AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 22, 2003
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STAKE TECHNOLOGY LTD.
(Exact name of registrant as specified in its charter)
Canada
(State or other jurisdiction of incorporation or organization)
Not Applicable
(I.R.S. Employer Identification Number)
2838 Highway 7
Norval, Ontario, Canada L0P 1K0
(905) 455-1990
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
STEVEN R. BROMLEY
Executive Vice President and Chief Financial Officer
Stake Technology Ltd.
2838 Highway 7
Norval, Ontario, Canada L0P 1K0
(905) 455-1990
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Robert T. Lincoln, Esq.
Dunnington, Bartholow & Miller LLP
666 Third Avenue
New York, NY 10017
(212) 682-8811
Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |_|
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. |X|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
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Calculation of Registration Fee
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Title of each class Proposed maximum Proposed maximum
Of securities to be Amount to be offering price Aggregate offering Amount of
registered registered per share (1) Price (1) registration fee
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Common Shares
without par value 196,809 $ 9.99 $ 1,966,122 $ 161.80
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to rule 457(c) and based on the average of the high and low
reported sales prices of the Registrant's Common Shares on the Nasdaq
Smallcap Market on September 18, 2003, a date within five (5) business
days of the date on which the Registration Statement was initially filed.
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The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 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. THE
SELLING SHAREHOLDER MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING
OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 2003
PROSPECTUS
196,809 Shares
STAKE TECHNOLOGY LTD.
Common Shares, Without Par Value
This Prospectus relates to the offer and sale of up to 196,809 Common Shares,
without par value (the "Shares") of Stake Technology Ltd. by the selling
security holders identified in this Prospectus. We originally issued the Shares
offered by this Prospectus to the selling security holders in connection with
our acquisition of 100% of the outstanding shares of Integrated Drying Systems
Inc. ("IDS") and its wholly-owned subsidiaries, Kettle Valley Dried Fruits Ltd.
and Kettle Valley Dried Fruits Inc. We agreed in connection with this
acquisition to register for resale the Shares issued to the IDS shareholders,
and also agreed to bear the expenses of the registration of the Shares. We will
not receive any of the proceeds from the possible sale of the Shares by the
selling security holders. See "RECENT DEVELOPMENTS" on page 5.
Our Common Shares are traded on the Nasdaq Smallcap Market under the symbol
"STKL" and are listed and posted for trading on the Toronto Stock Exchange under
the symbol "SOY".
On September 18, 2003, the last reported sale price for the Common Shares on the
Nasdaq Smallcap Market was $10.04 per share.
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INVESTING IN THE COMMON SHARES INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER , 2003
TABLE OF CONTENTS
PAGE
----
Forward-Looking Statements.................................................. 2
Presentation of Financial and Other Information............................. 2
Exchange Rate Information................................................... 3
Documents Incorporated by Reference......................................... 3
Prospectus Summary.......................................................... 4
Recent Developments......................................................... 5
Risk Factors................................................................ 7
Use of Proceeds ............................................................ 11
Description of Securities................................................... 11
Dividend Policy............................................................. 12
Selling Security Holders.................................................... 12
Plan of Distribution........................................................ 13
Legal Matters............................................................... 14
Experts..................................................................... 14
Transfer Agent and Registrar................................................ 14
Indemnification of Directors and Officers................................... 14
Enforceability of Civil Liabilities ........................................ 15
Where You Can Find More Information......................................... 15
THIS PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT
STAKE TECHNOLOGY LTD. AND ITS SUBSIDIARIES THAT IS NOT INCLUDED IN OR DELIVERED
