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PROSPECTUS Filed Pursuant to Rule 424(b)(4)
Registration No. 33-75750
KELLSTROM INDUSTRIES, INC.
(formerly known as Israel Tech Acquisition Corp.)
4,600,000 Shares of Common Stock
Underlying Redeemable Common Stock Purchase Warrants
This Prospectus relates to the issuance of a maximum of 4,600,000
shares of common stock, par value $.001 per share (the "Common Stock"), of
Kellstrom Industries, Inc., a Delaware corporation (formerly known as Israel
Tech Acquisition Corp.) (the "Company"), upon the exercise of the Company's
outstanding Redeemable Common Stock Purchase Warrants (the "Warrants"). Each
Warrant entitles the holder thereof to purchase one share of Common Stock for
$5.00, subject to adjustment in certain circumstances, at any time through and
including April 11, 2001. The Warrants are redeemable by the Company, with the
consent of GKN Securities Corp. ("GKN") and Brean Murray, Foster Securities Inc.
("Brean Murray", and together with GKN, the "Underwriters") the underwriters of
Company's initial public offering consummated in April 1994, upon notice (the
"Redemption Notice") of not less than 30 days, at a price of $.01 per Warrant
(the "Redemption Price"), provided that the last sale price of the Common Stock
on all 20 consecutive trading days ending on the third day prior to the date on
which the Redemption Notice is given has been at least 170% of the then
effective exercise price of the Warrants (currently $8.50 based on the $5.00
exercise price, subject to adjustment). Based upon the historical price per
share of the Common Stock, on the date of this Prospectus the Company has the
ability to redeem the Warrants. The Company has obtained the consent of the
Underwriters to redeem the Warrants and has provided notice to the
warrantholders of its intention to redeem the Warrants on March 7, 1997. Any
Warrants not exercised for shares of Common Stock prior to the close of business
on the date fixed for redemption (the "Expiration Date") will be redeemed. From
and after the Expiration Date, holders of Warrants will be entitled only to the
Redemption Price.
The principal market for trading of the Common Stock and the Warrants
is the Nasdaq SmallCap Market under the symbols KELL and KELLW, respectively. On
February 3, 1997, the last sale price for the Common Stock was $12.25 and for
the Warrants was $7.13 as reported on the Nasdaq SmallCap Market.
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PURCHASE OF THE COMMON STOCK IS SPECULATIVE, INVOLVES A
HIGH DEGREE OF RISK, AND SHOULD BE CONSIDERED
ONLY BY PERSONS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT.
SEE "RISK FACTORS" BEGINNING ON PAGE 5.
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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.
<TABLE>
<CAPTION>
Underwriting Discounts
Price to Public (1) and Commissions(2) Proceeds to Company (3)
------------------- ------------------ -----------------------
<S> <C> <C> <C>
Per Share.................... $ 5.00 $ 0.25 $ 4.75
Total(4)..................... $23,000,000.00 $ 1,150,000.00 $21,850,000.00
</TABLE>
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(1) Upon Exercise of each Warrant.
(2) The Underwriters are entitled to a commission of 5% of the exercise
price for each Warrant exercised which is solicited by the Underwriters
(the "Solicitation Fee"). The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933. See "Plan of Distribution".
(3) Before deducting expenses payable by the Company, estimated at $50,000.
(4) Assuming exercise of all outstanding Warrants and the payment of the
Solicitation Fee on the exercise of all the Warrants.
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The date of this Prospectus is February 4, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed with the Commission may be
inspected and copied at the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 as well as at the following
Commission regional offices: 500 West Madison Street, Chicago, Illinois 60661;
Seven World Trade Center, New York, New York 10048; and 1401 Brickell Avenue,
Miami, Florida 33131. Copies of such material can be obtained from the Public
Reference Section of the Commission at prescribed rates by writing to the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such reports and
other information can also be reviewed through the Commission's Electronic Data
Gathering, Analysis, and Retrieval System which is publicly available through
the Commission's Web site (http://www.sec.gov).
This Prospectus constitutes a part of a Registration Statement on Form
S-3 filed by the Company with the Commission under the Securities Act of 1933,
as amended (the "Securities Act"), as Post-Effective Amendment No. 2 to the
Company's Registration Statement on Form S-1 (No. 33-75750) (herein, together
with all amendments and exhibits, referred to as the "Registration Statement").
This Prospectus does not contain all the information set forth in the
Registration Statement, certain items of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and its Common Stock and Warrants, reference is hereby
made to the Registration Statement. Statements contained herein concerning the
provisions of any document are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement contained herein is qualified in its entirety by such reference.
