represented by a labor union, and
Canmax considers its employee relations to be excellent.
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PROPERTIES
Canmax occupies 47,178 square feet of office space at 150 West Carpenter
Freeway, Irving, Texas, pursuant to a lease which expires August 31, 1998.
The space is used for executive, administrative, sales, engineering
personnel, help desk and related services, as well as for inventory storage
and demonstration purposes. Canmax does not have an option to renew the
lease. Canmax believes that its existing facilities are adequate to meet its
current and foreseeable requirements and that suitable additional or
substitute space will be available as needed. Canmax does not believe it has
been or will be materially affected by environmental laws.
LEGAL PROCEEDINGS
Neither Canmax nor any of its subsidiaries are party to any material
legal proceedings.
RECENT EVENTS
EDS OPTION EXERCISE
On April 29, 1997, EDS exercised an option to acquire up to 25% of
Canmax's Common Stock, resulting in Canmax issuing to EDS an additional
1,598,136 shares of Canmax Common Stock. Canmax accounted for this
transaction by reclassifying the amount associated with the option to common
stock. EDS then immediately sold its total interest in Canmax, representing
1,863,364 shares, in a private transaction to Founders Equity Group, Inc.
("the Selling Stockholder") and the Dodge Jones Foundation, two Texas-based
institutional investors. In conjunction with this transaction, Canmax agreed
to extend certain registration rights similar to those held by EDS with
regard to such shares to the two institutional investors.
Canmax believes that the termination of its relationship with EDS is
beneficial because Canmax will be able to market its products directly
(rather than through EDS) to a much larger customer base within selected
target markets. Additionally, Canmax believes that the termination of the
EDS option will facilitate Canmax's future growth strategies as the dilutive
effect of the EDS option has been eliminated.
ENGAGEMENT OF THE SELLING STOCKHOLDER
In May 1997, Canmax retained the Selling Stockholder, to provide
investment advisory services to Canmax with regards to the proposed Merger
with AGSI. Pursuant to the terms of such agreement, Canmax has agreed to pay
to the Selling Stockholder a fee of $25,000.
WARRANT ISSUANCE
On May 9, 1997, the Selling Stockholder exercised its right to demand
that Canmax file a registration statement with regard to all its shares of
Canmax Common Stock. Under applicable securities laws, Canmax was unable to
file such registration statement until after the filing of the registration
statement relating to the resale of shares of Canmax Common Stock in the
Merger. Pursuant to the terms of the registration rights agreement with the
Selling Stockholders, Canmax was to have filed a registration statement on or
about July 23, 1997 or incur a registration penalty of 50,000 shares per
month. The Selling Stockholder has agreed to extend the registration
obligation until August 26, 1997 in exchange for its receipt of a warrant to
purchase 50,000 shares of Canmax Common Stock at an exercise price of $2.00
per share. The registration obligation has been satisfied by the filing of
the registration statement of which this Prospectus forms a part.
THE PROPOSED AUTO-GAS MERGER
Canmax has entered into an Amended and Restated Agreement and Plan of
Merger (the "Merger Agreement") dated as of June 16, 1997 among Canmax, CRSI
and AGSI pursuant to which AGSI will be merged (the "Merger") with an into
CRSI. Upon the consummation of the Merger, the separate corporate existence
of AGSI will cease to exist and the business operations of AGSI and CRSI will
be conducted through CRSI. Pursuant to the
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terms of the Merger Agreement, Canmax has agreed to issue up to 6.7 million
shares of its Common Stock to the AGSI stockholders. In addition, Canmax has
agreed to grant to G. Randy Nicholson, the Chief Executive Officer and
President of AGSI, and Jeffrey F. Upp, the Vice President of Finance and
Chief Financial Officer of AGSI, warrants to purchase 285,000 shares and
120,000 shares, respectively, of Common Stock at an exercise price of $0.58
per share, in each case as additional compensation for certain
non-competition covenants by such persons. Based upon the current number of
shares of common stock of AGSI outstanding as of the date hereof, Canmax
anticipates issuing approximately 5.2 million shares of Canmax stock to
current AGSI stockholders upon consummation of the Merger, and an additional
1.5 million shares will be reserved for issuance upon the exercise of
outstanding options and warrants to purchase shares of AGSI common stock,
which options and warrants are to be assumed by Canmax in the Merger. For a
description of the anticipated combined business of Canmax and AGSI and Pro
forma Financial Information relating to the Merger, see "The Combined
Company."
THE COMBINED COMPANY
BUSINESS OF THE COMBINED COMPANY
Following the consummation of the Merger, Canmax, together with the
combined operations of AGSI (the "Combined Company"), will be in the business
of developing and providing enterprise wide technology solutions to the
convenience store and retail petroleum industries. In particular, the
Combined Company will offer an expanded product line, with solutions that
will service the needs of the smaller customer or the larger customer looking
for an integrated, scaleable solution, plus "pay-at-the-pump," unattended and
fleet fueling capability. The Combined Company's products and services will
be sold through its direct sales force and extensive distribution network.
The Combined Company will have access to in excess of 40 credit/debit card
networks, including proprietary networks of major oil companies and third
party electronic payment networks. Further, the Combined Company will have an
expanded presence internationally, with installed sites currently in Hong
Kong, mainland China, the Middle East, South America and Canada.
The Combined Company's products have been installed in over 15,000
locations and its customers include Circle K, BHP Hawaii, Thrifty Oil,
Fuelman, Inc., Irving Oil Corp., West Texas Gas, The Southland Corporation,
ARCO, and the Army and Airforce Exchange.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial information
gives effect to the proposed Merger. Upon consummation of the Merger, each
share of AGSI Common Stock will be converted into the right to receive
3.37623 shares of Canmax Common Stock. The Merger will be accounted for as a
purchase of AGSI by Canmax.
The unaudited pro forma combined condensed balance sheet as of April 30, 1997
gives effect to the Merger as if it had occurred on April 30, 1997, and
combines the unaudited consolidated balance sheet of Canmax as of April 30,
1997 and the unaudited balance sheet of AGSI as of March 31, 1997.
The unaudited pro forma combined condensed statement of operations for the
six months ended April 30, 1997 combines the unaudited consolidated statement
of operations of Canmax for the six months ended April 30, 1997, and the
unaudited statement of operations of AGSI for the six months ended March 31,
1997, as if the Merger had occurred at the beginning of the respective period.
The unaudited pro forma combined condensed statement of operations for the
year ended October 31, 1996, combines the audited consolidated statement of
operations of Canmax for the year ended October 31, 1996, and the audited
statement of operations of AGSI for the year ended September 30, 1996, as if
the Merger had occurred at the beginning of the respective fiscal year.
The unaudited pro forma combined condensed financial information described
above is presented for illustrative
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purposes only and is not necessarily indicative of the financial position or
results of operations that would have actually been reported had the Merger
occurred at the beginning of the periods presented, nor is it necessarily
indicative of future financial position or results of operations. The
accompanying unaudited pro forma combined condensed financial statements are
based upon the respective historical financial statements of Canmax and AGSI
and should be read in conjunction with the respective historical financial
statements and notes thereto of Canmax and AGSI included elsewhere in this
Prospectus. Additionally, the accompanying unaudited pro forma combined
condensed financial statements do not incorporate any benefits from cost
savings that may result in the combined entity.
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<TABLE>
Historical Pro Forma
----------------------------- --------------------------------
Canmax Inc. AutoGas
Systems Inc.
April 30, March 31,
1997 1997 Adjustments Combined
---------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 71,573 $ 2,358,053 $ 2,429,626
Accounts receivable, net 2,726,096 2,444,107 5,170,203
Inventories 50,582 2,299,657 2,350,239
Deferred tax asset 239,625 239,625
Prepaid expenses and other 151,715 570,858 722,573
---------- ----------- -----------
Total current assets 2,999,966 7,912,300 10,912,266
Property and equipment, net 1,094,989 660,453 1,755,442
Purchased research and development $ 6,960,000 (A) -
(6,960,000)(B)
Capitalized software costs, net 401,292 1,247,048 400,000 (A) 1,548,340
(500,000)(D)
Intangible assets, net 38,889 481,391 (A) 1,315,050
794,770 (C)
Investment in FST Holdings 283,547 (283,547)(D) -
Other assets 134,329 6,657 140,986
---------- ----------- ----------- -----------
Total assets $4,669,465 $10,110,005 $ 892,614 $15,672,084
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>
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UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET (CONTINUED)
<TABLE>
Historical Pro Forma
------------------------------- --------------------------------
Canmax Inc. AutoGas
Systems Inc.