WITH THIS DOCUMENT. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO SECURITY
HOLDERS UPON WRITTEN OR ORAL REQUEST.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
DIFFERENT INFORMATION. WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY
STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Generally,
these forward-looking statements include but are not limited to, statements
about our plans, objectives, expectations, intentions and other statements,
contained in this Prospectus or incorporated by reference, that are not
historical facts. You can identify these statements by forward-looking words,
such as "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate,"
"may," "will" and "continue" or similar words. You should read statements that
contain these words carefully because they discuss our future expectations,
contain projections of our future results of operations or of our financial
condition, or state other forward-looking information. We caution readers that
these forward-looking statements are not guarantees of future performance or
events and are subject to a number of uncertainties, risks and other influences,
many of which are beyond our control and may influence the accuracy of the
statements and projections upon which the statements are based. The factors
listed in the section captioned "Risk Factors" as well as any cautionary
language in this Prospectus provide examples of risks, uncertainties and events
that may cause our actual results to differ materially from the expectations we
describe in our forward-looking statements. Before you invest in our Common
Shares, you should be aware that the occurrence of the events described in the
"Risk Factors" section and elsewhere in this Prospectus could have a material
adverse effect on our business, operating results and financial condition.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
The Company's financial statements have been prepared in accordance with the
accounting principles generally accepted in Canada ("Canadian GAAP"). For
disclosure of the principal differences between Canadian GAAP and the accounting
principles generally accepted in the United States, see Note 18 to the Audited
Consolidated Financial Statements for the year ended December 31, 2002 and Note
14 to the Interim Consolidated Financial Statements for the six months ended
June 30, 2003. We publish our Audited Consolidated Financial Statements in U.S.
dollars. All dollar amounts in this Prospectus are expressed in United States
dollars "$". Amounts expressed in Canadian dollars are preceded by the symbols
"CDN. $".
2
EXCHANGE RATE INFORMATION
The following table sets forth information with respect to the noon exchange
rates of the Canadian dollar into United States currency during the eight month
period ended August 31, 2003 and the twelve month period ended December 31,2002.
(1) The rate of exchange for the Canadian dollar, expressed in US dollars, in
effect at the end of the period (2) the average of exchange rates in effect on
the last day of each month during the applicable period and (3) the high and low
exchange rates during the applicable period.
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RATES August 31, 2003 December 31, 2002
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Last Day (1) $0.7216 $0.6331
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Average (2) $0.6928 $0.6373
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High (3) $0.7491 $0.6618
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Low (3) $0.6381 $0.6199
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On September 18 , 2003 the closing rate payable in U.S. dollars for each Cdn
$1.00 as reported by the Bank of Canada was U.S. $.7348.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" into this Prospectus information
we file with the SEC in other documents. This means that we can disclose
important information by referring you to other documents that we file with the
SEC. The information incorporated by reference is considered to be part of this
Prospectus, and information that we file later with the SEC will automatically
update and supercede this information. We incorporate by reference the documents
listed below and future filings we will make with the Commission under Sections
13(a), 13(c), 14, or 15(d) of the Exchange Act until the offering of these
shares is terminated:
(1) Amendment No. 4 to our Annual Report on Form 10-K for the year ended
December 31, 2002, filed July 14, 2003, SEC file no.0-9989.
(2) Our Quarterly Report on Form 10-Q for the six months ended June 30, 2003,
filed August 14, 2003, SEC file no. 0-9989.
(3) Our Information Circular and Proxy Statement filed May 21, 2003 relating
to our 2003 Annual and Special Meeting of Shareholders held on June 18,
2003.
(4) Our Current Reports on Form 8-K filed August 12, 2003, SEC file no.
0-9989; August 11, 2003, SEC file no. 0-9989; and February 5, 2003, SEC
file no. 0-9989.
