AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 2005
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------------------
DEFENSE INDUSTRIES INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
NEVADA 84-1421483
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 BRISEL STREET
INDUSTRIAL ZONE SDEROT, ISRAEL
TEL: (972)(8) 689-1611
(Address and telephone number of Registrant's principal executive offices)
--------------------------------------
MICHAEL M. RATNER
RIZZO INC.
14812 CALVERT STREET
VAN NUYS, CALIFORNIA 91411
TEL: (818) 781-6891
(Name, address and telephone number of agent for service)
--------------------------------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COMMUNICATIONS SENT TO AGENT FOR
SERVICE, SHOULD BE SENT TO:
Steven J. Glusband, Esq. David Efrati, Adv.
Carter, Ledyard & Milburn Efrati, Galili & Co.
2 Wall Street 6 Wissotsky Street
New York, NY 10005 Tel Aviv, Israel 62338
Tel: (212) 238-8605 Tel: (972)(3) 545-2020
Fax: (212) 732-3232 Fax: (972)(3) 604-0111
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time to
time after this registration statement becomes effective as determined by market
conditions and other factors.
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, please 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 436,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AGGREGATE REGISTRATION FEE
TO BE REGISTERED REGISTERED (1) PRICE PER ORDINARY SHARE (2) OFFERING PRICE (3)
Common Stock, par value. $.0001
per share.................... 3,911,158 $0.625 2,444,473.75 $287.72
(1) The number of common stock registered hereunder is based upon the
maximum number of common stock of the registrant that is issuable upon
the exercise of the warrants. Pursuant to Rule 416 under the
Securities Act of 1933, as amended, the amount to be registered also
includes an indeterminate number of common stock issuable as a result
of stock splits, stock dividends, recapitalizations or similar events.
(2) Estimated pursuant to Rule 457(c) and 457(o) solely for the purpose of
computing the amount of the registration fee on the basis of the
average of the low bid and high ask prices ($0.55 and $0.70) of an
ordinary share as reported by the Over-The-Counter Bulletin Board on
August 8, 2005.
(3) Calculated pursuant to Section 6(b) of the Securities Act of 1933 as
follows: proposed maximum aggregate offering price multiplied by
.0001177.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
ii
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities, and it is not soliciting an offer to buy these
securities, in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED AUGUST 10, 2005
PROSPECTUS
DEFENSE INDUSTRIES INTERNATIONAL, INC.
3,911,158 SHARES OFCOMMON STOCK
This prospectus relates to up to 3,911,158 shares of common stock of
Defense Industries International, Inc. that the selling shareholders named in
this prospectus or their transferees may offer from time to time. Of the common
stock offered hereby: (i) 1,915,467 shares of common stock were issued to the
selling shareholders; (ii) up to 627,500 shares of common stock are issuable
upon exercise of warrants; and (iii) up to additional 1,368,191 shares of common
stock are issuable under certain circumstances in the event of a decrease in the
share price of our common stock. Such shares and warrants were issued to the
selling shareholders pursuant to a securities purchase agreement, dated as of
June 15, 2005. The registration of the shares of common stock does not
necessarily mean that the selling shareholders or their transferees will offer
or sell their shares.
We are not offering or selling any of our shares of common stock pursuant
to this prospectus. We will not receive any of the proceeds from the sale by the
selling shareholders of the shares of common stock offered by this prospectus.
We will bear all expenses in connection with the preparation of this prospectus.
Our common stock is listed for trading on the Over-the-Counter Bulletin
Board, or OTCBB, under the symbol "DFNS.OB." On August 8, 2005, the closing
price of our common stock on the OTCBB was $0.70.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 4
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
2005
Table of Contents
PAGE
----
Notice Regarding Forward-Looking Statements .................... 2
Prospectus Summary ............................................. 2
Private Placement of Common Stock and Warrants ................. 2
The Offering ................................................... 3
Risk Factors ................................................... 4
Risks Related to Our Business and Our Industry .............. 4
Risk Factors Related to Our Common Stock .................... 10
Risks Relating to Our Location in Israel .................... 11
Capitalization and Indebtedness ............................... 13
Reasons for the Offer and Use of Proceeds ...................... 13
Market Price Data .............................................. 13
Selling Shareholders ........................................... 14
Offer Statistics, Expected Time Table and Plan of Distribution 16
Experts ........................................................ 18
Legal Matters .................................................. 18
Material Changes ............................................... 18
Where You Can Best Find More Information; Incorporation of
Certain Information by Reference ............................... 19
Defense Industries International, Inc. Common Stock and Warrants 21
When you are deciding whether to purchase the common stock being offered by
this prospectus, you should rely only on the information incorporated by
reference or provided in this prospectus or any supplement. We have not
authorized anyone to provide you with different information. We are not making
any offer of the common stock in any state where the offer is not permitted. You
should not assume that the information in this prospectus or any supplement is
accurate as of any date other than the date on the front of those documents.
In this prospectus, "we," "us," "our," the "Company" and "Defense
Industries" refer to Defense Industries International, Inc., a Nevada
corporation, and our subsidiaries.
NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated in it by reference contain
forward-looking statements that involve known and unknown risks and
uncertainties. We include this notice for the express purpose of permitting us
to obtain the protections of the safe harbor provided by the Private Securities
Litigation Reform Act of 1995 with respect to all such forward-looking
statements. Examples of forward-looking statements include: projections of
capital expenditures, competitive pressures, revenues, growth prospects, product
development, financial resources and other financial matters. You can identify
these and other forward-looking statements by the use of words such as "may,"
"will," "should," "plans," "anticipates," "believes," "estimates," "predicts,"
"intends," "potential" or the negative of such terms, or other comparable
terminology.
II-2
Our ability to predict the results of our operations or the effects of
various events on our operating results is inherently uncertain. Therefore, we
caution you to consider carefully the matters described under the caption "Risk
Factors" and certain other matters discussed in this prospectus, the documents
incorporated by reference in this prospectus, and other publicly available
sources. These factors and many other factors beyond the control of our
management could cause our actual results, performance or achievements to be
materially different from any future results, performance or achievements that
may be expressed or implied by the forward-looking statements.
II-3
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION ABOUT US, THE SECURITIES THAT MAY BE SOLD FROM TIME TO TIME, AND OUR
FINANCIAL STATEMENTS AND THE NOTES TO THEM, ALL OF WHICH APPEAR ELSEWHERE IN
THIS PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE IN THIS
PROSPECTUS.
Defense Industries International, Inc.
