-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P6tQ4poFw+vW9K0Oj7tZOhhYtg+gV7NjY1/Op3txUzicLXQ05H/O2ngZ0Yb+8cp2 RfPkSNdfAc7hwdfvEiYYzA== 0000912057-96-011512.txt : 19960605 0000912057-96-011512.hdr.sgml : 19960605 ACCESSION NUMBER: 0000912057-96-011512 CONFORMED SUBMISSION TYPE: 424B1 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19960604 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BASE TEN SYSTEMS INC CENTRAL INDEX KEY: 0000010242 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 221804206 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 424B1 SEC ACT: 1933 Act SEC FILE NUMBER: 333-00719 FILM NUMBER: 96576610 BUSINESS ADDRESS: STREET 1: ONE ELECTRONICS DR CITY: TRENTON STATE: NJ ZIP: 08619 BUSINESS PHONE: 6095867010 MAIL ADDRESS: STREET 1: ONE ELECTRONICS DR CITY: TRENTON STATE: NJ ZIP: 08619 424B1 1 424B1 Re: Prospectus dtd 5/30/96 File No. 333-719 Rule 424 (b) (1) PROSPECTUS 451,000 SHARES BASE TEN SYSTEMS, INC. CLASS A COMMON STOCK All 451,000 shares (the "Shares") of Class A Common Stock ("Class A Common Stock"), of Base Ten Systems, Inc., a New Jersey corporation (the "Company" or "Base Ten"), offered hereby are being offered by certain stockholders of the Company (the "Selling Stockholders"). The Shares may be offered by the Selling Stockholders from time to time in open market transactions, negotiated transactions, principal transactions or by a combination of these methods of sale. See "Plan of Distribution." The Shares offered for sale hereby are issuable to the Selling Stockholders upon exercise of outstanding warrants and options. The Company has agreed to provide certain registration rights to the Selling Stockholders. See "Selling Stockholders." None of the proceeds from the sale of the Shares by the Selling Stockholders will be received by the Company. Base Ten has agreed to bear all expenses in connection with the registration and sales of the Shares, other than underwriting discounts and selling commissions. The Company has also agreed to indemnify the Selling Stockholders against certain liabilities, including liabilities under the Securities Act of 1933, as amended. On May 30, 1996, the last reported sale price of the Class A Common Stock on the Nasdaq National Market was $ 12 5/8. The Class A Common Stock is traded under the Nasdaq symbol "BASEA." See "RISK FACTORS" on page 2 for a discussion of certain factors that should be considered in evaluating an investment in the Common Stock. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- MAY 30, 1996 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "SEC"). Reports, proxy material and other information filed by the Company can be inspected and copied at prescribed rates at the public reference facilities maintained by the SEC at 450 5th Street, N.W. Judiciary Plaza, Washington, D.C. 20549 and the following Regional Offices of the SEC: 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661-2511. Copies of these material can also be obtained from the Public Reference Section of the SEC at 450 5th Street, N.W., Judiciary Plaza, Washington, D.C. 20549. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed by the Company with the SEC under the Exchange Act are incorporated by reference in this Prospectus: 1. Annual Report on Form 10-K for the fiscal year ended October 31, 1995. 2. Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 1996 and an Amendment thereto dated April 16, 1996 on Form 10 Q-A. 3. Proxy Statement dated February 24, 1995 for the Company's Annual Meeting of Stockholders. 4. All documents subsequently filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of this offering will be deemed to be incorporated herein by reference and to be a part hereof from their respective filing dates. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom a Prospectus Supplement is delivered, upon request, a copy of the documents incorporated by reference in this Prospectus. Requests should be directed to Base Ten Systems, Inc., One Electronic Drive, Trenton, New Jersey 08169, Attention: Edward J. Klinsport (609) 586-7010. Additional copies of the Prospectus are also available from the Company or the Transfer Agent upon request. SUMMARY INFORMATION THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS INCLUDED ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS. Base Ten is engaged in the design and manufacture of electronic systems employing safety critical software for defense markets and the development of commercial applications focused on batch processing control, medical screening and image processing software. The Company also manufactures defense products to specifications for prime government contractors and designs and builds proprietary electronic systems for use in secure communications by various U.S. government agencies. Specialization in extreme reliability defense products has enabled the Company to develop expertise in the field of safety critical technology dedicated to the prevention of performance errors. Operations in this