(5) Amendment No. 1 to our Current Report on Form 8-K filed February 14, 2003,
SEC file no. 0-9989.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for the
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 such statement. Any
statement so modified or superseded shall not constitute a part of this
Prospectus, except as so modified or superseded. The modifying or superseding
statement need not state that it has modified or superseded a prior statement or
include any other information set forth in the document which it modifies or
supersedes. The making of such a modifying or superseding statement shall not be
deemed an admission for any purposes that the modified or superseded statement,
when made, constituted a misrepresentation, an untrue statement of a material
fact or an omission to state a material fact that is required to be stated or
that is necessary to make a statement not misleading in light of the
circumstances in which it was made. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
3
PROSPECTUS SUMMARY
This summary highlights some information from this Prospectus. It is qualified
in its entirety by the more detailed information and consolidated financial
statements, including the notes to the consolidated financial statements,
incorporated by reference in this Prospectus. You should read the full text of,
and consider carefully, the more specific details contained in or incorporated
by reference in this Prospectus. When used in this Prospectus, the terms
"Company" "Stake," "we," "our," "ours" and "us" refer to Stake Technology Ltd.
and its consolidated subsidiaries, unless the context requires otherwise, and
not to the selling security holders.
Our Business
Stake Technology Ltd. ("Stake" or the "Company") operates in three principal
businesses; (1) sourcing, processing, packaging and distribution of natural and
organic food products, (2) processing, distribution and recycling of
environmentally responsible industrial mineral products and (3) engineering and
marketing of a proprietary clean pulping system using patented steam explosion
technology.
The Company was incorporated under the laws of Canada on November 13, 1973. The
principal executive offices are located at 2838 Highway 7, Norval, Ontario,
Canada, L0P 1K0, telephone: (905) 455-1990, fax: (905) 455-2529, e-mail:
info@staketech.com and web site: www.staketech.com.
The Food Group, which represented approximately 80% of the Company's fiscal 2002
consolidated revenues, consists of the SunRich Food Group ("SunRich"), recently
acquired Opta Food Ingredients, Inc. ("Opta") and the newly formed Canadian
Organic Food Group. These groups form the backbone of the Company's vertically
integrated food operations, focused on the natural and organic foods markets.
The Company is currently integrating these operations in order to leverage
efficiencies and cost savings, maximize product and processing capabilities and
develop a solid platform to support continued growth in the natural and organic
foods sectors. SunRich produces organic and non-genetically modified (non-GMO)
food ingredients with a specialization in soy and other natural and organic food
products. SunRich is headquartered at 3824 - 93rd Street S.W., Hope, Minnesota,
56046-0128, telephone: (507) 451-3316, fax: (507) 451-2910. Opta is the world's
largest supplier of oat fibre to the food industry based on management's
estimate of these markets. Its mission is to resolve its customers' product
formulation challenges through innovating, manufacturing and selling proprietary
ingredients to improve the nutritional content, healthfulness, texture and taste
of foods. Opta is headquartered at 25 Wiggins Avenue, Bedford, Massachusetts,
01730, telephone: (781) 276-5100, fax (781) 276-5101. The Canadian Organic Food
Group consists of the 2002 acquisitions of Wild West Organic Harvest
Co-operative Association ("Wild West") of Richmond, British Columbia, Simply
Organic Co. Ltd. ("Simply Organic") of Toronto, Ontario and Organic Kitchen of
Toronto, Ontario, Sunrich Valley, a new division launched in 2002, and the 2003
acquisition of Kettle Valley Dried Fruits Ltd. and its related companies
("Kettle Valley"). Wild West specializes in the distribution of natural and
organic foods throughout Western Canada. Simply Organic is a growing natural and
organic foods distribution business serving the Central Canada market. Organic
Kitchen provides organic feeds and partners with processors to market organic
poultry and other organic meat products. Sunrich Valley markets a full line of
organic dairy products under the trademark Mu. Kettle Valley operates from
facilities in Summerland, B.C. where it produces natural and organic fruit bars
and fruit leathers with an apple base and markets these products under the
Kettle Valley Real Fruit Snacks and Frunola brands.
The Environmental Industrial Group, which represented approximately 20% of
fiscal 2002 consolidated revenues, consists of BEI/PECAL, a division of the
Company, Temisca Inc., Virginia Materials Inc. ("Virginia Materials") and
International Materials & Supplies, Inc. ("International Materials"). The
Environmental Industrial Group processes, sells and distributes abrasives and
other industrial minerals to the foundry, steel and marine/bridge cleaning
industries; sources specialty sands and garnets for the water filtration
industry; and recycles inorganic materials under special permits from government
authorities at both its Waterdown, Ontario and Norfolk, Virginia sites. The
Environmental Industrial Group is located at 407 Parkside Drive, Waterdown,
Ontario, L0R 2H0, telephone: (905) 689-6661, fax: (905) 689-0485.