We are a manufacturer and global provider of personal military and civilian
protective equipment and supplies. Our products are used by military, law
enforcement, border patrol enforcement, and other special security forces,
corporations, non-governmental organizations and individuals throughout the
world. Our principal executive offices are located at 8 Brisel Street,
Industrial Zone Sderot, Israel, and our telephone number is (972) (8) 689-1611.
Our main products include body armor, bomb disposal suits, bullet proof
vests and jackets, ballistic wall coverings, bullet proof ceramic and
polyethylene panels, V.I.P. car armoring and lightweight armor kits for
vehicles, personal military equipment, dry storage systems, liquid logistic
products, tents and other camping and travel gear.
From time to time we have provided bulletproof vests developed by us to
laboratories in the United States for testing, and following the tests, the
products were deemed to have met the American National Institute of Justice
(NIJ) standards. The American NIJ standards are the accepted standards worldwide
for bulletproof vests and compliance with these standards has enabled us to
enter into the North American market as well as other new markets for our
bulletproof vests. Similarly, we have submitted our ballistic ceramic plates for
testing by German laboratories and following the tests, the products were deemed
to have met the German qualification standard. Obtaining this standard has
enabled us to enter the German and other European markets for these products.
We are a holding company whose subsidiaries include Export Erez USA, Inc.,
and Rizzo Inc. Export Erez USA, Inc., is a holding company whose subsidiaries
include Export Erez, Ltd., a wholly owned subsidiary, Mayotex, Ltd., a wholly
owned subsidiary, Dragonwear Trading Ltd., a wholly owned subsidiary and
Achidatex Nazareth Elite (1977) Ltd., a majority owned subsidiary.
PRIVATE PLACEMENT OF COMMON STOCK AND WARRANTS
On June 15, 2005, we concluded a private placement of 1,833,334 shares of
our common stock. The purchase price was $0.60 per share. We also granted the
investors a right to purchase up to an aggregate of 365,000 additional shares of
common stock at $0.94 per share issuable upon the exercise of warrants which
exercisable until June 30, 2007 and a right to purchase up to an aggregate of
182,500 additional shares of common stock at $2.40 per share issuable upon the
exercise of warrants which exercisable until June 30, 2010. In addition,
pursuant to the securities purchase agreement, under certain circumstances in
the event of a decrease in the share price of our common stock, the investors
will have the right to receive up to additional 1,368,191 shares of common stock
on June 16, 2006. In consideration for their services in connection with this
private placement, we issued to two entities, 82,133 shares of common stock,
warrants exercisable until June 30, 2007, to purchase up to an aggregate of
60,000 additional shares of common stock at $0.94 per share, and warrants
exercisable until June 30, 2010, to purchase up to an aggregate of 20,000
additional shares of common stock at $2.40 per share. We are filing this
prospectus, at our expense, as required by the securities purchase agreement
among us and the selling shareholders. We will not receive any proceeds from the
resale of the common stock offered hereby by the selling shareholders.
2
THE OFFERING
Common stock offered.. 3,911,158 shares, including 627,500 shares that are
issuable upon exercise of outstanding warrants and
1,368,191 shares that are issuable under certain
circumstances in the event of a decrease in the share
price of our common stock.
OTCBB Symbol.......... "DFNS.OB"
Use of proceeds....... We will not receive any proceeds from the sale of the
common stock offered hereby. We will, however, receive
the proceeds from the exercise of the warrants if and
when they are exercised.
3
RISK FACTORS
Our business, results of operations and financial condition could be
seriously harmed due to any of the following risks, among others. If we do not
successfully address the risks to which we are subject, our business, results of
operations and financial condition may be materially and adversely affected and
our share price may decline.
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
THE PRODUCTS WE SELL ARE USED IN APPLICATIONS THAT ARE INHERENTLY RISKY AND
COULD GIVE RISE TO PRODUCT LIABILITY AND OTHER CLAIMS.
The products that we manufacture are typically used in applications and
situations that involve high levels of risk of personal injury. Failure to use
our products for their intended purposes, failure to use them properly, their
malfunction, or, in some limited circumstances, even correct use of our
products, could result in serious bodily injury or death. Our main products
include personal military and civilian protective equipment and supplies such as
body armor, bomb disposal suits, ballistic wall coverings, bulletproof vests,
and associated heavy fabric products, such as battle pouches and combat harness
units, dry storage systems, liquid logistic products, tents and other camping
and travel gear.
The manufacture and sale of certain of our products may be the subject of
product liability claims arising from the design, manufacture or use of such
goods. If we are found to be liable in such claim, we may be required to pay
substantial damages and our insurance costs may increase significantly as a
result. Also, a significant or extended lawsuit, such as a class action, could
also divert significant amounts of management's time and attention. We cannot
assure you that our insurance coverage would be sufficient to cover the payment
of any potential claim. In addition, we cannot assure you that this or any other
insurance coverage will continue to be available or, if available, that we will
be able to obtain it at a reasonable cost. Any material uninsured loss could
have a material adverse effect on our business, financial condition and results
of operations. In addition, the inability to obtain product liability coverage
would prohibit us from bidding for orders from certain governmental customers
since, at present, many bids from governmental entities require such coverage,
and any such inability would have a material adverse effect on our business,
financial condition and results of operations.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION AND OUR FAILURE OR INABILITY
TO COMPLY WITH THESE REGULATIONS COULD MATERIALLY RESTRICT OUR OPERATIONS AND
SUBJECT US TO SUBSTANTIAL PENALTIES.
We are subject to extensive regulation by governmental authorities and are
subject to various laws and judicial and administrative decisions imposing
requirements and restrictions on our operations. Furthermore, we have material
contracts with governmental entities and are subject to rules, regulations and
approvals applicable to government contractors. We are also subject to routine
audits to assure our compliance with these requirements. In addition, a number
of our employees are required to obtain specified levels of security
classification. Our business may suffer if we or our employees are unable to
obtain the security classifications that are needed to perform services
contracted for the Israeli Ministry of Defense, one of our major customers. Our
failure to comply with these contract terms, rules or regulations could expose
us to substantial penalties, including the loss of these contracts and
disqualification as a government contractor of certain governments.
4
WE HAVE SIGNIFICANT INTERNATIONAL OPERATIONS AND ARE THEREFORE SUBJECT TO
ADDITIONAL FINANCIAL AND REGULATORY RISKS.
While our principal executive offices are located in Israel, 69% of our
sales in 2004, 45% of our sales in 2003 and 24% of our sales in 2002 were
generated from exports. We are seeking to increase the level of our
international business activity. Our overseas operations are subject to various
risks, including; foreign import controls (which may be arbitrarily imposed and
enforced and which could preclude sales to certain customers).