environment during the last two decades have also provided experience in developing advanced quality control procedures for 1 products meeting stringent government standards as well as familiarity with complex government regulations and agency procedures. Over the last several years, Base Ten has redirected resources to decrease its historical dependence on defense contracting and has concentrated on commercial products for highly regulated industries, relying on the same safety critical techniques developed in its traditional businesses. While the Company's nondefense programs involve major potential markets, the resulting products are still primarily developmental and may not succeed in reaching their potential. RISK FACTORS RISK OF RECURRING LOSSES. The Company recognized a net loss of $875,000 or $.13 per share in fiscal 1995 and could continue to incur losses in subsequent periods if revenues from its nondefense software products fail to offset declining revenues form its defense operations. The 1995 losses resulted from reduction in defense related sales and an increase in expenses associated with the development and introduction of nondefense products by Base Ten's Medical Technology Division. The Company's commercial development of its manufacturing execution, medical screening and ultrasound image archiving software products have been internally funded and could be adversely affected by delays in the development cycle, competition and changing technology. RISKS ASSOCIATED WITH DEPENDENCE ON MAJOR CONTRACTS. Base Ten's defense operations have historically been dependent on a limited number of customers or contracts. The Company primary revenue sources during fiscal 1995, 1994 and 1993 were defense related programs with the United States military and other agencies or contractors, accounting for 40%, 28% and 68% of revenues, respectively. The Company has also remained dependent on the sale of weapons control systems for the West German and Italian versions of the Tornado aircraft, accounting for 36% of revenues in fiscal 1995 and 1994 and 17% of fiscal 1993 revenues. Profit margins for these programs are limited by strict government procedures, and all aspects of the Company's participation in these markets are characterized by intense competition. Base Ten's investment of funds in product development has not always resulted in sales. Any termination of the Company's major contracts or loss of its primary customers in this market would have a material adverse impact on its financial condition. RISKS ASSOCIATED WITH CHANGE IN BUSINESS DIRECTION. In response to sharp declines in sales and profitability resulting from significant reductions in military defense expenditures beginning in 1990, Base Ten implemented a plan for reducing fixed costs and redeploying its resources to development projects that are subject to all of the risks inherent in the commercialization of new products for nondefense markets in which the Company is not an established participant. The Company has been required to significantly increase its technical and marketing staffs to accommodate anticipated growth in these fields without any assurance of achieving that growth. The developmental nature of these products makes their ultimate success in the marketplace uncertain. RISKS OF DELAYS IN OBTAINING REGULATORY APPROVALS FOR NEW PRODUCTS. Because the Company has concentrated on products that draw upon its electronic, software and systems engineering capabilities in safety critical, highly regulated environments, many of its new products are subject to regulatory approval procedures that increase development costs and can substantially delay commercialization efforts. Base Ten's medical screening programs involve noninvasive testing procedures but are nevertheless treated by the Food and Drug Administration (the FDA ) as a medical device under guidelines introduced in 1991, requiring FDA clearance prior to sales in the United States. The Company s first medical screening software program was submitted to the FDA in August 1992 and was initially subjected to review under a premarket approval application supported by prospective clinical data before an Advisory Panel convened by the FDA denied approval on the grounds that the product should not be classified as a medical device. The FDA subsequently reclassified the software as a Class 1 Tier 3 medical device requiring only a 510(k) premarket notification and granted Base Ten permission to market the device beginning in September 1995. Although the basic software used in this device can be applied to a wide variety of medical screening programs, the Company has postponed further development efforts for this product line pending implementation of a more favorable regulatory environment. Uncertainties in the domestic regulatory structure and delays inherent in approval procedures could deter or postpone other commercial development efforts by the Company. RISK OF INADEQUATE FINANCIAL RESOURCES. The Company has financed its development efforts to date from equity capital and retained earnings, depleting its cash and cash equivalents to $3.6 million at the end of fiscal 1995. 