The Company furnishes annual reports to its stockholders which include
audited financial statements. The Company may also furnish quarterly financial
statements to its stockholders and such other reports as may be authorized by
its Board of Directors.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are on file with the Commission
(Exchange Act File No. 0-23764), are incorporated in this Prospectus by
reference and made a part hereof:
(1) Annual Report on Form 10-KSB of the Company for the fiscal
year ended December 31, 1995;
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(2) Quarterly Report on Form 10-QSB of the Company for the fiscal
quarter ended March 31, 1996;
(3) Current Report of the Company on Form 8-K filed on April 26,
1996; and
(4) Quarterly Report on Form 10-QSB of the Company for the fiscal
quarter ended June 30, 1996.
(5) Quarterly Report on Form 10-QSB of the Company for the fiscal
quarter ended September 30, 1996.
(6) Current Report of the Company on Form 8-K filed on January 30,
1997.
The Company's Registration Statement on Form 8-A (which contains
descriptions of the Common Stock and Warrants), which was declared effective by
the Commission on April 11, 1994, is also incorporated in this Prospectus by
reference and made a part hereof.
All documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering made hereby shall
be deemed to be incorporated by reference in this Prospectus and shall be a part
hereof from the date of filing of such documents. Any statement contained in a
document incorporated by reference in this Prospectus and filed with the
Commission prior to the date of this Prospectus shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document which is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, on the written or oral request of any such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into such documents). Written or telephone requests for such copies should be
directed to 14000 N.W. 4th Street, Sunrise, Florida 33325, Attention: Investor
Relations (telephone number: (954) 845-0427).
No dealer, salesman or other person is authorized in connection with
any offering made hereby to give any information or to make any representation
not contained in this Prospectus, and if given or made, such information or
representation must not be relied upon as having been authorized by the
Company.This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any securities other than the registered securities offered
hereby nor does it constitute an offer to sell
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or a solicitation of an offer to buy any of the securities offered hereby to any
person in any jurisdiction in which it is unlawful to make such an offer or
solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that the
information contained herein is correct as of any date subsequent to the date
hereof.
TABLE OF CONTENTS
Page
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AVAILABLE INFORMATION....................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................. 2
THE COMPANY................................................................. 5
RISK FACTORS................................................................ 5
USE OF PROCEEDS............................................................. 7
PLAN OF DISTRIBUTION......................................................... 8
DESCRIPTION OF WARRANTS...................................................... 9
INDEMNIFICATION OF DIRECTORS AND OFFICERS................................... 10
LEGAL MATTERS............................................................... 11
EXPERTS..................................................................... 11
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THE COMPANY
Kellstrom Industries, Inc. ("Kellstrom" or the "Company"), which
conducts its business under the name "Westco International", engages in the
purchasing, refurbishing (through subcontractors), marketing and distributing of
commercial jet engines and jet engine parts. The Company's customers include
major domestic and international airlines, engine manufacturers, engine part
distributors and dealers and overhaul service suppliers throughout the world.
The Company enables customers to reduce their engine maintenance costs by
providing Federal Aviation Administration- approved engines and engine parts on
a timely basis and at competitive prices. Upon consummation by Israel Tech
Acquisition Corp. ("ITAC") of the acquisition of substantially all of the assets
of Kellstrom in June 1995, ITAC changed its name to Kellstrom. The Company's
operations are conducted at its facility located at 14000 N.W. 4th Street,
Sunrise, Florida 33325, and its telephone number is (954) 845-0427.
RISK FACTORS
The securities offered hereby are speculative and involve a high degree
of risk. Each prospective investor should consider carefully the following risk
factors in addition to the other information presented in, and incorporated by
reference into, this Prospectus before making an investment decision.
RISKS APPLICABLE TO THE AIRCRAFT ENGINE BUSINESS. An investment in
companies in the aircraft engine part distribution and refurbishing (through
third parties) business entails special considerations and risks. These
businesses are highly competitive and are characterized by price fluctuations in
inventories and the discontinuing of certain engine types due to airline
operational decisions.
DEPENDENCE UPON KEY PERSONNEL. The Company depends upon the efforts of
the officers and directors of the Company. The loss of the services of such key
personnel could have a material adverse effect on the Company's ability to
successfully achieve its business objectives. Although each of the executive
employees has executed an employment agreement which prohibits him from
competing against the Company for a specified period of time, there can be no
assurance that such remedy will be available to the Company or that such
protection will mitigate any losses incurred as a result of a termination of
employment.