One component of our strategy is to expand our operations into selected
international markets. Military procurement, for example, has traditionally been
international in scope. Countries in which we are actively marketing include
Turkey, Cyprus, Chile, Mexico, Guatemala, India, Peru, Singapore and Brazil. We,
however, may be unable to execute our business model in these markets or new
markets. Further, foreign providers of competing products and services may have
a substantial advantage over us in attracting consumers and businesses in their
country due to earlier established businesses in that country, greater knowledge
with respect to the cultural differences of consumers and businesses residing in
that country and/or their focus on a single market.
In pursuing our international expansion strategy, we face several
additional risks, including:
o reduced protection of intellectual property rights in some countries;
o licenses, tariffs and other trade barriers;
o longer sales and payment cycles;
o greater difficulties in collecting accounts receivable;
o potential adverse tax consequences;
o laws and business practices favoring local competition;
o costs and difficulties of doing business and customizing products for
foreign countries;
o compliance with a wide variety of complex foreign laws and treaties;
o political and economic instability; and
o variance and unexpected changes in local laws and regulations
We may operate in areas where local government policies regarding foreign
entities and the local tax and legal regimes are often uncertain, poorly
administered and in a state of flux. We cannot be certain that we are in
compliance with, or will be protected by, all relevant local laws at any given
point in time. A subsequent determination that we failed to comply with relevant
local laws and taxation regimes could have a material adverse effect on our
business, financial condition and results of operations.
5
One or more of these factors could adversely effect our future
international operations and, consequently, could have a material adverse effect
on our business, financial condition and results of operation.
CURRENCY EXCHANGE RATE FLUCTUATIONS IN THE WORLD MARKETS IN WHICH WE CONDUCT
BUSINESS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF
OPERATIONS AND FINANCIAL CONDITION.
We may be adversely affected by fluctuations in currency exchange rates.
While our revenues are generally denominated in U.S. dollars, a significant
portion of our expenses is incurred in NIS and Euro. We do not currently engage
in any currency hedging transactions intended to reduce the effect of
fluctuations in foreign currency exchange rates on our results of operations. If
we were to determine that it was in our best interests to enter into any hedging
transactions in the future, there can be no assurance that we will be able to do
so or that such transactions, if entered into, will materially reduce the effect
of fluctuations in foreign currency exchange rates on our results of operations.
In addition, if for any reason exchange or price controls or other restrictions
on the conversion of foreign currencies into NIS were imposed, our business
could be adversely affected.
There can be no assurance such fluctuations in the future will not have a
material adverse effect on revenues from international sales, and consequently,
on our business, operating results and financial condition.
REDUCTION IN MILITARY BUDGETS WORLDWIDE MAY CAUSE A REDUCTION IN OUR REVENUES,
WHICH WOULD ADVERSELY AFFECT OUR BUSINESS, OPERATING RESULTS AND FINANCIAL
CONDITION.
A significant portion of our revenues is derived from the sale of products
to military markets. These revenues, on a consolidated basis, totaled
approximately $10.4 million, or 86.5% of our revenues in 2004, $6.7 million, or
74.7% of our revenues in 2003 and $7.5 million, or 70.7% of revenues in 2002.
The military budgets of a number of countries may be reduced in the future.
Declines in government military budgets may result in reduced demand for our
products. This would result in reduction in our revenues and adversely affect
our business, results of operations and financial condition.
SALES OF OUR PRODUCTS ARE SUBJECT TO GOVERNMENTAL PROCUREMENT PROCEDURES AND
PRACTICES; TERMINATION, REDUCTION OR MODIFICATION OF CONTRACTS WITH OUR
CUSTOMERS, AND ESPECIALLY WITH THE GOVERNMENT OF ISRAEL, OR A SUBSTANTIAL
DECREASE IN OUR CUSTOMERS' BUDGETS MAY ADVERSELY AFFECT OUR BUSINESS, OPERATING
RESULTS AND FINANCIAL CONDITION.
Our military products are sold primarily to government agencies and
authorities, many of which have complex and time-consuming procurement
procedures. A long period of time often elapses from the time we begin marketing
a product until we actually sell that product to a particular customer. In
addition, our sales to government agencies, authorities and companies are
directly affected by those customers' budgetary constraints and the priority
given in their budgets to the procurement of our products.
6
The termination, reduction or modification of our contracts or subcontracts
with the Government of Israel in the event of change in requirements, policies
or budgetary constraints would have an adverse effect on our business, operating
results and financial condition.
WE DEPEND ON SALES TO KEY CUSTOMERS AND THE LOSS OF ONE OR MORE OF OUR KEY
CUSTOMERS WOULD RESULT IN A LOSS OF A SIGNIFICANT AMOUNT OF OUR REVENUES.
A significant portion of our revenues is derived from a small number of
customers. Our two largest customers accounted for 38.3% of our total sales for
the year ended December 31, 2003 and 43.6% of our total sales for the year ended
December 31, 2004.
We anticipate that a significant portion of our future revenues will
continue to be derived from sales to a small number of customers. Although we
are attempting to expand the number of our customers, if our principal customers
do not continue to purchase products from us at current levels or if such
customers are not retained and we are not able to derive sufficient revenues
from sales to new customers to compensate for their loss, our revenues would be
reduced and adversely affect our business, financial condition and results of
operations.
OUR MARKETS ARE HIGHLY COMPETITIVE AND IF WE ARE UNABLE TO COMPETE EFFECTIVELY,
WE WILL BE ADVERSELY AFFECTED.
The markets in which we operate are highly competitive with a large number
of competitors ranging from small businesses to multinational corporations.
Competitors who are larger, better financed and better known than us may compete
more effectively than we can. In order to stay competitive in our industry, we
must keep pace with changing technologies and client preferences.
If we are unable to differentiate our products from those of our
competitors, our revenues may decline. In addition, our competitors have
established relationships among themselves or with third parties to increase
their ability to address client needs. As a result, new competitors or alliances
among competitors may emerge and compete more effectively than we can. There is
also a significant industry trend towards consolidation, which may result in the
emergence of companies which are better able to compete against us.
THERE ARE LIMITED SOURCES FOR SOME OF OUR RAW MATERIALS AND ANY SHORTAGE MAY
SIGNIFICANTLY CURTAIL OUR MANUFACTURING OPERATIONS.