2 In view of its limited financial resources, Base Ten will be unable to continue pursuing its development objectives at the desired pace and scope without additional financing or increased sales of its new products. Funds generated from operations of the Medical Technology Division to date have been substantially less than the development and marketing costs for these products. In the absence of accelerated sales by the Medical Technology Division, the Company could be required to raise additional equity capital or incur debt to finance future development activities. The issuance of additional equity could be dilutive to existing stockholders, and the alternative of financing development through borrowings could weaken the Company s financial condition. RISK OF INADEQUATE MARKETING RESOURCES. Success in the technological development and refinement of the Company s new products will not guarantee profitable sales without substantial marketing resources that may be unavailable to Base Ten. The Company's limited exposure to healthcare, pharmaceutical manufacturing and other relevant commercial markets along with financial constraints could impair its ability to penetrate those markets with sufficient speed to fully capitalize on its technological lead time. The Company is dependent on strategic alliances and OEM relationships to facilitate marketing arrangements for its new products in the EEC and is primarily dependent on its own limited marketing resources for penetrating domestic markets. INTENSELY COMPETITIVE NATURE OF THE COMPANY'S BUSINESS. Base Ten competes in both defense and commercial sectors with a number of businesses that have substantially greater financial, technical, manufacturing and marketing resources. In the defense sector, the Company competes with established U.S. and foreign manufacturers of weapons control and similar equipment, many of whom are able to offer a broader product base. In the secure communications market, competitors include established manufacturers that have greater experience as well as product diversification. In the markets for its manufacturing execution, medical screening and ultrasound image archiving software, Base Ten believes it competes with many small and several large established firms with assets and resources substantially greater than those available to the Company. RISK OF TECHNOLOGICAL OBSOLESCENCE. The industries in which the Company competes are characterized by rapid technological changes. Accordingly, products using different technologies could be introduced before market acceptance is achieved for any of Base Ten s new products. Historically, Base Ten has experienced time lags of up to three years between commencement of marketing activities through the completion of field trials and ultimate sales of its military products. A similar time lag was experienced in securing regulatory approval from the FDA for the Company's first medical screening product. Similar or longer delays could be experienced for other products, during the course of which Base Ten could face the risk of the products technological obsolescence. RISKS FROM DEPENDENCE ON SUBCONTRACTORS. The Company s manufacturing operations primarily involve the assembly of final products from components and sub-assemblies supplied by other manufacturers. Base Ten has single sources of supply for certain sub-assemblies and integrated circuits manufactured to its specifications. The Company's efforts to maintain an inventory of material and components to cover foreseeable production requirements would not protect it against production delays and increased costs if a single source were unable to support its needs. Delays in the Company's manufacturing output could adversely affect its contractual performance and cash flow. RISKS ASSOCIATED WITH DEPENDENCE ON KEY PERSONNEL. The Company's success will continue to be dependent to a large extent upon its ability to retain the services of its executive officers and technical staff. To reduce costs, Base Ten has curtailed salary increases from time to time and suspended contributions to its 401(k) plan. Current compensation and benefit levels could contribute to the loss of any key personnel or reduced productivity, either of which could have a materially adverse affect on the Company. FOREIGN TRADE AND CURRENCY EXCHANGE RELATED RISKS. A portion of the Company's revenues is derived from foreign customers and is subject to disruption by political and economic conditions abroad. Currency exchange fluctuations could also affect the Company by increasing the price of its products to foreign customers or decreasing the cost of competing products abroad. NO DIVIDENDS. Base Ten has not paid dividends on its Common Stock since 1985 and presently intends to retain any future earnings for reinvestment in its business. Accordingly, the Company does not anticipate paying any dividends in the foreseeable future. 