April 30, March 31,
1997 1997 Adjustments Combined
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 827,203 $ 563,104 $ 1,390,307
Accrued liabilities 496,566 942,746 $ 647,000 (G) 2,086,312
Deferred revenue 271,871 124,283 396,154
Current portion of lease obligation 132,839 132,839
Current portion of long term debt 34,703 34,703
------------ ----------- ----------- ------------
Total current liabilities 1,763,182 1,630,133 647,000 4,040,315
Lease obligations 103,060 103,060
Long-term debt 68,600 68,600
Non-compete 794,770 (C) 794,770
Deferred tax liability 396,044 (156,419)(L) 239,625
Shareholders' equity:
Common stock 23,234,233 1,541,794 (1,541,794)(H) 37,885,324
14,651,091 (H)
Additional paid-in capital 5,344,739 (5,344,739)(H) -
Retained earnings (deficit) (20,499,610) 1,197,295 (6,960,000)(B) (27,459,610)
(1,197,295)(H)
------------ ----------- ----------- ------------
Total shareholders' equity 2,734,623 8,083,828 (392,737) 10,425,714
------------ ----------- ----------- ------------
Total liabilities and
shareholders' equity $ 4,669,465 $10,110,005 $ 892,614 $ 15,672,084
------------ ----------- ----------- ------------
------------ ----------- ----------- ------------
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>
19
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
Historical Pro Forma
-------------------------------- --------------------------------
Canmax Inc. AutoGas
Systems, Inc.
Six months Six months
ended ended
April 30, 1997 March 31, 1997 Adjustments Combined
-------------- -------------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ - $3,153,881 $ 3,153,881
Software licenses and product
revenue 654,761 621,405 1,276,166
Development 6,081,848 177,170 6,259,018
Service agreements 997,565 750,214 1,747,779
---------- ---------- -----------
7,734,174 4,702,670 12,436,844
---------- ---------- -----------
Costs and expenses:
Cost of systems sales - 1,352,466 $ 200,000 (E) 1,552,466
Costs of software licenses
and product revenue 474,353 64,193 (50,000)(I) 488,546
Cost of development revenues 2,991,773 14,672 3,006,445
Customer service 1,154,793 1,026,319 2,181,112
Product development 314,515 515,987 830,502
Sales and marketing 253,753 887,094 1,140,847
General and administrative 1,878,471 733,653 37,910 (E) 2,729,511
79,477 (K)
---------- ---------- --------- -----------
7,067,658 4,594,384 267,387 11,929,429
---------- ---------- --------- -----------
Operating income 666,516 108,286 (267,387) 507,415
Other income (expense):
Interest, net (7,250) 61,563 (4,738)(K) 49,575
Equity loss in FST Holdings - (40,552) 40,552 (N) -
---------- ---------- --------- -----------
Income before taxes 659,266 129,297 (231,573) 556,990
Income tax expense (benefit) - 73,043 (73,043)(M) -
---------- ---------- --------- -----------
Net income $ 659,266 $ 56,254 $(158,530) $ 556,990
---------- ---------- --------- -----------
---------- ---------- --------- -----------
Net income per common
and common equivalent share $ 0.10 $ 0.05
---------- -----------
---------- -----------
Shares used in per share computation 6,618,348 12,369,719
---------- -----------
---------- -----------
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>
20
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
<TABLE>
Historical Pro Forma
------------------------------------- ----------------------------------
Canmax Inc. AutoGas
Systems, Inc.
Year Ended Year Ended
October 31, 1996 September 30, 1996 Adjustments Combined
---------------- ------------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenues:
Systems sales $ - $ 9,529,884 $ 9,529,884
Software licenses and product
revenue 1,892,077 1,483,934 3,376,011
Development 7,392,040 271,526 7,663,566
Service agreements 2,979,743 1,159,174 4,138,917
----------- ----------- -----------
12,263,860 12,444,518 24,708,378
----------- ----------- -----------
Costs and expenses:
Cost of systems sales - 3,572,913 $ 400,000 (F) 3,972,913
Costs of software licenses
and product revenue 1,539,644 203,351 (100,000)(J) 1,642,995
Cost of development revenues 2,949,166 182,082 3,131,248
Customer service 2,321,798 1,895,954 4,217,752
Product development 1,476,720 1,066,365 2,543,085
Sales and marketing 440,582 1,612,475 2,053,057
General and administrative 3,365,289 1,730,753 75,821 (F) 5,330,817
158,954 (K)
----------- ----------- --------- -----------
12,093,199 10,263,893 534,775 22,891,867
----------- ----------- --------- -----------
Operating income 170,661 2,180,625 (534,775) 1,816,511
Other income (expense):
Interest, net (28,047) 141,554 (9,477)(K) 104,030
Equity loss in FST Holdings - (87,983) 87,983 (N) -
----------- ----------- --------- -----------
Income before taxes 142,614 2,234,196 (456,269) 1,920,541
Income tax expense (benefit) - 831,564 (660,724)(M) 170,840
----------- ----------- --------- -----------
Net income $ 142,614 $ 1,402,632 $ 204,455 $ 1,749,701
----------- ----------- --------- -----------
----------- ----------- --------- -----------
Net income per common and common
equivalent share $ 0.02 $ 0.14
----------- -----------
----------- -----------
Shares used in per share computation 6,851,148 12,481,356
----------- -----------
----------- -----------
See accompanying notes to unaudited pro forma combined condensed financial statements.
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(A) Adjustment to reflect intangible assets resulting from the merger of
AGSI with Canmax. The purchase price was 5,205,451 shares of Canmax common
stock which, for purposes of purchase accounting, was valued at $12,638,842
plus the value assigned to AGSI stock options and warrants assumed by Canmax
of $2,174,249 and acquisition costs of $485,000 for a total purchase price of
$15,298,091. Canmax is currently in the process of having an independent
appraiser perform an allocation of the purchase price.
Based upon discussions with the independent appraiser, a preliminary
allocation of the purchase price with regards to intangible assets is as
follows:
<TABLE>
Description Allocation of Purchase Price Amortization Period
(Useful Life)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Purchased Research and Development $6,960,000 N/A
Goodwill $ 123,391 5 years
Capitalized software costs $1,147,048 1-5 years
Assembled Workforce $ 358,000 7 years
</TABLE>
Of the total purchase price allocated to capitalized software costs,
$400,000 represents additional value identified by the appraisal which has
been assigned a 1 year life.
The above allocation is preliminary and may change based upon the final
valuation and allocation of the purchase price.
(B) Purchased research and development was identified and valued through
extensive interviews and analysis of data for each of AGSI's products under
development. Expected future cash flows of each product under development
were discounted taking into account risks associated with the difficulties
and uncertainties in completing the project(s) and thereby achieving
technological feasibility and risks related to the viability of and potential
changes in future target markets. This resulted in $6,960,000 of purchased
research and development which has not reached technological feasibility and
does not have alternative future use. Therefore, in accordance with
generally accepted accounting principles, the $6,960,000 of purchased
research and development cost was written-off as a pro forma adjustment in
the accompanying pro forma balance sheet as of April 30, 1997. Such charge
will be included in the income statement in the period the transaction is
consummated. Such charge has been excluded from the pro forma statements of
operations as it was considered a non-recurring material charge.
(C) Adjustment to reflect non-compete agreements with AGSI executives
resulting from the merger of AGSI with Canmax.
(D) The adjustment to capitalized software costs represents a write-down to
projects recorded on AGSI's books for which the Combined Company has no plans
to market the products or will not pursue additional development to market
the products. Therefore, Canmax has assigned no value to such projects.
The investment in FST Holdings, which is accounted for under the equity
method, has historically incurred losses. The Combined Company does not plan
to invest additional funds in the underlying venture. Therefore, Canmax has
assigned no value to the investment.
(E) Adjustment to reflect the pro forma amortization of capitalized software
costs of $200,000, assembled work force of $25,571 and goodwill of $12,339
over their estimated useful lives resulting from the acquisition of AGSI for
the six months ended April 30, 1997.
22
<PAGE>
(F) Adjustment to reflect the pro forma amortization of capitalized software
costs of $400,000, assembled work force of $51,143 and goodwill of $24,678
over their estimated useful lives resulting from the acquisition of AGSI for
the year ended October 31, 1996.
(G) Represents accrual for estimated costs associated with the merger
totaling $647,000 which primarily consist of legal and professional fees of
$235,000, estimated severance and relocation costs of $250,000 and
registration costs of $162,000 Costs totaling $485,000 have been accounted
for as additional purchase price. The remaining costs of $162,000 represent
costs estimated to be incurred to register the securities to be issued
relating to the merger and have been recorded as a reduction of the fair
value of the securities issued.
(H) Reflects the elimination of AGSI's historical shareholders' equity and
the recording of the additional shares, options and warrants issued as a
result of the merger, net of estimated costs to register securities to be
issued.
(I) Impact on amortization of $50,000 for the six months ended April 30,
1997, of the pro forma write-down of capitalized software (see (D) above).
(J) Impact on amortization of $100,000 for the year ended October 31, 1996
of the pro forma write-down of capitalized software (see (D) above).
(K) Imputed interest and amortization on non-compete agreements.
(L) Adjustment to reflect tax impact of the merger as of April 30, 1997.
(M) The Combined Company anticipates that the Merger will qualify as a tax
free reorganization under Internal Revenue Code (I.R.C.) Section 368(a).