The raw materials that we use in manufacturing ballistic resistant garments
and cars armoring include: Kevlar(R) produced by Dupont Ltd., Twaron(R) produced
by Twaron Teijn Ltd., Dyneema(R) produced by DSM Ltd. and Spectra(R) and Gold
Flex(R) produced by Honeywell. We purchase these materials in the form of woven
cloth from independent weaving companies. In the event DuPont or its licensee in
Europe cease for any reason to produce or sell Kevlar(R) to us, we would utilize
the other ballistic resistant materials as a substitute. However, none of them
is expected to become a complete substitute for Kevlar(R) in the near future. We
enjoy a good relationship with our suppliers for these materials. If ouR supply
of any of these materials were materially reduced or cut off, or if there were a
material increase in the prices of these materials, our manufacturing operations
could be adversely affected and our costs increased, and our business, financial
condition and results of operations would be materially adversely affected.
7
WE MAY BE UNABLE TO COMPLETE OR INTEGRATE ACQUISITIONS EFFECTIVELY, IF AT ALL,
AND AS A RESULT MAY INCUR UNANTICIPATED COSTS OR LIABILITIES OR OPERATIONAL
DIFFICULTIES.
We intend to grow through the acquisition of businesses and assets that
will complement our current businesses. We cannot be certain that we will be
able to identify attractive acquisition targets, obtain financing for
acquisitions on satisfactory terms or successfully acquire identified targets.
Furthermore, we may have to divert our management's attention and our financial
and other resources from other areas of our business. Our inability to implement
our acquisition strategy successfully may hinder the expansion of our business.
Because we depend in part on acquiring new businesses and assets to develop
and offer new products, failure to implement our acquisition strategy may also
adversely affect our ability to offer new products in line with industry trends.
We may not be successful in integrating acquired businesses into our
existing operations. Integration may result in unanticipated liabilities or
unforeseen operational difficulties, which may be material, or require a
disproportionate amount of management's attention. Acquisitions may result in us
incurring additional indebtedness or issuing preferred stock or additional
common stock. Competition for acquisition opportunities in the industry may
rise, thereby increasing our cost of making acquisitions or causing us to
refrain from making further acquisitions.
OUR RESOURCES MAY BE INSUFFICIENT TO MANAGE THE DEMANDS IMPOSED BY ANY FUTURE
GROWTH.
Expansion of our operations, may place significant demands on our
management, administrative, operating and financial resources. Growth of our
customer base, the types products offered and the geographic markets served can
place a significant strain on our resources. In addition, we cannot easily
identify and hire personnel qualified both in the provision and marketing of our
security services and products. Our future performance and profitability will
depend in large part on our ability to attract and retain additional management
and other key personnel, our ability to implement successful enhancements to our
management, accounting and information technology systems, and our ability to
adapt those systems, as necessary, to respond to growth in our business.
8
TECHNOLOGICAL ADVANCES, THE INTRODUCTION OF NEW PRODUCTS, AND NEW DESIGN AND
MANUFACTURING TECHNIQUES COULD ADVERSELY AFFECT OUR OPERATIONS UNLESS WE ARE
ABLE TO ADAPT TO THE RESULTING CHANGE IN CONDITIONS.
Our future success and competitive position depend to a significant extent
upon our proprietary technology. We must make significant investments to
continue to develop and refine our technologies. We will be required to expend
substantial funds for and commit significant resources to the conduct of
continuing research and development activities, the engagement of additional
engineering and other technical personnel, the purchase of advanced design,
production and test equipment, and the enhancement of design and manufacturing
processes and techniques. Our future operating results will depend to a
significant extent on our ability to continue to provide design and
manufacturing services for new products that compare favorably on the basis of
time to market, cost and performance with the design and manufacturing
capabilities. The success of new design and manufacturing services depends on
various factors, including utilization of advances in technology, innovative
development of new solutions for customer products, efficient and cost-effective
services, timely completion and delivery of new product solutions and market
acceptance of customers' end products. Because of the complexity of some of our
products, we may experience delays from time to time in completing the design
and manufacture of new product solutions. In addition, there can be no assurance
that any new product solutions will receive or maintain customer or market
acceptance. If we were unable to design and manufacture solutions for new
products of our customers on a timely and cost-effective basis, such inability
could have a material adverse effect on our business, financial condition and
results of operations.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, WHICH MAY NOT BE
AVAILABLE TO US.
We may need to raise additional funds for a number of uses, including:
o maintaining and expanding research and development;
o implementing marketing and sales activities for our products;
o hiring additional qualified personnel; and
o supporting an increased level of operations.
We may not be able to obtain additional funds on acceptable terms or at
all. If we cannot raise needed funds on acceptable terms, we may be required to
delay, scale back or eliminate some aspects of our operations and we may not be
able to:
o develop new products;
o enhance our existing products;
o remain current with evolving industry standards;
o take advantage of future opportunities; or
o respond to competitive pressures or unanticipated requirements.
If adequate funds are not available to us, our business, results of
operations and financial condition will be materially and adversely affected.
Any equity or debt financings, if available at all, may cause dilution to our
then-existing shareholders and may increase our financing expenses. If
additional funds are raised through the issuance of equity securities, the net
tangible book value per share of our common stock would decrease and the
percentage ownership of then current shareholders would be diluted.
9
COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC
DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSES.
Changing laws, regulations and standards relating to corporate governance
and public disclosure, including the Sarbanes-Oxley Act of 2002 and new
Securities and Exchange Commission regulations, are creating uncertainty for
companies such as ours. We are committed to maintaining high standards of
corporate governance and public disclosure. As a result, we intend to invest
reasonably necessary resources to comply with evolving standards, and this
investment may result in increased general and administrative expenses and a
diversion of management time and attention from revenue-generating activities to
compliance activities, which could harm our operating results and business
prospects
RISK FACTORS RELATED TO OUR COMMON STOCK
OUR SHARES OF COMMON STOCK ARE THINLY TRADED, SO YOU MAY BE UNABLE TO SELL AT OR
NEAR "ASK" PRICES OR AT ALL IF YOU NEED TO SELL YOUR SHARES TO RAISE MONEY OR
OTHERWISE DESIRE TO LIQUIDATE YOUR SHARES.