3 CONTROL BY HOLDERS OF CLASS B COMMON STOCK. Holders of the Company's Class B Common Stock, of which 48.91% is owned on a fully diluted basis by management, are entitled to elect 75% of the members of Base Ten's board of directors (the Board ). In addition, holders of Class B Common Stock receive one vote per share held, compared to one-tenth (1/10th) of one vote per share held for Class A Common Stock, on all matters other than the election of directors submitted to the Company's shareholders, entitling holders of Class B Common Stock to 39% of the Company s combined voting power on those matters. Accordingly, holders of the Class B Common Stock are able to control the election of a majority of the members of the Board and to substantially influence all other aspects of corporate governance. DEPENDENCE ON CONTINUATION OF SECURITY CLEARANCES. The Company relies on the continuance of its security clearances from agencies of the United States government and from NATO for its defense products. If Base Ten experienced any material deficiencies in the manner or method of complying with prescribed security regulations, any resulting loss of its security clearances would have an immediate and adverse affect on the Company's business. DESCRIPTION OF CAPITAL STOCK GENERAL. The authorized capital stock of Base Ten consists of 22,000,000 shares of Class A Common Stock, 2,000,000 shares of Class B Common Stock and 1,000,000 shares of Preferred Stock, all of which have a par value of $1.00 per share. COMMON STOCK DIVIDENDS. Both classes of Base Ten's Common Stock have identical cash and property dividend rights except that no cash or property dividend may be paid on the Class B Common Stock unless a dividend at least equal in amount is paid concurrently on the Class A Common Stock. Cash or property dividends can be declared and paid on the Class A Common Stock without being declared and paid on the Class B Common Stock. If a distribution is paid in shares of Class A Common Stock or Class B Common Stock, the distribution may be paid only as follows: (i) shares of Class A Common Stock may be paid to holders of shares of Class A Common Stock and shares of Class B Common Stock may be paid to holders of shares of Class B Common Stock, and (ii) the same number of shares shall be paid in respect of each outstanding share of Class A Common Stock or Class B Common Stock. Base Ten may not subdivide or combine shares of either class without at the same time proportionately subdividing or combining shares of the other class. VOTING RIGHTS. Holders of Class A Common Stock are entitled to elect 25% of the members of the Board of Directors (rounded to the next highest whole number) so long as the number of outstanding shares of Class A Common Stock is at least 10% of the number of outstanding shares of both classes. Currently, the holders of Class A Common Stock are entitled, as a class, to elect two directors of Base Ten, and the holders of the Class B Common Stock are entitled, as a class, to elect the remaining three directors. As a result of this provision, the holders of a majority of the Class B Common Stock can and will continue to be able to elect a majority of the directors and thereby control Base Ten, regardless of the number of shares of Class B Common Stock outstanding from time to time. Directors may be removed, only for cause, by the holders of the class of common stock which elected them. Except for the election or removal of directors as described above and except for class votes as required by law or Base Ten's Restated Certificate of Incorporation, holders of both classes of common stock vote or consent as a single class on all matters, with each share of Class A Common Stock having one- tenth vote per share and each share of Class B Common Stock having one vote per share. The outstanding shares of the Class A Common Stock currently represents approximately 92% of the total number of shares of both classes outstanding. If the number of outstanding shares of Class A Common Stock should becomes less than 10% of the total number of shares of both classes of common stock outstanding, the holders of Class A Common Stock would not have the right to elect 25% of the Board of Directors, but would have one-tenth vote per share for all directors, and the holders of Class B Common Stock would have one vote per share for all directors. 