The Combined Company anticipates limitation of use of its tax net
operating loss ("NOL") carryforwards as a result of a change in ownership as
defined in I.R.C. Section 382. Based on the estimated market value of Canmax
prior to the Merger, as provided under Section 382, the Combined Company will
utilize its limited NOL carryforward to partially offset the pro forma
taxable income and accordingly has reduced tax expense paid or accrued for
the six months ended April 30, 1997 and the year ended October 31, 1996.
The Combined Company will provide an allowance of approximately $6.2
million to reduce its deferred tax asset to zero due to uncertainty of its
realization. The deferred tax asset is principally attributable to $17.3
million in NOL carryforwards expiring from 2006 to 2010.
(N) Adjustment to reflect impact on equity loss in FST Holdings of the pro
forma valuation adjustment to investment in FST Holdings (See (D) above).
USE OF PROCEEDS
The Shares being offered hereby are for the account of the Selling
Stockholder. Accordingly, Canmax will not receive any of the proceeds from
the sale of the Shares by the Selling Stockholder. See "Selling Stockholder."
DILUTION
The net tangible book value of Canmax at April 30, 1997 was $2,692,734,
or $0.41 per share. "Net tangible book value per share" is equal to Canmax's
total tangible assets less total liabilities (excluding deferred income
taxes), divided by the number of shares of Common Stock outstanding. Based on
an assumed public offering price of $2.375 (the closing price of the Common
Stock on the Nasdaq SmallCap Market on August 8, 1997), new investors
purchasing shares at the public offering price would experience an immediate
dilution of $1.965 in net tangible book value per share.
The following table illustrates the per-share dilution at April 30,
1997:
23
<PAGE>
Assumed public offering price $ 2.375
Net tangible book value $ 0.41
Assumed dilution to new investors in the offering $ 1.965
SELLING STOCKHOLDER
The following table sets forth the name of the Selling Stockholder and
the number of shares that may be offered by it. The number of Shares that may
be actually sold by the Selling Stockholder will be determined by the Selling
Stockholder, and may depend upon a number of factors, including, among other
things, the market price of the Common Stock. Because the Selling
Stockholder may offer all, some or none of the Shares that it holds, and
because the offering contemplated by this Prospectus is currently not being
underwritten, no estimate can be given as to the number of Shares that will
be held by the Selling Stockholder upon or prior to termination of this
offering. See "Plan of Distribution." The table below sets forth information
as of August 8, 1997, concerning the beneficial ownership of the Shares of
the Selling Stockholder. All information as to beneficial ownership has been
furnished by the Selling Stockholder.
<TABLE>
SHARES OF
COMMON STOCK
STOCK OFFERED IN SHARES
THE OFFERING PREVIOUSLY
SHARES OF COMMON STOCK (INCLUDING SHARES SOLD IN SHARES OF COMMON STOCK
OWNED BEFORE OFFERING PREVIOUSLY SOLD) THE OFFERING OWNED AFTER OFFERING(1)
---------------------- ----------------- ------------ -----------------------
NAME OF SELLING STOCKHOLDER NUMBER PERCENT NUMBER NUMBER NUMBER PERCENT
- --------------------------- ---------- ------- ---------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
Founders Equity Group, Inc. 913,364(2) 13.7 863,364(3) 0 50,000(2) 0.8
</TABLE>
- ------------
(1) Assumes all shares of Common Stock offered hereby are sold.
(2) Includes 50,000 shares subject to presently exercisable warrants.
(3) On April 29, 1997, Founders Equity Group, Inc., a Texas corporation
("Founders") entered into a Purchase Agreement with Electronic Data
Systems Corporation, a Texas corporation ("EDS"), whereby Founders
purchased from EDS 863,364 shares of Common Stock. In connection with
such acquisition, Canmax granted certain registration rights to Founders,
and pursuant thereto, has registered for sale in the offering made hereby
863,364 of Common Stock. The costs of this registration (other than
brokerage commissions and other similar expenses) will be paid by Canmax.
PLAN OF DISTRIBUTION
Canmax will not receive any proceeds from the sale of the Shares by the
Selling Stockholder. The Shares may be sold from time to time to purchasers
directly by the Selling Stockholder. Alternatively, the Selling Stockholder
may from time to time offer its Shares to or through underwriters,
broker-dealers or agents who may receive compensation in the form of
commissions, underwriting discounts, concessions or other compensation from
the Selling Stockholder and/or the purchasers of such Shares for whom they
may act as agent. However, neither Canmax nor the Selling Stockholder has
entered into any arrangements or underwriting agreements with any
underwriter, broker-dealer or agent relative to the Shares to be offered
hereby. It is anticipated that the Selling Stockholder will offer all of the
Shares held by it for sale. All expenses of registration incurred in
connection with this offering are being borne by Canmax, but all brokerage
commissions and other similar expenses incurred by the Selling Stockholder
will be borne by the Selling Stockholder.
The Shares may be sold from time to time in one or more transactions at
fixed prices, at the prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. The sale of
the Shares may be effectuated in transactions (which may involve crosses or
block transactions) (i) on any national securities exchange or quotation
service on which the Shares may be listed or quoted at the time of sale, (ii)
in the over-the-
24
<PAGE>
counter market, (iii) in transactions otherwise than on such exchanges or in
the over-the-counter market, or (iv) through the writing and exercise of
options. At the time a particular offer of Shares is made, if and to the
extent required, a supplement to this Prospectus (the "Prospectus
Supplement") will be distributed that will identify and set forth the
aggregate amount of Shares being offered and the terms of the offering,
including the name or names of any underwriters, dealers or agents, the
purchase price paid by any underwriter for Shares purchased from the Selling
Stockholder, any commissions, discounts and other items constituting
compensation from the Selling Stockholder and any commissions, discounts or
concessions allowed or reallowed or paid to dealers, including the proposed
selling price to the public. In order to comply with certain states'
securities laws, if applicable, the Shares will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In certain states,
the Shares may not be sold unless the Shares have been registered and qualify
for sale in such state, or unless an exemption from registration or
qualification is available and is obtained.
The Selling Stockholder and any dealer acting in connection with the
offering of any of the Shares or any broker executing or selling orders on
behalf of the Selling Stockholder may be deemed to be an "underwriter" within
the meaning of the Securities Act, in which event any profit on the sale of
any or all of the Shares and any commissions, underwriting discounts
concessions or other compensation received by any such dealers or brokers may
be deemed to be underwriting commissions and discounts under the Securities
Act. Any dealer or broker participating in any distribution of the Shares
may be required to deliver a copy of this Prospectus, including the
Prospectus Supplement, if any, to any person who purchases any of the Shares
from or through such dealer or broker.
Under applicable rules and regulations under the Exchange Act, any
person engaged in a distribution of the Shares may not simultaneously engage
in market making activities with respect to the Shares for a period of nine
business days prior to the commencement of such distribution. The Selling
Stockholder will be subject to applicable provisions of the Exchange Act and
the rules and regulations promulgated thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases
and sales of the Shares by the Selling Stockholder.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of Canmax consists of 44,169,100 shares of
Common Stock. As of August 8, 1997, there were 6,611,005 shares of Common
Stock held by 480 stockholders of record.
The Common Stock is the only class of capital stock authorized by
Canmax's Articles of Incorporation. Each share of Common Stock ranks equally
as to dividends, voting rights, participation in assets on winding-up and in
all other respects. No shares have been or will be issued subject to call or
assessment. There are no pre-emptive rights, provisions for redemption or
purchase for either cancellation or surrender or provisions for sinking or
purchase funds. Provisions as to the modification, amendment or variation of
such rights or such provisions are contained in the laws of the State of
Wyoming. All outstanding shares of Common Stock are fully paid and
non-assessable, and the shares of Common Stock offered hereby will, upon
issuance (as described herein), be fully paid and non assessable.
Canmax's common stock trades on the Nasdaq SmallCap Market tier of The
Nasdaq Stock Market under the symbol CNMX. On November 25, 1995, Canmax's
Common Stock was granted a temporary exception to the Minimum Bid Price
listing requirement and Canmax's stock remained listed and traded under the
symbol CNMXC. At the time, Canmax's stock had been trading below the minimum
bid price of $1.00. Nasdaq granted Canmax a temporary listing exception
subject to Canmax achieving a minimum bid price in excess of $1.00 on or
before January 22, 1996. In order to meet the Nasdaq listing requirements,
the Board of Directors of Canmax approved a one-for five reverse stock split
effective December 21, 1995. No fractional shares were issued pursuant to
such change. In lieu of issuing fractional shares, one additional share was
issued to replace the fractional share. From this date, Canmax had a
temporary new trading symbol of CNMCD, previously CNMXC. Canmax's stock has
traded in excess of the minimum bid price requirement since December 21,
1995. On January 15, 1996, Nasdaq advised Canmax that it was in compliance
with all requirements necessary for continued listing on The Nasdaq SmallCap
Market tier of The Nasdaq Stock Market. Effective January 17, 1996, Canmax's
trading symbol reverted back to
25
<PAGE>
CNMX. While Canmax anticipates meeting the requirements for continued listing
on the Nasdaq SmallCap Market in the future, there can be no assurance that
Canmax will continue to comply with the listing requirements. See "Risk
Factors - Proposed Increased Listing Standards."