Our shares of common stock are "thinly-traded" on the OTCBB, meaning that
the number of persons interested in purchasing our common stock at or near ask
prices at any given time may be relatively small or non-existent. This situation
is attributable to a number of factors, including the fact that we are a small
company which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or
influence sales volume, and that even if we came to the attention of such
persons, they tend to be risk-averse and would be reluctant to follow an
unproven development stage company such as ours or purchase or recommend the
purchase of our shares until such time as we became more seasoned and viable. As
a consequence, there may be periods of several days or more when trading
activity in our shares is minimal or non-existent. We cannot give you any
assurance that a broader or more active public trading market for our common
stock will develop or be sustained, or that current trading levels will be
sustained. Due to these conditions, we can give you no assurance that you will
be able to sell your shares at or near ask prices or at all if you need money or
otherwise desire to liquidate your holdings.
WE ARE SUBJECT TO THE PENNY STOCK RULES AND THESE RULES MAY ADVERSELY EFFECT
TRADING IN OUR COMMON STOCK.
Until our shares qualify for inclusion in the NASDAQ system, the public
trading, if any, of our common stock will be on the OTCBB. As a result, an
investor may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the common stock offered. Our common stock is
subject to provisions of Section 15(g) and Rule 15g-9 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), commonly referred to as the "penny
stock rule." Section 15(g) sets forth certain requirements for transactions in
penny stocks, and Rule 15g-9(d) incorporates the definition of "penny stock"
that is found in Rule 3a51-1 of the Exchange Act. The SEC generally defines
"penny stock" to be any equity security that has a market price less than $5.00
per share, subject to certain exceptions. If our common stock is deemed to be a
penny stock, trading in the shares will be subject to additional sales practice
requirements on broker-dealers who sell penny stock to persons other than
established customers and accredited investors. The definition of "Accredited
Investors" includes among others, persons with assets in excess of $1,000,000 or
annual income exceeding $200,000 or $300,000 together with their spouse. For
transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such security and must have the
purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the first transaction, of a risk disclosure
document, prepared by the SEC, relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information for the penny stocks held in an account and information on the
limited market in penny stocks. Consequently, these rules may restrict the
ability of a broker-dealer to trade and/or maintain a market in our common stock
and may affect the ability of our shareholders to sell their shares.
10
WE DO NOT INTEND TO PAY DIVIDENDS.
We have never paid cash dividends to our shareholders. Any future dividend
policy will be determined by the board of directors, subject to the applicable
law, and will be based upon conditions then existing, including our results of
operations, financial condition, current and anticipated cash needs, contractual
restrictions and other conditions as the board of directors may deem relevant.
We currently intend to retain future earnings, if any, to finance operations and
expand our business and, therefore, do not expect to pay any dividends in the
foreseeable future.
RISKS RELATING TO OUR LOCATION IN ISRAEL
CONDUCTING BUSINESS IN ISRAEL ENTAILS SPECIAL RISKS.
Our principal operations and facilities are located in Israel, and our
directors, executive officers and other key employees are also located primarily
in the State of Israel. Accordingly, we are directly influenced by the
political, economic and military conditions affecting Israel. Specifically, we
could be adversely affected by any major hostilities involving Israel, a full or
partial mobilization of the reserve forces of the Israeli army, the interruption
or curtailment of trade between Israel and its present trading partners, and a
significant downturn in the economic or financial condition of Israel.
Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors, and a state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. Since September 2000, there has been
a marked increase in violence, civil unrest and hostility, including armed
clashes, between the State of Israel and the Palestinians, and acts of terror
have been committed inside Israel and against Israeli targets in the West Bank
and Gaza. There is no indication as to how long the current hostilities will
last or whether there will be any further escalation. Any further escalation in
these hostilities or any future armed conflict, political instability or
violence in the region may have a negative effect on our business condition,
harm our results of operations and adversely affect our share price.
Furthermore, there are a number of countries that restrict business with Israel
or Israeli companies. Restrictive laws or policies of those countries directed
towards Israel or Israeli businesses has had, and may in the future continue to
have, an adverse impact on our operations, our financial results or the
expansion of our business. No predictions can be made as to whether or when a
final resolution of the area's problems will be achieved or the nature thereof
and to what extent the situation will impact Israel's economic development or
our operations.
11
MOST OF OUR DIRECTORS, OFFICERS AND EMPLOYEES ARE OBLIGATED TO PERFORM ANNUAL
MILITARY RESERVE DUTY IN ISRAEL. WE CANNOT ASSESS THE POTENTIAL IMPACT OF THESE
OBLIGATIONS ON OUR BUSINESS.
Our directors, officers and employees who are male adult citizens and
permanent residents of Israel under the age of 48 are, unless exempt, obligated
to perform annual military reserve duty and are subject to being called to
active duty at any time under emergency circumstances. We cannot assess the full
impact of these requirements on our workforce or business if conditions should
change, and we cannot predict the effect on us of any expansion or reduction of
these obligations.
THE ECONOMIC CONDITIONS IN ISRAEL HAVE NOT BEEN STABLE IN RECENT YEARS.
In recent years Israel has been going through a period of recession in
economic activity, resulting in low growth rates and growing unemployment. Our
operations could be adversely affected if the economic conditions in Israel will
deteriorate.
12
CAPITALIZATION AND INDEBTEDNESS
The table below sets forth the capitalization of our company as of March
31, 2005 and as adjusted to give effect to the issuance to the Selling
Shareholders on June 15, 2005 of 1,833,334 shares of common stock in
consideration for $1.1 million and of 82,133 shares of common stock as finders
fees.
ACTUAL AS ADJUSTED
----------- -----------
(unaudited in thousands)
Shareholders' equity
Common stock of NIS 0.0001 par value, 25,350,000 shares
authorized; shares issued and outstanding, actual; 27,265,467
shares issued and outstanding as
adjusted .................................................... $ 2,535 $ 2,727
Additional paid-in capital ........................................ 1,711,450 2,761,978
Retained earnings ................................................. 3,232,186 3,232,186
Accumulated other comprehensive loss .............................. (200,898) (200,898)
Total shareholders' equity .......................................... $ 4,745,273 $ 5,795,993
----------- -----------
REASONS FOR THE OFFER AND USE OF PROCEEDS
We are filing this prospectus, at our expense, as required by the
securities purchase agreement among us and the selling shareholders.
We will not receive any of the proceeds from the sale by the selling
shareholders of our common stock. We will, however, receive the proceeds from
the exercise of the warrants issued to selling shareholders if and when they are
exercised. We have agreed to bear all expenses relating to the registration of
the common stock registered pursuant to the registration statements of which
this prospectus is a part.