4 CONVERSION. At the option of the holder of record, each share of Class B Common Stock is convertible at any time into one share of Class A Common Stock. Conversion of a significant number of shares of Class B Common Stock into Class A Common Stock could put control of the Board of Directors into the hands of the holders of a relatively small equity interest in Base Ten who would continue to hold the Class B Common Stock. The Class A Common Stock is not convertible. OTHER RIGHTS. Shareholders of the Base Ten have no preemptive or other rights to subscribe for additional shares. On liquidation, dissolution or winding up of Base Ten, all shareholders, regardless of class, are entitled to share ratably in any assets available for distribution. No shares of either class are subject to redemption. All outstanding shares are fully paid and non- assessable. TRANSFER AGENT. The transfer agent and registrar for shares of the Class A Common Stock and Class B Common Stock is American Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005. PREFERRED STOCK No shares of Preferred Stock have been issued. Base Ten's Board of Directors is empowered to fix the designations, powers, preferences and relative, participating, optional or other special rights of the Preferred Stock and the qualifications, limitations or restrictions of those preferences or rights. The voting rights of the Class B Common Stock described above are subject to voting rights that may be granted in connection with the creation of any series of Preferred Stock. However, no issue of Preferred Stock may change the ratio of one-tenth of a vote for each share of Class A Common Stock to one vote for each share of Class B Common Stock described above. SELLING STOCKHOLDERS The following table sets forth (i) the name of each Selling Stockholder, (ii) to the best of the Company's knowledge, the total number of shares of Class A Common Stock owned beneficially by each Selling Stockholder as of the date of this Prospectus, (iii) the number of Shares to be offered for the account of each Selling Stockholder in this offering and (iv) to the best of the Company's knowledge, the number of shares of Class A Common Stock to be owned by each Selling Stockholder after giving effect to this offering.
NUMBER OF SHARES OF NUMBER OF NUMBER OF STOCK TO BE SHARES OF SHARES TO BE OWNED AFTER NAME STOCK OWNED OFFERED THE OFFERING - ---- ----------- ------------ ------------ Alexander M. Adelson 369,416 161,000 208,416 Bruce D. Cowen 606,250 175,000 431,250 Donald M. Daniels 10,000 10,000 0 Alan S. Poole 10,000 10,000 0 Daniel Tierney 15,000 15,000 0 Pharma Overseas, Ltd. 30,000 30,000 0 Strategic Growth International, Inc. 150,000 50,000 100,000 ---------- --------- ----------- Total 1,190,666 451,000 739,666 ---------- --------- ----------- ---------- --------- -----------
The information set forth in the foregoing table was provided to the Company by the Selling Stockholders. None of the Selling Stockholders has had any position or other material relationship with the Company or its affiliates during the past three years, except that Messers. Adelson and Daniels have served as directors of Base Ten since 1992, Mr. Poole has served as a director of Base Ten since 1994, Mr. Cowen has served as a consultant to the Company since 1991, Mr. Tierney is an officer of Clonmel Health Care, Ltd., an Irish pharmaceutical manufacturer that has been a customer of Base Ten during the last three years, and Strategic Growth International, Inc. has provided public relations services to the Company during that period. 5 All of the Shares being offered hereunder by the Selling Stockholders are issuable upon exercise of warrants or options issued by Base Ten to the Selling Stockholders. The Company agreed to register the Shares for the accounts of the Selling Stockholders and has filed with the Securities and Exchange Commission under the Securities Act a Registration Statement on Form S-3 of which this Prospectus is a part, covering the resale of the Shares from time to time. PLAN OF DISTRIBUTION The Shares being offered hereunder by the Selling Stockholders will be offered from time to time in open market transactions, negotiated transactions, principal transactions or by a combination of these methods of sale. The Shares may be offered at market prices prevailing at the time of sale, at prices related to the prevailing market prices or at negotiated prices. The Selling Stockholders may effect these transactions by selling Shares to or thorugh broker-dealers. Broker-dealers may receive compensation in the form of discounts, concessions or commissions from Selling Stockholders or purchasers for whom the broker-dealers may act as agent or to whom they sell as principal or both. Compensation paid to a particular broker-dealer might be in excess of customary commissions. Selling Stockholders and broker-dealers participating in the sale of Shares may be deemed to be underwriters, and any profit on the sale of Shares or compensation received by them may be deemed to be underwriting compensation under the Securities Act. The Company has agreed with the Selling Stockholders, among other things, (i) to bear all expenses (other than underwriting discounts and selling commissions, and fees and expenses of counsel and other advisers to the Selling Stockholders) in connection with the registration and sale of the Shares being offered by them and (ii) to indemnify the Selling Stockholders against certain liabilities, including liabilities under the Securities Act, as underwriters or otherwise. 6
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