REGISTRATION RIGHTS
The beneficial owners of 1,863,364 shares of Canmax Common Stock
currently outstanding have the right to request that Canmax effect the
registration of any or all of such shares or to include any or all of such
shares in any registration statement to be filed by Canmax relating to the
registration of Canmax Common Stock under the Securities Act (other than
registration statements on Form S-4 or Form S-8). The holders of such shares,
the Dodge Jones Foundation (with respect to 1,000,000 shares) and the Selling
Stockholder (with respect to 863,364 shares), acquired such shares from EDS
on April 29, 1997. See "Recent Events - EDS Option Exercise." In connection
with such transaction, Canmax extended to such investors registration rights
similar to the registration rights formerly held by EDS. The registration
rights agreement with the Selling Stockholder requires Canmax to file with
the Commission, within 75 days of demand, a registration statement covering
the shares of Canmax Common Stock requested to be included in the
registration statement or incur registration penalties of 50,000 shares per
month until such registration statement is filed or until the demand
registration is withdrawn. On May 9, 1997, the Selling Stockholder requested
that Canmax file a registration statement covering all of its shares of
Canmax Common Stock. The Selling Stockholder has agreed to extend the date
for Canmax's registration obligation until August 26, 1997 to allow Canmax to
first file the registration statement regarding the shares of Common Stock to
be issued in the Merger. As consideration for such extension, Canmax agreed
to grant to the Selling Stockholder a warrant to purchase up to 50,000 shares
of Canmax Common Stock at an exercise price of $2.00 per share. The
registration obligation has been satisfied by the filing of the registration
statement of which this purchase forms a part. Canmax has agreed to grant to
the Selling Stockholder the right to include the shares issuable upon the
execution of such warrant in other registration statements (other than on
Form S-4 or S-8) of Canmax.
In addition, Canmax has agreed to file within 60 days following the
consummation of the Merger a registration statement to permit resales of
shares of Canmax Common Stock received in the Merger by certain former
affiliates of AGSI. Canmax has also agreed to include in such registration
statement shares issuable upon the exercise of the warrants granted to
Messrs. Nicholson and Upp as consideration for certain noncompetition
agreements. See "Recent Events - The Proposed Auto-Gas Merger."
Pursuant to the terms of employment agreements entered into between
Canmax and Roger D. Bryant, its President and Chief Executive Officer, Debra
L. Burgess, its Executive Vice President and Chief Operating Officer and
Philip M. Parsons, its Executive Vice President and Chief Financial Officer,
such persons were granted warrants to require shares of Canmax Common Stock
that vest upon Canmax's achieving certain financial performance results or a
Change of Control. See "Description of Capital Stock-Change of Control and
Severance Agreements." These warrants entitle the holders thereof to request
the registration of the shares issuable pursuant to such warrants or to
include such shares in other registration statements (other than on Form S-4
or S-8) of Canmax.
CHANGE OF CONTROL AND SEVERANCE ARRANGEMENTS
Roger D. Bryant, the Chief Executive Officer and President of Canmax,
Philip M. Parsons, Executive Vice President and the Chief Financial Officer
of Canmax, and Debra L. Burgess, an Executive Vice President and the Chief
Operating Officer of Canmax, each serve as executive officers of CRSI
pursuant to written employment agreements that commenced July 1, 1997. Each
employment agreement provides these executives certain benefits and
protections upon a "Change of Control," which is defined to occur (i) at any
time a person acquires in excess of thirty percent of the combined voting
power of the outstanding securities of CRSI or Canmax, (ii) if, at any time
during the twenty-four month period following a merger, tender offer,
consolidation, sale of assets or contested election, or any combination
thereof, at least a majority of the Canmax Board shall cease to consist of
either (a) directors who served prior to such transaction or (b) directors
whose nomination for election by the stockholders of Canmax was approved by
at least two-thirds of all directors then serving, or (iii) at any time the
stockholders of Canmax approve an agreement to sell or dispose of all or
substantially all of the assets of CRSI or Canmax. Each employment agreement
specifically excludes the proposed Merger with AGSI from the Change of
Control
26
<PAGE>
definition. Each employment agreement also permits CRSI to terminate the
executive for "Cause", meaning a termination as a result of (a) acts of
dishonesty constituting a felony or intended to result in substantial gain
for personal enrichment at the expense of CRSI or Canmax, or (b) the willful
and continued failure to substantially perform such person's duties and
responsibilities following a demand for substantial performance by CRSI or
Canmax. Each employment agreement prohibits the executive from engaging in
any activities in competition with CRSI or Canmax during the employment term
and prohibits the executive from soliciting any employees, customers or
clients of Canmax or CRSI during the 2-year period following any voluntary
termination by the executive or termination for Cause.
The employment agreements with Messrs. Bryant, Parsons and Ms. Burgess
also provide for the issuance of warrants ("Performance Warrants") to each
executive as additional employment compensation. Each Warrant expires 10
years from the date of issuance, and is exercisable at a price of $2.25 per
share, the closing price of the Canmax Common Stock on July 17, 1997, the
date that the compensation committee approved the issuance of such warrants.
The Performance Warrants vest 50% upon the "Trigger Date" and 50% on the
one-year anniversary of the Trigger Date. As used in each employment
agreement, the Trigger Date means the date of the earlier of the following
events: (i) the earnings per share of Canmax (after tax) equals or exceeds
$0.30 per share during any fiscal year, (ii) the closing price of the Canmax
Common Stock equals or exceeds $8.00 per share for sixty-five consecutive
trading days, or (iii) a Change of Control.
Mr. Bryant's employment agreement expires June 30, 1999. Mr. Bryant is
entitled to receive an annual base salary of $185,000 and to participate in
any bonus programs established by the Canmax Board. Upon execution of his
employment agreement, Mr. Bryant was also granted Performance Warrants to
acquire 250,000 shares of Canmax Common Stock. Pursuant to the terms of his
agreement, Mr. Bryant may elect to voluntarily terminate his employment
within 90 days following a Change of Control and receive a lump sum payment
equal to one year's base salary. If Mr. Bryant is terminated during his
employment period without Cause, he will be entitled to continue to receive
his base salary and benefits for a period of two years and an amount equal to
any bonus paid during the preceding 12 months (payable in 24 monthly
installments) in accordance with CRSI's standard payroll cycle; provided,
however, that such amounts shall be payable in a lump sum following a Change
of Control.
Ms. Burgess' employment agreement expires June 30, 1998. Ms. Burgess is
entitled to receive an annual base salary of $140,000 and to participate in
any bonus programs established by the Canmax Board. Upon the execution of
her employment agreement, Ms. Burgess was also granted Performance Warrants
to acquire 125,000 shares of Canmax Common Stock. Pursuant to the terms of
her agreement, Ms. Burgess may elect to voluntarily terminate her employment
within 90 days following a Change of Control and receive a lump sum payment
equal to one year's base salary. If Ms. Burgess is terminated during her
employment period without Cause, she will be entitled to continue to receive
her base salary and benefits for a period of one year and an amount equal to
50% of any bonus paid during the preceding 12 months (payable in 12 monthly
installments) in accordance with CRSI's standard payroll cycle; provided,
however, that such amounts shall be payable in a lump sum following a Change
of Control.
Mr. Parsons' employment agreement expires June 30, 1998. Mr. Parsons is
entitled to receive an annual base salary of $125,000 and to participate in
any bonus programs established by the Canmax Board. Upon the execution of
his employment agreement, Mr. Parsons was also granted Performance Warrants
to acquire 100,000 shares of Canmax Common Stock. Pursuant to the terms of
his agreement, Mr. Parsons may elect to voluntarily terminate his employment
within 90 days following a Change of Control and receive a lump sum payment
equal to one year's base salary. If Mr. Parsons is terminated during his
employment period without Cause, he will be entitled to continue to receive
his base salary and benefits for a period of one year and an amount equal to
50% of any bonus paid during the preceding 12 months (payable in 12 monthly
installments) in accordance with CRSI's standard payroll cycle; provided,
however, that such amounts shall be payable in a lump sum following a Change
of Control.
27
<PAGE>
Upon consummation of the Merger, Steve Covington is anticipated to
execute an employment agreement with CRSI for a one year term, pursuant to
which he will be entitled to receive an annual base salary of $100,000 and to
participate in any bonus programs established by the Canmax Board. Mr.
Covington's employment agreement will contain "Change of Control" and "Cause"
definitions and provisions similar to Mr. Parsons' and Ms. Burgess'.
Pursuant to the terms of his agreement, Mr. Covington would be entitled to
elect to voluntary terminate his employment within 90 days following a Change
of Control and receive a lump sum payment equal to one year's base salary.