MARKET PRICE DATA
Our common stock trade on the OTCBB under the symbol DFNS.OB. The following
table sets forth, for the periods indicated, the range of high ask and low bid
prices of our common stock on the OTCBB:
13
HIGH LOW
----- -----
2003
First Quarter .................. $0.87 $0.32
Second Quarter ................. 0.43 0.19
Third Quarter .................. 0.30 0.18
Fourth Quarter ................. 0.27 0.17
2004
First Quarter .................. $0.39 $0.19
Second Quarter ................. 0.80 0.22
Third Quarter .................. 0.51 0.33
Fourth Quarter ................. 1.32 0.40
2005
First Quarter .................. $1.45 $0.80
Second Quarter ................. 1.01 0.48
Third Quarter (through August 8) 0.70 0.46
MONTHLY STOCK INFORMATION
The following table sets forth, for the most recent six months, the range
of high asks and low bid prices of our common stock on the OTCBB:
2005 HIGH LOW
------- ---- ---
February 1.29 0.90
March .. 1.20 0.80
April .. 1.01 0.55
May .... 0.83 0.51
June ... 0.65 0.48
July ... 0.67 0.46
SELLING SHAREHOLDERS
The common stock being offered by the selling shareholders were issued
pursuant to a securities purchase agreement, dated as of June 15, 2005 and are
issuable upon exercise of the warrants. For additional information regarding the
issuance of those shares and warrants, see "Private Placement of Common Stock
and Warrants" above. We are registering the common stock in order to permit the
selling shareholders to offer the shares for resale from time to time. Except
for the ownership of the common stock and the warrants issued pursuant to the
securities purchase agreement, the selling shareholders have not had any
material relationship with us within the past three years.
14
The table below lists the selling shareholders and other information
regarding the beneficial ownership of the common stock by each of the selling
shareholders. The second column lists the number of common stock beneficially
owned by each selling shareholder, based on its ownership of the common stock
and warrants, as of the date of this prospectus, assuming exercise of the
warrants held by the selling shareholders on that date, without regard to any
limitations on exercise.
The third column lists the common stock being offered by this prospectus by
the selling shareholders.
In accordance with the terms of the stockholder's agreement with the
selling shareholders, this prospectus generally covers the resale of at least
sum of (i) the number of common stock initially issued pursuant to the
securities purchase agreement; (ii) the number of common stock issuable upon
exercise of the warrants as of the trading day immediately preceding the date
the registration statement is initially filed with the SEC and (iii) the number
of common stock issuable to the investors in the event of decrease in the share
price, under certain circumstances. The fourth column assumes the sale of all of
the shares offered by the selling shareholders pursuant to this prospectus.
The selling shareholders may sell all, some or none of their shares in this
offering. See "Offer Statistics, Expected Time Table and Plan of Distribution."
MAXIMUM NUMBER OF SHARES NUMBER OF SHARES OF
NUMBER OF SHARES COMMON OF COMMON STOCK TO BE COMMON STOCK
OF STOCK BENEFICIALLY SOLD PURSUANT TO THIS BENEFICIALLY OWNED
NAME OF SELLING SHAREHOLDER OWNED PRIOR TO OFFERING PROSPECTUS AFTER OFFERING
--------------------------- ----------------------- ---------- --------------
Gov Financial Holdings Ltd. (1)............. 3,416,706 3,416,706 -
Avshalom Hershcovich ...................... 201,293 201,293 -
Multi Concept (Consultants), Ltd.(2)....... 157,170 157,170 -
Ruth Creative Business Ltd. (3)............ 135,989 135,989 -
----------
(1) Mr. Leon Recanati, owns 100% of Gov Financial Holdings Ltd. shares, and
consequently has voting control and investment discretion over the common
stock held by Gov Financial Holdings Ltd.
(2) Mr. Shmuel Even, owns 100% of Multi Concept (Consultants), Ltd. shares, and
consequently has voting control and investment discretion over the common
stock held by Multi Concept (Consultants), Ltd.
(3) Mr. Boaz Benrush, owns 100% of Ruth Creative Business Ltd. shares, and
consequently has voting control and investment discretion over the common
stock held by Ruth Creative Business Ltd.
15
OFFER STATISTICS, EXPECTED TIME TABLE
AND PLAN OF DISTRIBUTION
We are registering the common stock issued and issuable upon exercise of
the warrants to permit the resale of these common stock by the holders of the
common stock and warrants from time to time after the date of this prospectus.
We will not receive any of the proceeds from the sale by the selling
shareholders of the common stock. We will bear all fees and expenses incident to
our obligation to register the common stock.
The selling shareholders may sell all or a portion of the common stock
beneficially owned by them and offered hereby from time to time directly or
through one or more underwriters, broker-dealers or agents. If the common stock
are sold through underwriters or broker-dealers, the selling shareholders will
be responsible for underwriting discounts or commissions or agent's commissions.
The common stock may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of the sale, at varying prices determined
at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
o on any national securities exchange or quotation service on which the
securities may be listed or quoted at the time of sale;
o in the over-the-counter market;
o in transactions otherwise than on these exchanges or systems or in the
over-the-counter market;
o through the writing of options, whether such options are listed on an
options exchange or otherwise;
o ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the
shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
o an exchange distribution in accordance with the rules of the
applicable exchange;
o privately negotiated transactions;
o short sales;
o sales pursuant to Rule 144;
16
o broker-dealers may agree with the selling securityholders to sell a
specified number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
If the selling shareholders effect such transactions by selling common
stock to or through underwriters, broker-dealers or agents, such underwriters,
broker-dealers or agents may receive commissions in the form of discounts,
concessions or commissions from the selling shareholders or commissions from
purchasers of the common stock for whom they may act as agent or to whom they
may sell as principal (which discounts, concessions or commissions as to
particular underwriters, broker-dealers or agents may be in excess of those
customary in the types of transactions involved). In connection with sales of
the common stock or otherwise, the selling shareholders may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the
common stock in the course of hedging in positions they assume. The selling
shareholders may also sell common stock short and deliver common stock covered
by this prospectus to close out short positions. The selling shareholders may
also loan or pledge common stock to broker-dealers that in turn may sell such
shares.
The selling shareholders may pledge or grant a security interest in some or
all of the warrants or common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the common stock from time to time pursuant to this prospectus or
any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended, amending, if necessary, the
list of selling shareholders to include the pledgee, transferee or other
successors in interest as selling shareholders under this prospectus. The
selling shareholders also may transfer and donate the common stock in other
circumstances in which case the transferees, donees, pledgees or other
successors in interest will be the selling beneficial owners for purposes of
this prospectus.