The Steam Explosion Technology Group is located on the corporate property of the
Company in Norval, Ontario. This division holds a number of patents on its steam
explosion process and is marketing a clean pulping system with a special focus
on China, the world's largest user of non-woody pulp. The Steam Explosion
Technology uses high temperature and pressure rather than chemicals to process
non-woody fibres into pulp which can be used to produce various paper products.
The Steam Explosion Group is also pursuing opportunities to leverage this
technology to North American companies for food grade applications, primarily to
convert complex sugars into food grade sweeteners. The Steam Explosion
Technology Group is located at 2838 Hwy 7, Norval, Ontario, L0P 1K0, telephone:
(905) 455-1990, fax: (905) 455-2529.
4
RECENT DEVELOPMENTS
Change of Corporate Name
At the annual and special meeting of the shareholders of the Company held in
Toronto, Canada on June 18, 2003, the shareholders of the Company approved a
special resolution to change the name of the Company to SunOpta Inc. The
proposed name change is intended to more accurately reflect the Company's stated
mission and focus on the development of vertically integrated natural and
organic food businesses. The Company intends to file articles of amendment to
change its name and implement the proposed name change throughout the
organization on or before December 31, 2003.
Acquisitions during 2003 and 2002
Kettle Valley
On May 1, 2003, Stake acquired 100% of the outstanding shares of Integrated
Drying Systems Inc. and its wholly-owned subsidiaries, Kettle Valley Dried
Fruits Ltd. and Kettle Valley Dried Fruits, Inc. Purchase consideration totaled
$2,668,000 and included a combination of cash, Common Shares and notes payable.
Kettle Valley produces natural and organic fruit bars and fruit leathers with an
apple base and markets these products under the Kettle Valley Real Fruit Snack
and Frunola brands and realized revenues of approximately $4,000,000 in 2002.
Kettle Valley operates two production facilities in Summerland, British
Columbia, the heart of the British Columbia apple growing district, and is
currently constructing a third plant in the State of Washington, the centre of
the apple growing district of the Western United States. In addition, Kettle
Valley produces a number of private label products for customers in the United
States, Canada and the United Kingdom. Kettle Valley products are sold through
agents and distributors to the health food and mass markets as well as to
various school districts which are committed to improving the dietary content of
student lunches.
Opta
On December 4, 2002, Stake completed its cash tender offer for Opta (formerly
listed on the Nasdaq - OPTS) for $2.50 per share in accordance with the terms of
its tender offer for all of the outstanding shares of Opta. Approximately 92.6%
of the outstanding Common Shares of Opta were tendered. On December 18, 2002,
the Company merged Opta with Stake Acquisition Corp., a wholly-owned subsidiary
of the Company. As a result of this merger and pursuant to applicable law, the
remaining 7.4% of Opta's outstanding Common Shares were converted into a right
to receive $2.50 per share in cash from Stake. The total purchase price
including associated costs was $28,600,000.
Opta is an innovator, manufacturer and marketer of proprietary food ingredients
that improve the nutritional content, healthfulness, texture and taste of its
customers' food products. Opta's food ingredients are used by more than 350 food
companies, including some of the largest consumer packaged food companies and
largest quick service restaurant chains in the United States. For the nine-month
period ended September 30, 2002, Opta's sales were $21,100,000 from its four
manufacturing plants. As of September 30, 2002, Opta's net assets were
approximately $38,100,000, which included approximately $9,500,000 in cash and
short-term investments.