If Mr. Covington were to be terminated during his employment without Cause,
he would be entitled to continue to receive his base salary and benefits for
a period of one year and an amount equal to 50% of any bonus paid during the
preceding 12 months (payable in 12 monthly installments) in accordance with
CRSI's regular payroll cycle; provided, however, that such amounts shall be
payable in a lump sum following a Change of Control. Mr. Covington's
employment agreement prohibits him from competing with CRSI during the
employment term and prohibits him from soliciting any employee, consultant,
supplier or customer of CRSI or Canmax during the two year period following
his voluntary termination of the agreement or a termination for Cause. The
agreement also provides for the vesting of all of his options to acquire
shares of AGSI Common Stock held by Mr. Covington (which options will be
assumed by Canmax in the Merger) following a Change of Control.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Canmax Common Stock is Montreal
Trust Company.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
Canmax by Arter & Hadden, Dallas, Texas.
EXPERTS
The consolidated financial statements of Canmax Inc. appearing in Canmax
Inc.'s Annual Report (Form 10-K) for the year ended October 31, 1996, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts
in accounting and auditing.
The financial statements of AGSI at September 30, 1996, 1995 and 1994
appearing in this Prospectus and Registration Statement have been audited by
Price Waterhouse LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein and in the Registration Statement, and are
included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
28
<PAGE>
Index To Financial Statements
Financial Statements of Auto-Gas Systems, Inc.:
Report of Price Waterhouse LLP, Independent Accountants..................... F-2
Balance Sheets.............................................................. F-3
Statements of Income........................................................ F-4
Statements of Stockholders' Equity.......................................... F-5
Statements of Cash Flows.................................................... F-6
Notes to Financial Statements............................................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
AUTO-GAS SYSTEMS, INC.
In our opinion, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Auto-Gas
Systems, Inc. (the "Company") at September 30, 1996 and 1995, and the results
of its operations and its cash flows for the three years ended September 30,
1996 in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting for income taxes in fiscal 1994.
/s/ Price Waterhouse LLP
Fort Worth, Texas
November 8, 1996
F-2
<PAGE>
AUTO-GAS SYSTEMS, INC.
BALANCE SHEETS
- ------------------------------------------------------------------------------
<TABLE>
MARCH 31, SEPTEMBER 30,
1997 1996 1995
------------ ----------- ----------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,358,053 $ 3,137,473 $2,882,179
Accounts and notes receivable, net of
allowance for doubtful accounts of
$356,171, $332,924 and $291,020,
respectively 2,444,107 2,020,890 1,845,500
Inventories 2,299,657 2,118,754 1,676,276
Deferred tax assets 239,625 350,609 428,339
Prepaid expenses and other current assets 570,858 313,500 277,555
----------- ----------- ----------
Total current assets 7,912,300 7,941,226 7,109,849
Property and equipment, net 660,453 682,737 396,830
Computer software development and
acquisition costs, net 1,247,048 1,228,564 881,876
Investment in FST Holdings 283,547 324,099 374,582
Other assets 6,657 16,373 40,423
----------- ----------- ----------
Total assets $10,110,005 $10,192,999 $8,803,560
----------- ----------- ----------
----------- ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 563,104 $ 561,507 $ 500,809
Accrued warranty 258,831 284,963 160,770
Accrued management bonus 5,042 283,170 297,355
Accrued franchise taxes 186,986 183,557 120,798
Accrued commissions 31,589 44,007 126,569
Accrued expenses and other current liabilities 460,298 374,340 255,779
Deferred revenue 124,283 15,000 380,563
----------- ----------- ----------
Total current liabilities 1,630,133 1,746,544 1,842,643
Deferred tax liabilities 396,044 418,881 335,975
Commitments and contingencies (Note 10)
Stockholders' equity:
Common stock, $1 par value, 3,000,000
shares authorized, 1,541,794 shares
issued and outstanding 1,541,794 1,541,794 1,541,794
Additional paid-in capital 5,344,739 5,344,739 5,344,739
Retained earnings (deficit) 1,197,295 1,141,041 (261,591)
----------- ----------- ----------
Total stockholders' equity 8,083,828 8,027,574 6,624,942
----------- ----------- ----------
Total liabilities and stockholders' equity $10,110,005 $10,192,999 $8,803,560
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AUTO-GAS SYSTEMS, INC.
STATEMENTS OF INCOME
- -----------------------------------------------------------------------------
<TABLE>
FOR THE SIX MONTHS
ENDED MARCH 31, FOR THE YEARS ENDED SEPTEMBER 30,
------------------------- ----------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Systems $3,153,881 $5,007,791 $ 9,529,884 $ 9,907,056 $ 8,512,754
Software 621,405 948,596 1,483,934 864,042 1,479,526
Development 177,170 203,034 271,526 755,412 136,680
Support and service agreements 750,214 542,634 1,159,174 555,852 224,158
---------- ---------- ----------- ----------- -----------
4,702,670 6,702,055 12,444,518 12,082,362 10,353,118
---------- ---------- ----------- ----------- -----------
Costs and expenses:
Cost of systems 1,352,466 1,876,424 3,572,913 3,554,288 3,788,184
Cost of software 64,193 120,501 203,351 378,119 323,518
Cost of development 14,672 132,075 182,082 762,134 7,039
Cost of support and service
agreements 78,855 94,260 241,843 63,860 31,652
Writedown of capitalized software - - - 892,060 -
Sales and marketing 887,094 813,246 1,612,475 1,427,587 1,182,185
Product development 515,987 416,966 1,066,365 560,025 582,646
Support services 947,464 700,615 1,654,111 948,557 549,326
General and administrative 733,653 861,648 1,730,753 1,658,136 1,266,785
---------- ---------- ----------- ----------- -----------
4,594,384 5,015,735 10,263,893 10,244,766 7,731,335
---------- ---------- ----------- ----------- -----------
108,286 1,686,320 2,180,625 1,837,596 2,621,783
Other income (expense):
Interest income 61,5636 6,905 141,678 104,386 10,098
Interest expense - - (124) (4,068) (29,648)
Equity loss in FST Holdings (40,552) (45,883) (87,983) (134,467) (117,701)
---------- ---------- ----------- ----------- -----------
Income before income tax expense 129,297 1,707,342 2,234,196 1,803,447 2,484,532
Income tax expense 73,043 645,380 831,564 728,583 116,294
---------- ---------- ----------- ----------- -----------
Net income $ 56,254 $1,061,962 $ 1,402,632 $ 1,074,864 $ 2,368,238
---------- ---------- ----------- ----------- -----------
---------- ---------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AUTO-GAS SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------------------
<TABLE>
ADDITIONAL RETAINED
COMMON PAID-IN EARNINGS
SHARES STOCK CAPITAL (DEFICIT) TOTAL
--------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1993 1,541,794 $1,541,794 $5,344,739 $(3,704,693) $3,181,840
Net income for the year ended
September 30, 1994 2,368,238 2,368,238
--------- ---------- ---------- ----------- ----------
Balance at September 30, 1994 1,541,794 1,541,794 5,344,739 (1,336,455) 5,550,078
Net income for the year ended
September 30, 1995 1,074,864 1,074,864
--------- ---------- ---------- ----------- ----------
Balance at September 30, 1995 1,541,794 1,541,794 5,344,739 (261,591) 6,624,942
Net income for the year ended
September 30, 1996 1,402,632 1,402,632
--------- ---------- ---------- ----------- ----------
Balance at September 30, 1996 1,541,794 1,541,794 5,344,739 1,141,041 8,027,574
Net income for the six months
ended March 31, 1997 (unaudited) 56,254 56,254
--------- ---------- ---------- ----------- ----------
Balance at March 31, 1997
(unaudited) 1,541,794 $1,541,794 $5,344,739 $ 1,197,295 $8,083,828
--------- ---------- ---------- ----------- ----------
--------- ---------- ---------- ----------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AUTO-GAS SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------
<TABLE>
FOR THE SIX MONTHS FOR THE YEARS
ENDED MARCH 31, ENDED SEPTEMBER 30,
------------------------- -----------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ----------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 56,254 $1,061,962 $ 1,402,632 $1,074,864 $2,368,238
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Depreciation and amortization 96,756 72,251 160,613 135,664 123,598
Writedown and amortization of
capitalized software 132,728 131,766 256,413 1,271,766 600,362
Deferred income taxes 88,147 112,985 160,636 (38,174) (54,190)
Equity loss in FST Holdings 40,552 45,883 87,983 134,467 117,701
Bad debt expense 23,247 32,156 41,904 107,252 17,545
Changes in assets and liabilities providing
(using) cash:
Accounts and notes receivable (446,464) (734,977) (217,294) (76,646) (527,075)
Inventories (180,903) (85,564) (442,478) (355,060) (439,165)
Prepaid expenses and other current
assets (257,358) 129,091 (35,945) (51,468) (173,387)
Other assets 9,716 13,525 24,050 36,865 51,061
Accounts payable 1,597 180,250 60,698 42,916 (93,623)
Accrued expenses and other current
liabilities (118,008) 77,692 (156,797) 265,579 695,524
---------- ---------- ----------- ---------- ----------
Cash provided by (used for) operating activities (553,736) 1,037,020 1,342,415 2,548,025 2,686,589
---------- ---------- ----------- ---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (74,472) (186,753) (446,520) (226,762) (180,106)
Computer software development and
acquisition costs (151,212) (199,940) (603,101) (558,699) (219,881)
Investment in FST Holdings - - (37,500) (112,500) (328,000)
---------- ---------- ----------- ---------- ----------
Cash used for investing activities (225,684) (386,693) (1,087,121) (897,961) (727,987)
---------- ---------- ----------- ---------- ----------
Cash flows from financing activities:
Net repayments on line of credit and other notes - - - (235,369) (951,215)
---------- ---------- ----------- ---------- ----------
Cash used for financing activities - - - (235,369) (951,215)
---------- ---------- ----------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (779,420) 650,327 255,294 1,414,695 1,007,387
Cash and cash equivalents, beginning of period 3,137,473 2,882,179 2,882,179 1,467,484 460,097
---------- ---------- ----------- ---------- ----------
Cash and cash equivalents, end of period $2,358,053 $3,532,506 $ 3,137,473 $2,882,179 $1,467,484
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ - $ - $ 124 $ 4,990 $ 50,408
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
Income taxes $ 89,066 $ 289,052 $ 597,844 $1,081,036 $ -
---------- ---------- ----------- ---------- ----------
---------- ---------- ----------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AUTO-GAS SYSYEMS, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
DESCRIPTION OF BUSINESS. Auto-Gas Systems, Inc. ("Auto-Gas" or the
"Company") was incorporated in the state of Delaware in December 1986.