The selling shareholders and any broker-dealer participating in the
distribution of the common stock may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission paid, or any discounts or
concessions allowed to, any such broker-dealer may be deemed to be underwriting
commissions or discounts under the Securities Act. At the time a particular
offering of the common stock is made, a prospectus supplement, if required, will
be distributed which will set forth the aggregate amount of common stock being
offered and the terms of the offering, including the name or names of any
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the selling shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
Under the securities laws of some states, the common stock may be sold in
such states only through registered or licensed brokers or dealers. In addition,
in some states the common stock may not be sold unless such shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
17
There can be no assurance that any selling shareholder will sell any or all
of the common stock registered pursuant to the shelf registration statement, of
which this prospectus forms a part.
The selling shareholders and any other person participating in such
distribution will be subject to applicable provisions of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder, including,
without limitation, Regulation M of the Exchange Act, which may limit the timing
of purchases and sales of any of the common stock by the selling shareholders
and any other participating person. Regulation M may also restrict the ability
of any person engaged in the distribution of the common stock to engage in
market-making activities with respect to the common stock. All of the foregoing
may affect the marketability of the common stock and the ability of any person
or entity to engage in market-making activities with respect to the common
stock.
We will pay all expenses of the registration of the common stock pursuant
to the registration rights agreement; provided, however, that a selling
shareholder will pay all underwriting discounts and selling commissions, if any.
We will indemnify the selling shareholders against liabilities, including some
liabilities under the Securities Act, in accordance with the registration rights
agreement, or the selling shareholders will be entitled to contribution. We may
be indemnified by the selling shareholders against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the related registration rights agreement,
or we may be entitled to contribution.
Once sold under the registration statement, of which this prospectus forms
a part, the common stock will be freely tradable in the hands of persons other
than our affiliates.
EXPERTS
Our consolidated financial statements incorporated by reference in our
Annual Report on Form 10-KSB for the years ended December 31, 2004 and 2003,
have been audited by Weinberg & Company, P.A., independent registered public
accounting firm as set forth in their report incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the registration of the common
stock hereunder with respect to Nevada law will be passed upon for us by
McDonald Carano Wilson LLP, Las Vegas, Nevada.
MATERIAL CHANGES
Except as otherwise described our Annual Report on Form 10-KSB for the
fiscal year ended December 31, 2004 and in our Reports on Form 10-QSB and 8-K
filed under the Exchange Act and incorporated by reference herein, no reportable
material changes have occurred since December 31, 2004.
18
WHERE YOU CAN BEST FIND MORE INFORMATION; INCORPORATION OF CERTAIN
INFORMATION BY REFERENCE
This prospectus is a part of a registration statement on Form S-3 OF
Defense Industries International Inc., Registration No. 333- ________ , which we
filed with the Securities and Exchange Commission under the Securities Act of
1933. As permitted by the rules and regulations of the SEC, this prospectus does
not contain all of the information contained in the registration statement and
the exhibits and schedules thereto. As such we make reference in this prospectus
to the registration statement and to the exhibits and schedules thereto. For
further information about us and about the securities we hereby offer, you
should consult the registration statement and the exhibits and schedules
thereto. You should be aware that statements contained in this prospectus
concerning the provisions of any documents filed as an exhibit to the
registration statement or otherwise filed with the SEC are not necessarily
complete, and in each instance reference is made to the copy of such document so
filed. Each such statement is qualified in its entirety by such reference.
We file annual, quarterly and special reports and other information with
the Securities and Exchange Commission (Commission File Number 0-15375). These
filings contain important information which does not appear in this prospectus.
For further information about us, you may read and copy these filings at the
SEC's public reference room at 450 Fifth Street, N.W, Washington, D.C. 20549.
You may obtain information on the operation of the public reference room by
calling the SEC at 1-800-SEC-0330, and may obtain copies of our filings from the
public reference room by calling (202) 942-8090.
The SEC allows us to "incorporate by reference" information into this
prospectus, which means that we can disclose important information to you by
referring you to other documents which we have filed or will file with the SEC.
We are incorporating by reference in this prospectus the documents listed below
and all amendments or supplements we may file to such documents, as well as any
future filings we may make with the SEC on Form 10-KSB under the Exchange Act
before the time that all of the securities offered by this prospectus have been
sold or de-registered.
o Our Annual Report on Form 10-KSB for the fiscal year ended December
31, 2004;
o Our Quarterly Report on Form 10-QSB for the period ended March 31,
2005;
o Our Reports on Form 8-K submitted to the SEC on June 1, 2005 and June
20, 2005;
o The description of our common stock contained in Item 8 of Form
10SB12G, filed with the SEC on March 27, 2000 under the Exchange Act
and any amendment or report filed for the purpose of updating that
description.
19
All documents filed by us with the SEC pursuant to Section 13(a), 13(c) 14
or 15(d) of the Securities Exchange Act after the date of this prospectus and
before the termination or completion of this offering of our shares of Common
Stock shall be deemed to be incorporated by reference in this prospectus and to
be a part of it from the filing dates of such documents. Certain statements in
and portions of this prospectus update and replace information in the above
listed documents incorporated by reference. Likewise, statements in or portions
of a future document incorporated by reference in this prospectus may update and
replace statements in and portions of this prospectus or the above listed
documents.
We shall provide you without charge, upon your written or oral request, a
copy of any of the documents incorporated by reference in this prospectus, other
than exhibits to such documents which are not specifically incorporated by
reference into such documents. Please direct your written or telephone requests
to Defense Industries International, Inc. 8 Brisel Street Industrial Zone
Sderot, Israel. Attn: Baruch Tosh, President, telephone number (972)(8)
689-1611. You may also obtain information about us by visiting our website at
www.defense-industries.com. Information contained in our website is not part of
this prospectus.
20
--------------------------------------
DEFENSE INDUSTRIES INTERNATIONAL, INC.
COMMON STOCK AND WARRANTS
--------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses of the issuance and distribution of the securities being
registered hereby, other than selling discounts and commissions, are estimated
as follows:
Securities and Exchange Commission registration fee
Securities and Exchange Commission registration fee $ 287.72
NASD filing fee ................................... -
Legal fees and expenses ........................... 23,000.00
Accounting fees and expenses ...................... 4,500.00
Printing fees and expenses ........................ -
Miscellaneous ..................................... 2.28
----------
Total ................................... $27,790.00
----------
Item 15. Indemnification of Directors and Officers
Chapter 78, section 7502, subsection 1 of the Business Associations;
Securities; Commodities Law of the State of Nevada empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, except an action by or in the
right of the corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with the
action, suit or proceeding if (i) he is not liable pursuant to Chapter 78,
Section 138, which provides that a director or officer is entitled to rely on
information, opinions, reports, books of account or statements prepared or
presented by directors, officers or employees of the corporation reasonably
believed to be reliable and competent in the matters presented, by counsel,
public accountants or other persons as to matters reasonably believed to be
within the preparer's or presenter's professional or expert competence or by a
properly established committee on which the relying director or officer does not
serve as to matters within the committee's designated authority, in each case so
long as the director or officer has no knowledge concerning the matter in
question that would cause reliance thereon to be unwarranted, or (ii) if he
acted in good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person is liable
pursuant to section 138 or did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and that, with respect to any criminal action or proceeding, he had
reasonable cause to believe that his conduct was unlawful.