DIVIDENDS UNLIKELY. The Company has not paid any dividends on its
Common Stock to date. The payment of dividends will be contingent upon the
Company's revenues and earnings, if any, capital requirements and general
financial condition. The payment of any dividends will be within the discretion
of the Board of Directors of the Company. It is the present intention of the
Board to retain all earnings, if any, for use in the Company's business
operations and,accordingly, the Board does not anticipate declaring any
dividends in the foreseeable future.
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POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price of the
Company's securities may be highly volatile. Factors such as the Company's
operating results or other announcements by the Company or its competitors may
have a significant effect on the market price of the Company's securities. In
addition, market prices for securities of many small capitalization companies
have experienced wide fluctuations in response to variations in quarterly
operating results and general economic indicators and conditions, as well as
other factors beyond the control of the Company.
SHARES ELIGIBLE FOR FUTURE SALE. Substantially all of the Company's
outstanding shares of Common Stock and Warrants have been registered for sale
under the Securities Act or are eligible for sale under an exemption therefrom.
In addition, the holders of other warrants are entitled to certain
"piggyback"registration rights upon the exercise of up to 400,000 shares of
Common Stock, and holders of certain options will be entitled, upon exercise
thereof, to up to 200,000 shares of Common Stock and Warrants to purchase up to
400,000 shares of Common Stock with certain demand and "piggyback" registration
rights. The possibility that substantial amounts of Common Stock or Warrants may
be sold in the public market may adversely affect prevailing market prices for
the Common Stock or the Warrants and could impair the Company's ability to raise
capital through the sale of its equity securities.
OUTSTANDING WARRANTS AND OPTIONS; POTENTIAL ADVERSE EFFECT ON MARKET
PRICE OF COMMON STOCK AND WARRANTS. The Company has 4,600,000 Warrants
outstanding, exercisable at a price of $5.00 per share. Additionally, the
Company has reserved an aggregate of 2,360,000 shares of Common Stock for
issuance upon exercise of other outstanding warrants and options. To the extent
that outstanding options and warrants are exercised, dilution of the percentage
ownership of the Company's stockholders will occur, and any sales in the public
market of the Common Stock underlying such options and warrants may adversely
affect prevailing market prices for the Common Stock and the Warrants. Moreover,
the terms upon which the Company will be able to obtain additional equity
capital may be adversely affected since the holders of outstanding options and
warrants can be expected to exercise them at a time when the Company would, in
all likelihood, be able to obtain any needed capital on terms more favorable to
the Company than those provided in the outstanding options and warrants.
POSSIBLE INABILITY TO EXERCISE WARRANTS. The Company intends to qualify
the sale of the Common Stock issuable upon exercise of the Warrants in a limited
number of states. Although certain exemptions in the securities laws of certain
states might permit Warrants to be transferred to purchasers in states other
than those in which the Warrants were initially qualified, the Company will be
prevented from issuing Common Stock in such other states upon the exercise of
the Warrants unless an exemption from qualification is available or unless the
issuance of Common Stock upon exercise of the Warrants is qualified. The Company
is under no obligation to seek, and may decide not to seek or may not be able to
obtain, qualification of the issuance of such Common Stock in all of the states
in which the ultimate purchasers
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of the Warrants reside. In such a case, the Warrants held will expire and have
no value if such Warrants cannot be sold.
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Warrants may be
redeemed by the Company, with the consent of the Underwriters, at any time upon
notice of not less than 30 days, at a price of $.01 per Warrant (the "Redemption
Price"), provided the closing sales price of the Common Stock on all 20
consecutive trading days ending on the third day prior to the day on which the
Company gives notice has been at least 170% of the then effective exercise price
($8.50 based upon the current exercise price, subject to adjustment). Redemption
of the Warrants could force the holders to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for the holders to do
so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants or to accept the Redemption Price, which is
likely to be substantially less than the market value of the Warrants at the
time of redemption.