The Company is engaged in the design, development, manufacture, and
marketing of automated fueling systems and convenience store automation
software. Sales are achieved by in-house salesmen primarily to operators
of convenience stores and gas stations located in the United States with
some international sales.
INTERIM FINANCIAL INFORMATION. The accompanying interim financial
information for the six-month period ended March 31, 1997 and 1996 has
not been audited but, in the opinion of management of the Company,
includes all adjustments (consisting of normal recurring adjustments)
which the Company considers necessary for a fair presentation of the
Company's financial position at March 31, 1997, and results of
operations and cash flows for the six-month periods ended March 31, 1997
and 1996. The results of operations for the six-month period ended
March 31, 1997 are not necessarily indicative of results expected for
any subsequent period or the full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION - Revenue from the sale of automated fueling systems
and convenience store automation software is recognized upon shipment to
customers when all significant risks of ownership have been transferred.
Certain software sales are contingent upon acceptance after a trial period.
In such cases, revenue is not recognized until after the trial period when
the buyer becomes obligated to pay the Company. Revenue from software
maintenance agreements is recognized ratably over the term of the
agreement. Revenue from product development contracts is recorded as
deferred revenue until completion of the related project and delivery to
the customer.
CONCENTRATION OF CREDIT RISK - Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of
account receivables and cash and cash equivalents in excess of FDIC insured
limits. Substantially all of the Company's customers are engaged in
convenience store and automated fueling system operations; however, credit
risk is limited due to the large number of customers, their dispersion
across many different geographic locations and the Company's ongoing
performance of credit evaluations of its customers' financial condition.
As of September 30, 1996, the Company had no significant concentration of
credit risk. Cash and cash equivalents in excess of FDIC insured limits
approximated $2,600,000 as of September 30, 1996. The Company has not
experienced any losses on its cash and cash equivalents.
CASH AND CASH EQUIVALENTS - For purposes of the Statements of Cash Flows,
the Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
F-7
<PAGE>
AUTO-GAS SYSYEMS, INC.
NOTES TO FINANCIAL STATEMENTS
INVENTORIES - Inventories are stated at the lower of cost or market with
cost being determined using the first-in, first-out (FIFO) method. The
cost of inventory includes material, freight-in, labor and overhead. The
components of inventories are as follows:
MARCH 31, SEPTEMBER 30,
1997 1996 1995
---------- ---------- ----------
(unaudited)
Raw materials $1,279,429 $1,212,243 $1,034,502
Work-in-process 196,056 158,458 109,867
Finished goods 824,172 748,053 531,907
---------- ---------- ----------
$2,299,657 $2,118,754 $1,676,276
---------- ---------- ----------
---------- ---------- ----------
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost and
depreciated using the straight-line method over estimated useful lives
ranging from five to seven years. Leasehold improvements are generally
amortized on the straight-line method based on the shorter of an
estimated useful life of ten years or the lease term. Maintenance and
repairs are charged to income as incurred. The Company capitalizes
renewals and betterments which significantly enhance the value or extend
the useful life of an asset. Upon sale or retirement of depreciable
assets, the cost and related accumulated depreciation are removed from
the accounts, and the resulting gain or loss is credited to or charged
against income.
IMPAIRMENT OF LONG-LIVED ASSETS - In March 1995, the Financial Accounting
Standards Board issued FAS 121 on "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
statement requires companies to investigate potential impairments of
long-lived assets, certain identifiable intangibles, and associated
goodwill on an exception basis, when there is evidence that events or
changes in circumstances have made recovery of an asset's carrying value
unlikely. Upon adoption, where such circumstances exist, the Company
will evaluate the carrying amount of the related long-lived assets by
estimating future cash flows expected to result from the use of such
assets and their eventual disposition. If future cash flows
(undiscounted and without interest charges) are less than the carrying
amount of the assets, an impairment loss will be recorded. The
impairment loss is to be measured as the amount by which the carrying
amount of the asset exceeds the estimated fair value of the asset. The
Company is required to adopt this statement on October 1, 1996; however,
such adoption is not expected to have an impact on the Company's results
of operations or financial condition.
RESEARCH AND DEVELOPMENT COSTS - Costs associated with research and
development activities are expensed as incurred. Research and
development costs expensed for the years ended September 30, 1996, 1995
and 1994 were $1,066,365, $560,025 and $582,646, respectively.
COMPUTER SOFTWARE DEVELOPMENT AND ACQUISITION COSTS - The Company
capitalizes the cost of purchased software as well as proprietary
software development costs incurred
F-8
<PAGE>
AUTO-GAS SYSYEMS, INC.
NOTES TO FINANCIAL STATEMENTS
subsequent to the establishment of technological feasibility and prior to
general release of the product to the public. Annual amortization of
capitalized software development costs is equal to the greater of the
ratio of the products current gross revenues to the total of current and
expected gross revenues or the straight-line method computed on estimated
useful lives ranging from three to seven years. At each balance sheet
date, the unamortized capitalized costs for each product are compared to
the net realizable value (NRV) of the product with any excess of
capitalized costs over NRV written off. Accumulated amortization of
capitalized software development and acquisition costs as of September
30, 1996 and 1995 were $3,478,239 and $3,221,827, respectively.
Amortization of software costs for the years ended September 30, 1996,
1995 and 1994 amounted to $256,413, $379,706 and $600,362, respectively,
and is included in cost of systems and cost of software, as applicable,
in the accompanying statements of income.
During fiscal 1995, management's evaluation of the continued useful life
and the net realizable value of capitalized software projects resulted in
a writedown of capitalized computer software development costs of
$892,060 which has been reflected in the accompanying statements of
income.
For the years ended September 30, 1996, 1995 and 1994, the Company
received product development fees totaling $271,526, $755,412 and
$136,680, respectively, and incurred development costs of $182,082,
$429,134 and $7,039, respectively, under such contracts. Costs incurred
under such product development contracts are capitalized in prepaid
expenses and other current assets on the accompanying balance sheets and
charged to cost of development upon the delivery of the product to the
customer.
ADVERTISING COSTS - The Company's advertising expenditures are expensed
in the period the advertising first occurs. Advertising expense for the
years ended September 30, 1996, 1995 and 1994 was $197,380, $138,487 and
$77,969, respectively.
INCOME TAXES - Effective October 1, 1993, the Company adopted Statement
of Financial Accounting Standards No. 109 (FAS 109), "Accounting for
Income Taxes." The adoption of FAS 109 changes the Company's method of
accounting for income taxes from the deferred method (APB 11) to an asset
and liability approach. Previously, the Company deferred the past tax
effects of timing differences between financial reporting and taxable
income. The asset and liability method, which requires recognition of
deferred tax assets and liabilities for expected future tax consequences
of temporary differences between the book and tax basis of assets and
liabilities and other tax attributes, including tax loss and credit
carryforwards. The Company provides a valuation allowance for the amount
of tax assets not expected to be realized. The adoption of FAS 109 had
no effect on the Company's results of operations or financial position.