II-1
Subsection 2 of section 7502 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses, including amounts paid in settlement and attorneys' fees
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he is not liable pursuant to section 138 or
if he acted in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the corporation. Indemnification may not
be made for any claim, issue or matter as to which such a person has been
adjudged by a court of competent jurisdiction, after exhaustion of all appeals
therefrom, to be liable to the corporation or for amounts paid in settlement to
the corporation, unless and only to the extent that the court in which the
action or suit was brought or other court of competent jurisdiction determines
upon application that in view of all the circumstances of the case, the person
is fairly and reasonably entitled to indemnity for such expenses as the court
deems proper.
Subsection 3 of section 7502 further provides that to the extent that a
director, officer, employee or agent of a corporation has been successful on the
merits or otherwise in defense of any action, suit or proceeding referred to in
subsections 1 and 2 of section 7502, or in defense of any claim, issue or matter
therein, he must be indemnified by the corporation against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection with the
defense.
Chapter 78, Section 751, subsection 1 provides that any discretionary
indemnification pursuant to section 7502, unless ordered by a court or advanced
pursuant to subsection 2 of section 751, may be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances. The
determination must be made (i) by the stockholders,(ii) by the board of
directors by a majority vote of a quorum consisting of directors who were not
parties to the action, suit or proceeding, (iii) if a majority vote of a quorum
consisting of directors who were not parties to the action, suit or proceeding
so orders, by independent legal counsel in a written opinion, or (iv) if a
quorum consisting of directors who were not parties to the action, suit or
proceeding cannot be obtained, by independent legal counsel in a written
opinion.
Subsection 2 of section 751 provides that the articles of incorporation,
the bylaws or an agreement made by the corporation may provide that the expenses
of officers and directors incurred in defending a civil or criminal action, suit
or proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon receipt
of an undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that he is
not entitled to be indemnified by the corporation. Section 751 also provides
that the indemnification provided in Section 7502 is not deemed exclusive nor
exclude any other rights to which an indemnified party may be entitled,
including, without limitation, pursuant to the articles of incorporation or
bylaws of the corporation.
II-2
Article 8 of the Registrant's Articles of Incorporation provides that it
will, to the fullest extent permitted by the General Corporation Law of the
State of Nevada, indemnify any and all persons whom it will have power to
indemnify under said Law from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said Law, and the
indemnification provided for will not be deemed exclusive of any other rights to
which those indemnified may be entitled under any Bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
Chapter 78, section 752 provides that a corporation may purchase insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise for any liability asserted against him and
liability and expenses incurred by him in his capacity as a director, officer,
employee or agent, or arising out of his status as such, whether or not the
corporation has the authority to indemnify him against such liability and
expenses.
The Registrant purchased liability insurance of the type referred to in
section 752. The policy covers the Registrant with respect to its obligation to
indemnify its directors and officers. In addition, the policy covers the
Registrant's directors and officers with respect to certain liabilities which
are not reimbursable by the Registrant
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, 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.
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 Securities Purchase Agreement dated June 15, 2005 (1)
4.2 Stockholders Agreement dated June 15, 2005 (2)
4.3 Form of Warrant A dated June 15, 2005 (1)
4.4 Form of Warrant B dated June 15, 2005 (1)
5 Opinion of McDonald Carano Wilson LLP
23.1 Consent of Weinberg & Company, P.A.
II-3
EXHIBIT
NUMBER DESCRIPTION
------- -----------
23.2 Consent of McDonald Carano Wilson LLP (included in Exhibit 5)
24 Powers of Attorney (included in the signature page of this Registration
Statement)
----------
(1) Incorporated by reference to Item 1 of the Registrant's Report on Form 8-K
dated filed June 20, 2005.
(2) Incorporated by reference to Item 2 of the Registrant's Report on Form 8-K
dated filed June 20, 2005.
ITEM 17. UNDERTAKINGS.
(1) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions referred to in Item 15 above, 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 of 1933 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 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 of 1933 and will be governed by the final adjudication of such
issue.
(3) For purposes of determining any liability under the Securities Act of
1933, 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.
(4) For the purpose of determining any liability under the Securities Act
of 1933, 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-4
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, on the 10th day of August, 2005.
DEFENSE INDUSTRIES INTERNATIONAL, INC.
By: /S/ Joseph Postbinder
-------------------------
Joseph Postbinder
Chairman of the Board of Directors and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes Joseph Postbinder
and Baruch Tosh , and each of them singly, his true and lawful attorneys-in-fact
with full power to sign on behalf of such person, in the capacities indicated
below, any and all amendments to this registration statement (including
post-effective amendments) and any subsequent related registration statement
filed pursuant to Rule 462(b) under the Securities Act of 1933, and generally to
do all such things in the name and on behalf of such person, in the capacities
indicated below, to enable the registrant to comply with the provisions of the
Securities Act of 1933 and all requirements of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming the signature of such
person as it may be signed by said attorneys-in-fact, or any of them, to any and
all amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement and the above power of attorney have been signed below by
the following persons in the capacities indicated on August 10, 2005.
/S/ Joseph Postbinder
---------------------
Name: Joseph Postbinder
Title: Chairman of the Board of Directors and
Chief Executive Officer
/S/ Baruch Tosh
---------------------
Name: Baruch Tosh
Title: President
/S/ Meira Postbider
---------------------
Name: Meira Postbinder
Title: Vice President of Finance and Director
II-5
/S/ Tsippy Moldvan
---------------------
Name: Tsippy Moldovan
Title: Chief Financial Officer and Director
/S/ Avraham Hatzor
---------------------
Name: Avraham Hatzor
Title: Chief Operations Officer and Director
/S/ Dan Zarchin
---------------------
Name: Dan Zarchin
Title: Director
/S/ Motti Hassan
---------------------
Name: Motti Hassan
Title: Director
II-6