AUTHORIZATION AND DISCRETIONARY ISSUANCE OF PREFERRED STOCK. The
Company's Restated Certificate of Incorporation, as amended, authorizes the
issuance of up to 1,000,000 shares of Preferred Stock with such rights and
preferences as maybe determined from time to time by the Board of Directors. No
shares of Preferred Stock are currently outstanding. Accordingly, under the
Restated Certificate of Incorporation, as amended, the Board of Directors may,
without stockholder approval, issue Preferred Stock with dividend, liquidation,
conversion, voting, redemption or other rights which could adversely affect the
voting power or other rights of the holders of the Common Stock. The issuance of
any shares of Preferred Stock having rights superior to those of the Common
Stock may result in a decrease of the value or market price of the Common Stock
and could further be used by the Board as a device to prevent change in control
of the Company. Holders of the Preferred Stock may have the right to receive
dividends, certain preferences in liquidation and conversion rights. In
addition, the Preferred Stock could be utilized under certain circumstances, as
a method of discouraging, delaying or preventing a change in control of the
Company. Although the Company does not currently intend to issue any shares of
Preferred Stock, there can be no assurance that the Company will not do so in
the future.
USE OF PROCEEDS
The Company will derive net proceeds of approximately $21,800,000 upon
exercise of all the Warrants, after payment of the costs of this offering and
the 5% Warrant solicitation fee payable to the Underwriters (assuming that such
fee is payable with respect to all such Warrants). The Company intends to apply
approximately $4,000,000 of such proceeds to reduce outstanding indebtedness
under the Company's working capital line of credit with Bank Atlantic, a federal
savings bank ("Bank Atlantic"). The remaining net proceeds will be used to
finance any future acquisitions, purchase additional inventory and for other
working capital and general corporate
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purposes. The working capital line bears interest at the rate of 1% over the
prime rate as announced from time to time by Bank Atlantic and matures on May
31, 1997. The Company anticipates that the amounts repaid under the credit
facility with such proceeds will eventually be reborrowed in order to finance
future purchases of inventory.
PLAN OF DISTRIBUTION
The shares of Common Stock covered by this Prospectus are issuable upon
exercise of the Warrants. The Company issued 4,300,000 of the Warrants in April
1994 as part of its initial public offering (the "Public Offering") of "Units",
each consisting of one share of Common Stock and two Warrants. The Common Stock
and the Warrants comprising the Units were detachable and separately
transferable upon issuance. The remaining 300,000 Warrants, which are identical
to the Warrants issued in the Public Offering, were issued by the Company in
February 1994 upon consummation of a bridge financing.
The Common Stock offered hereby is offered pursuant to the terms and
conditions of the Warrants as described below. In connection with the Public
Offering, the Company agreed, with respect to the exercise of the Warrants, to
pay the Underwriters a fee of 5% of the exercise price for each Warrant
exercised, provided that upon exercise thereof, (i) the market price of the
Common Stock is greater than the exercise price of the Warrant; (ii) the
exercise of the Warrant is solicited by the Underwriters; (iii) the Warrant is
not held in a discretionary account; (iv) disclosure of compensation
arrangements is made both at the time of the original offering and at the time
of exercise (by delivery of a Prospectus or as otherwise required by applicable
law, rule or regulation) and (v) the solicitation of the exercise of the Warrant
was not in violation of Rule 10b-6 (as such rule or any successor rule may be in
effect as of such time of exercise) promulgated under the Exchange Act. The
Company agreed to indemnify the Underwriters against certain liabilities in
connection with any post-effective amendment to the Registration Statement under
the Securities Act.
The Underwriters acted as the underwriters in connection with the
Public Offering, in which the Company raised approximately $11,321,000 of net
proceeds. In connection with the Public Offering, the Company paid the
Underwriters approximately $950,000 in commissions and expenses, granted the
Underwriters Unit Purchase Options ("Options") to purchase an aggregate of
200,000 shares of Common Stock and 400,000 Warrants, and granted the
Underwriters certain other rights. The Options, which are exercisable at $7.62
per Unit at any time until April 11, 1998, grant the holders thereof certain
"piggyback" and demand registration rights. The Company also agreed to indemnify
the Underwriters against certain liabilities in connection with the Public
Offering under the Securities Act. In February 1994, GKN acted as placement
agent for the Company's bridge financing.
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How to Exercise the Warrants
Holders of the Warrants may exercise the Warrants by completing the
form of "Purchase Form To Be Executed Upon Exercise of Warrant Certificate"
appearing on the reverse side of the Warrant certificate, and forwarding the
completed and duly executed Warrant certificate, together with the payment
provided for therein, to Continental Stock Transfer & Trust Company (the
"Warrant Agent"), 2 Broadway, New York, New York 10004, telephone (212)
509-4000. There are certain instructions on the reverse of the Warrant
certificate; please contact the Warrant Agent in the event you have any further
questions. In the event that the Warrant certificates and payments for exercise
of the Warrants are not hand delivered to the Warrant Agent, registered mail or
insured overnight delivery are recommended. In the case of beneficial owners of
Warrants who hold in"street name" or "nominee name," please contact your broker
or bank to arrange exercise. The holders of the Warrants do not have the rights
or privileges of holders of the Common Stock prior to the exercise of the
Warrants.