F-9
<PAGE>
AUTO-GAS SYSYEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FAIR VALUES OF FINANCIAL INSTRUMENTS - The Company believes that the
carrying amounts of its cash and cash equivalents, accounts and notes
receivable, accounts payable, accrued expenses and other current
liabilities approximate their fair market values due to their short-term
nature.
ACCOUNTING FOR STOCK-BASED COMPENSATION - In October 1995, the FASB
issued FAS No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"), which is effective for fiscal years beginning after December 15,
1995. Effective October 1, 1996, the Company will adopt FAS 123 which
establishes financial accounting and reporting standards for stock-based
employee compensation plans. The pronouncement defines a fair value
based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting
for all of their employee stock option compensation plans. However, it
also allows an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting as prescribed
by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"). Entities electing to remain with the
accounting in APB 25 must make pro forma disclosures of net income and
earnings per share as if the fair value based method of accounting
defined in FAS 123 had been applied. The Company will continue to
account for stock-based employee compensation plans under the intrinsic
method pursuant to APB 25 and will make the disclosures in its footnotes
as required by FAS 123.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
3. INVESTMENT IN FST HOLDINGS
Auto-Gas and FleetStar, Inc., which is a wholly-owned subsidiary of Jack
B. Kelley, Inc., each own 50% of FST Holdings. FST Holdings ("FST") is
involved in a corporate joint venture with Lone Star Energy through
FleetStar of Texas, L.L.C. (FleetStar), which is owned 50% by each.
FleetStar develops and operates compressed natural gas fueling sites, the
majority of which are in the Dallas/Fort Worth metroplex. Auto-Gas uses
the equity method of accounting for its investment in FST.
F-10
<PAGE>
AUTO-GAS SYSYEMS, INC.
NOTES TO FINANCIAL STATEMENTS
4. PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1996 and 1995 consisted of the
following:
1996 1995
----------- ----------
Computer equipment $ 1,032,193 $ 770,272
Furniture and fixtures 246,441 176,834
Marketing assets 186,919 182,312
Machinery and equipment 127,281 90,333
Other assets 110,591 40,458
----------- ----------
1,703,425 1,260,209
Less: accumulated depreciation
and amortization (1,020,688) (863,379)
----------- ----------
$ 682,737 $ 396,830
----------- ----------
----------- ----------
Depreciation and amortization expense for the years ended September 30,
1996, 1995 and 1994 was $160,613, $135,664 and $123,598, respectively.
5. STOCK WARRANTS
On September 1, 1993, Auto-Gas issued to the president of the Company
warrants to purchase 142,667 shares of common stock at $4.50 per share.
The value assigned to the warrants of $39,233 is reflected in other
assets net of accumulated amortization of $39,233 and $26,156 at
September 30, 1996 and 1995, respectively. The value was amortized
ratably over the three-year period beginning October 1, 1993. The
warrants may be exercised at any time until the expiration date of
September 1, 1998. The Company has reserved 142,667 shares of common
stock for exercise of these warrants.
6. FEDERAL INCOME TAXES
The provision for income taxes for the years ended September 30, 1996, 1995
and 1994 consisted of:
1996 1995 1994
-------- -------- --------
Current state $ 62,470 $132,471 $110,484
Current federal 608,458 634,286 60,000
Deferred 160,636 (38,174) (54,190)
-------- -------- --------
Income tax expense $831,564 $728,583 $116,294
-------- -------- --------
-------- -------- --------
F-11
<PAGE>
AUTO-GAS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
Deferred tax assets and liabilities are comprised of the following:
SEPTEMBER 30,
1996 1995
--------- ---------
Deferred tax liabilities:
Capitalized software and custom projects $(376,001) $(305,602)
Depreciation and amortization (42,880) (30,373)
--------- ---------
Total deferred tax liabilities (418,881) (335,975)
--------- ---------
Deferred tax assets:
Bad debt and warranty reserves 210,081 266,829
Software amortization 70,967 141,940
Other 69,561 19,570
--------- ---------
350,609 428,339
Deferred tax assets valuation allowance - -
--------- ---------
Total deferred tax assets 350,609 428,339
--------- ---------
Net deferred tax (liabilities) assets $ (68,272) $ 92,364
--------- ---------
--------- ---------
The differences between the Company's effective tax rate and the federal
statutory rate of 34% for the years ended September 30, 1996, 1995 and
1994 are as follows:
1996 1995 1994
-------- -------- ---------
Tax at the statutory corporate rate $759,627 $613,172 $ 844,741
State income taxes, net of federal
benefit 41,230 87,431 81,791
Undistributed loss in FST Holdings 29,914 45,718 40,018
Research and development credit - (45,859) -
Utilization of NOL carryforward - - (854,319)
Other, net 793 27,121 4,063
-------- -------- ---------
$831,564 $728,583 $ 116,294
-------- -------- ---------
-------- -------- ---------
Effective tax rate 37% 40% 5%
-------- -------- ---------
-------- -------- ---------
During the year ended September 30, 1994, the Company utilized $2,830,073
of operating loss carryforwards to offset taxable income.
F-12
<PAGE>
AUTO-GAS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
7. BENEFIT PLANS
Under the terms of two incentive stock option plans (the "Plans"), Auto-Gas
may grant 300,000 options to key employees and directors for the purchase
of shares of its common stock. Terms of options under the Plans are
determined by a committee consisting of two or more members of the Board of
Directors and are not to exceed 10 years. The option price is determined
by the committee and shall not be less than 100% of the fair market value
of the common stock at the time of granting the option, or $3.35 per share,
whichever is greater. The options are exercisable 40% after two years and
an additional 20% each subsequent year. Information about the Plans for
the years ended September 30, 1996, 1995 and 1994 is as follows:
1996 1995 1994
----------- ----------- -----------
Options outstanding, October 1 300,000 183,000 198,000
Granted - 117,000 -
Exercised - - -
Surrendered (8,500) - (15,000)
----------- ----------- -----------
Options outstanding, September 30 291,500 300,000 183,000
----------- ----------- -----------
----------- ----------- -----------
Exercisable, September 30 174,500 163,800 144,600
----------- ----------- -----------
----------- ----------- -----------
Exercise Price, September 30 $3.50-$8.00 $3.50-$8.00 $3.50-$4.50
----------- ----------- -----------
----------- ----------- -----------
During fiscal 1991, the Company implemented a 401(k) plan for all qualified
employees of Auto-Gas. The Company may make contributions to the plan upon
approval from the Board of Directors; however, employer contributions are
not mandatory. Only employee contributions were made to the plan during
fiscal 1996, 1995 and 1994.
8. MAJOR CUSTOMERS
During the years ended September 30, 1996, 1995 and 1994, one major
customer accounted for 26%, 18% and 26%, respectively, of total sales.
This customer was acquired by another company during fiscal 1996. The
effect of this acquisition, if any, on future sales to this customer is not
yet determinable. During the years ended September 30, 1996, 1995 and
1994, another major customer accounted for 7%, 13%, and 13%, respectively,
of total sales.
9. RELATED PARTY TRANSACTIONS
Auto-Gas and AutoFuel Company (AFCO), an operator of unattended retail
gasoline stations, have certain common stockholders, directors and
officers. Revenues for the years ended September 30, 1996, 1995 and 1994
include $13,988, $45,392 and $17,498, respectively, of sales to AFCO.
Accounts and notes receivable as of September 30, 1996 and 1995 include
$26,372 and $62,258, respectively, due from
F-13
<PAGE>
AUTO-GAS SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
AFCO. During the year ended September 30, 1994, Auto-Gas wrote off
$100,952 of its September 30, 1993 receivable from AFCO as a result of
the discharge of this liability by AFCO's bankruptcy proceedings.
The Company subleases its administrative office facilities from AFCO. The
terms of the sublease require payments, on a month-to-month basis, of
$2,000 per month. The amount of rent paid for the years ended September
30, 1996, 1995 and 1994 was $24,000, $24,000 and $17,000, respectively.
10. COMMITMENTS AND CONTINGENCIES
At September 30, 1996, Auto-Gas does not have any operating leases with
initial or remaining noncancellable lease terms in excess of one year. The
amount of rent expense for the year ended September 30, 1996 aggregated
$102,574.
Auto-Gas is a party to various lawsuits arising in the ordinary course of
its business and does not believe that the outcome of these lawsuits will
have a material effect on the Company's financial position or results
from operations.
11. PROPOSED MERGER
Subject to stockholder approval, the Company is considering a proposal
whereby each outstanding share of the Company's common stock, $1.00 par
value per share, will be converted into the right to receive 3.37623 shares
of Canmax Inc. common stock and cash in lieu of any fractional shares.
F-14
<PAGE>
=============================================================================
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR ANY OTHER
PERSON. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON
STOCK OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF ANY OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE 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 OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
_______
TABLE OF CONTENTS
PAGE
Available Information................................................... 2
Incorporation of Certain Documents by Reference......................... 2
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995.................................................... 3
Prospectus Summary ..................................................... 4
Risk Factors............................................................ 6
The Company ............................................................ 10
Recent Events........................................................... 15
The Combined Company.................................................... 16
Use of Proceeds......................................................... 23
Dilution................................................................ 23
Selling Stockholder .................................................... 24
Plan of Distribution.................................................... 24
Description of Capital Stock............................................ 25
Legal Matters........................................................... 28
Experts................................................................. 28
Index to Financial Statements........................................... F-1
=============================================================================
=============================================================================
863,364 SHARES
CANMAX INC.