DESCRIPTION OF WARRANTS
The Warrants were issued subject to the terms and conditions of the
Warrant Agreement (the "Warrant Agreement") between the Company and the Warrant
Agent. The following description of the Warrants is not complete and is
qualified in all respects by reference to the Warrant Agreement, which is filed
as an exhibit to the Registration Statement of which this Prospectus is a part.
See "Available Information."
Each Warrant entitles the holder thereof to purchase one share of
Common Stock for $5.00, subject to adjustment in certain circumstances, at any
time through and including April 11, 2001. The Warrants are redeemable by the
Company, with the consent of the Underwriters, upon notice of not less than 30
days, at the Redemption Price, provided that the last sale price of the Common
Stock on all 20 consecutive trading days ending on the third day prior to the
date on which the Company gives notice has been at least 170% of the then
effective exercise price of the Warrants (currently $8.50, based upon the $5.00
exercise price, subject to adjustment).
The exercise price and the number of shares of Common Stock issuable
upon the exercise of the Warrants are subject to adjustment in certain
circumstances; including a stock dividend, recapitalization, reorganization,
merger or consolidation of the Company. No fractional shares will be issued upon
the exercise of the Warrants. If a Warrant holder exercises all the Warrants
then owned of record, the Company will pay to such Warrant holder, in lieu of
the issuance of any fractional share which is otherwise issuable to such holder,
an amount in cash based on the market value of the Common Stock on the last
trading day prior to the date of exercise. The Warrants are not subject to
adjustment for issuances of Common Stock at a price below the exercise price of
the Warrants.
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Any extension of the term of the Warrants will be subject to compliance
with Rule 13e-4 under the Exchange Act including the filing of a Schedule 13E-4.
Notice of any extension of the exercise period will be given to the Warrant
holders. The Company does not presently contemplate any extension of the
exercise period.
In certain cases, the sale of securities by the Company upon exercise
of Warrants could violate the securities laws of the United States, certain
states thereof or other jurisdictions. The Company has agreed to use its best
efforts to cause a registration statement with respect to such securities under
the Securities Act to be effective during the term of the Warrants and to take
such other actions under the laws of various states as may be required to cause
the sale of securities upon exercise of Warrants to be lawful. However, the
Company will not honor the exercise of the Warrants if, in the opinion of its
Board of Directors upon advice of counsel, the sale of securities upon such
exercise would be unlawful under federal or state securities laws or otherwise.
The Company has taken action to qualify the sale of Common Stock in certain
states where it has reason to believe that beneficial holders of Warrants
reside. The fact that the Company has commenced such actions, however, does not
mean that it will be able to successfully qualify the sales of Common Stock. In
addition, there are other states in which shares of Common Stock may be
purchased under an exemption from state securities laws and/or future action by
the Company.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The General Corporation Law of the State of Delaware (the "GCL")
authorizes Delaware corporations to eliminate or limit the personal liability of
a director to the corporation or a stockholder for monetary damages for breach
of certain fiduciary duties as a director, other than his duty of loyalty to the
corporation and its stockholders, or for acts or omissions not in good faith or
involving intentional misconduct or knowing violation of law, and the unlawful
purchase or redemption of stock or payment of unlawful dividends or the receipt
of improper benefits. The Company's Restated Certificate of Incorporation, as
amended (the "Certificate of Incorporation"), includes a provision eliminating
such personal liability. The Certificate of Incorporation, as well as the
By-Laws of the Company, provide for the indemnification of the officers and
directors of the Company to the fullest extent permitted under the GCL. In
addition, the Company has executed agreements with the officers and directors of
the Company that require the Company to indemnify such individuals for
liabilities incurred by them because of an act, omission, neglect or breach of
duty committed while acting in the capacity of an officer or director. Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions, the Company has been advised that in the opinion of
the Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
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LEGAL MATTERS
Certain legal matters with respect to the Common Stock offered hereby
have been passed upon for the Company by Gratch Jacobs & Brozman, P.C.
EXPERTS
The financial statements of the Company as of December 31, 1995 and
1994, and for each of the years in the two-year period ended December 31, 1995
have been incorporated herein by reference and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated herein by reference, and upon the authority of said
firm as experts in accounting and auditing.
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