COMMON STOCK
____________
PROSPECTUS
____________
________, 1997
=============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC registration fee $ 630
NASD filing fee 7,500*
Accounting fees and expenses 1,000*
Legal fees and expenses (not including Blue Sky) 6,000*
Printing and engraving expenses 500*
Registrar and transfer agent's fees 100*
Blue Sky fees and expenses (including counsel fees) 1,000*
Miscellaneous expenses 0*
Total $16,730*
-------
-------
- --------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The by-laws of Canmax provide for the indemnification of an individual
made a party to any proceeding because he or she is a director, officer,
employee or agent of Canmax against liability incurred in the proceeding if
(i) he or she conducted himself or herself in good faith; (ii) he or she
reasonably believed that his or her conduct was in or at least not opposed to
the best interest of Canmax; and (iii) in the case of any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct
was unlawful. Insofar as indemnification for liabilities arising under the
Securities Act may be committed to directors or persons controlling Canmax,
Canmax has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and it is therefore unenforceable.
II-1
<PAGE>
ITEM 16. EXHIBITS.
(a) Exhibits
The exhibits listed below are filed as part of or incorporated by
reference in this Registration Statement. Where such filing is made by
incorporation by reference to a previously filed report or registration
statement, such report or registration statement is identified in
parentheses. See the Index of Exhibits included with the exhibits filed as
part of this Registration Statement.
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Amended and Restated Agreement and Plan of Merger dated June 16,
1997 by and among Canmax Inc., ("Canmax") Canmax Retail Systems,
Inc. ("CRSI") and Auto-Gas Systems, Inc. (filed as Exhibit 2.1 to
Canmax's Registration Statement on Form S-4 filed with the
Commission August 13, 1997 and incorporated herein by reference).
3.1 Articles of Incorporation (file as of Exhibit 3.01 to Canmax's
Registration Statement on Form 10, File No. 0-22636 (the "Form
10"), and incorporated herein by reference).
3.2 Bylaws (filed as Exhibit 3.02 to the Form 10 and incorporated
herein by reference).
4.1 Registration Rights Agreement between Canmax and the Dodge Jones
Foundation (filed as Exhibit 4.02 to Canmax's Quarterly Report on
Form 10-Q for the period ended April 30, 1997 and incorporated
herein by reference).
4.2 Registration Rights Agreement between Canmax and Founders Equity
Group, Inc. (filed as Exhibit 4.02 to Canmax's Quarterly Report
on Form 10-Q for the period ended April 30, 1997 and incorporated
herein by reference).
4.3 Amended Stock Option Plan (filed as Exhibit 10.08 to Canmax's
Quarterly Report on Form 10-Q for the period ended July 31, 1996
and incorporated herein by reference).
5* Opinion of Arter & Hadden (including the consent of such firm)
regarding legality of securities being offered.
10.1 Master Agreement for Computer Software Development, License and
Maintenance between CRSI and The Southland Corporation (filed as
Exhibit 10.05 to the Form 10 and incorporated herein by
reference).
10.2** Software Development Agreement dated July 1, 1996 between NCR
Corporation and CRSI (filed as Exhibit 10.09 to Canmax's Annual
Report on Form 10-K for the period ended October 31, 1996).
23.1* Consent of Arter & Hadden (to be included as a part of its
Opinion filed as Exhibit 5 hereto).
23.2 Consent of Ernst & Young LLP, independent auditors.
II-2
<PAGE>
23.3 Consent of Price Waterhouse, L.L.P., independent accountants.
24.1 Power of Attorney (included on page II-6).
*To be filed by Amendment
**Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to Canmax's Application requesting
confidential treatment under Rule 406 under the Securities Act of 1933, as
amended.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because they are either not applicable or the
required information has been disclosed in the financial information or notes
thereto.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) Rule 415 Offering. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change in
the information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
Registration Statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information
in the Registration Statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or Section
15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) Filings incorporating subsequent Exchange Act documents by
reference. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(h) Request for acceleration of effective date. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to Canmax's Articles of Incorporation, Bylaws, both as amended, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has
II-4
<PAGE>
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
(i) Rule 430A. The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Irving, State of Texas, on the 13th
day of August, 1997.
CANMAX INC.
By: /s/ Roger D. Bryant
-----------------------------------
Roger D. Bryant,
CHIEF EXECUTIVE OFFICER AND PRESIDENT
POWER OF ATTORNEY
We, the undersigned directors and officers of Canmax Inc., do hereby
consent and appoint Roger D. Bryant and Philip M. Parsons, or either of them,
our true and lawful attorneys and agent, to do any and all acts and things in
our name and on our behalf in our capacities as directors and officers and to
execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or either of them, may deem
necessary or advisable to enable said Corporation to comply with the Securities
Act of 1933 and any rules, regulations and requirement of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, the power and authority to sign for us or
any of us in our names and in the capacities indicated below, and any and all
amendments (including post-effective amendments) hereto; and we do hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed on the 13th day of August, 1997, by the following
persons in the capacities indicated:
SIGNATURES TITLE
- ----------- -----
/s/ Roger D. Bryant
- -------------------------- Chief Executive Officer, President and Director
Roger D. Bryant (Principal Executive Officer)
/s/ Philip M. Parsons
- -------------------------- Executive Vice President, Chief Financial Officer
Philip M. Parsons and Director (Principal Financial and Accounting
Officer)
/s/ Debra L. Burgess
- -------------------------- Executive Vice President, Chief Operating Officer
Debra L. Burgess and Director
- -------------------------- Director
Nick DeMare
- -------------------------- Director
Robert M. Fidler
/s/ W. Thomas Rinehart
- -------------------------- Director
W. Thomas Rinehart
- -------------------------- Director
C. William Robertson
II-6
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
2.1 Amended and Restated Agreement and Plan of Merger dated June 16,
1997 by and among Canmax Inc., ("Canmax") Canmax Retail Systems,
Inc. ("CRSI") and Auto-Gas Systems, Inc. (filed as Exhibit 2.1 to
Canmax's Registration Statement on Form S-4 filed with the
Commission August 13, 1997 and incorporated herein by
reference).
3.1 Articles of Incorporation (file as of Exhibit 3.01 to Canmax's
Registration Statement on Form 10, File No. 0-22636 (the "Form
10"), and incorporated herein by reference).
3.2 Bylaws (filed as Exhibit 3.02 to the Form 10 and incorporated
herein by reference).
4.1 Registration Rights Agreement between Canmax and the Dodge Jones
Foundation (filed as Exhibit 4.02 to Canmax's Quarterly Report on
Form 10-Q for the period ended April 30, 1997 and incorporated
herein by reference).
4.2 Registration Rights Agreement between Canmax and Founders Equity
Group, Inc. (filed as Exhibit 4.02 to Canmax's Quarterly Report
on Form 10-Q for the period ended April 30, 1997 and incorporated
herein by reference).
4.3 Amended Stock Option Plan (filed as Exhibit 10.08 to Canmax's
Quarterly Report on Form 10-Q for the period ended July 31, 1996
and incorporated herein by reference).
5* Opinion of Arter & Hadden (including the consent of such firm)
regarding legality of securities being offered.
10.1 Master Agreement for Computer Software Development, License and
Maintenance between CRSI and The Southland Corporation (filed as
Exhibit 10.05 to the Form 10 and incorporated herein by
reference).
10.2** Software Development Agreement dated July 1, 1996 between NCR
Corporation and CRSI (filed as Exhibit 10.09 to Canmax's Annual
Report on Form 10-K for the period ended October 31, 1996).
23.1* Consent of Arter & Hadden (to be included as a part of its
Opinion filed as Exhibit 5 hereto).
23.2 Consent of Ernst & Young LLP, independent auditors.
23.3 Consent of Price Waterhouse LLP, independent accountants.
24.1 Power of Attorney (included on page II-6).
*To be filed by Amendment
**Portions of this Exhibit were omitted and have been filed separately with the
Secretary of the Commission pursuant to Canmax's Application requesting
confidential treatment under Rule 406 under the Securities Act of 1933, as
amended.
II-7
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Canmax Inc. for the
registration of 863,364 shares of its common stock and to the incorporation by
reference therein of our report dated December 19, 1996, with respect to the
consolidated financial statements of Canmax Inc. included in its annual Report
on Form 10-K for the year ended October 31, 1996, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
Dallas, Texas
August 8, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-3 of Canmax Inc. of our report dated
November 8, 1996 relating to the financial statements of Auto-Gas Systems,
Inc., which appears in such Prospectus. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Fort Worth, Texas
August 12, 1997
9