Simply Organic
On December 1, 2002, the Company acquired privately owned Simply Organic, a
Toronto based distributor of natural and organic food products. The purchase
price included aggregate cash payments of $187,000 and contingent consideration
of $160,000 payable upon achieving certain gross margin targets over the next
two to four years. Simply Organic celebrated its second year in business in
November, 2002 and had annualized revenues of approximately $3,500,000 in 2002.
Simply Organic distributes a broad range of regionally and internationally grown
and produced certified organic food products including Stake's line of organic
dairy products, marketed under the trademark Mu, throughout much of Ontario to
both the mass market and natural food retail outlets. It has recently expanded
to a new 14,000 square foot refrigerated warehouse.
Wild West Organic Harvest
On November 1, 2002, the Company acquired privately owned 632100 B.C. Ltd.,
formally operated as Wild West Organic Harvest Co-Operative Association, a
Vancouver, British Columbia based distributor of organic and natural food
products. The purchase price included aggregate cash payments of $889,000 and
contingent consideration of $144,000 payable upon achieving certain gross margin
targets over the next two to four years. Wild West had annualized revenues of
approximately $11,000,000 in 2002.
5
Wild West distributes approximately 2,400 products throughout Western Canada to
both the mass market and natural food retail outlets. Wild West has a historical
annual growth rate of 43% over the last three years and operates from a newly
expanded 38,000 square foot refrigerated and frozen warehouse facility.
Organic Kitchen
On July 2, 2002, the Company acquired organic feed and related inventories, the
Organic Kitchen trademark and the businesses of Organic Kitchen Inc. and Cloud
Mountain Inc. (together forming Organic Kitchen). Consideration consisted of
$297,000 paid in cash on closing. In addition, the Company will pay 10% of the
pre-tax profits earned to December 31, 2005, up to a maximum of $1,268,000. This
contingent consideration will be recorded as an increase to goodwill when the
amount of the contingency is determinable. No contingent consideration was paid
in 2002.
Financings during 2003 and 2002
Public Offering
On August 28, 2003 the Company completed an underwritten offering of 7,000,000
Common Shares at a price of $7.00 per share for gross proceeds of $49,000,000.
After deducting underwriter's commissions of $1,960,000 and estimated expenses
of the offering of $650,000, the estimated net proceeds to the Company were
$46,390,000. The Company used a portion of the net proceeds from the offering to
reduce a part of its outstanding indebtedness pursuant to existing credit
facilities maintained with a lending syndicate consisting of various Canadian
chartered banks and financial institutions and repaid the principal of and
accrued interest on the convertible debenture held by Claridge Israel LLC. Any
of the net proceeds not applied to reduce such debt or to repay the convertible
debenture will be used for general corporate purposes, including future
acquisitions, internal expansion projects and working capital requirements.
On September 4, 2003 the underwriters of the previously noted offering of
7,000,000 Common Shares exercised their over-allotment option for an additional
500,000 Common Shares, at a price of US $7.00 per Common Share, for total gross
proceeds of US $3,500,000. The net proceeds from this issuance will be used by
the Company primarily for general corporate purposes, including future
acquisitions, internal expansion projects and working capital requirements.
Bank Financing
The Company completed two bank refinancings in 2002 with a Canadian chartered
bank and its U.S. subsidiary (the "Banks") and has completed a further
refinancing in February, 2003.
The first refinancing in March, 2002 was used to consolidate a number of
separate banking and private lending relationships. This new facility included a
CDN $5,000,000 line of credit, a $5 million line of credit, and a $15,000,000
two year term facility payable quarterly based on a seven year amortization
period.
In November, 2002, Stake entered into a tender facility agreement with the Banks
for $17,000,000, which was used solely for the purchase of Opta's outstanding
Common Shares pursuant to the cash tender offer.
In February, 2003, the Company entered into an amended and restated banking
agreement with a group of Canadian chartered banks and one of its U.S.
subsidiaries (the "Syndicate"). This amended facility increased the term debt to
$21,700,000 and the U.S. line of credit to $9,000,000. The incremental proceeds
from this facility, in addition to cash on hand were used to repay the tender
facility. The term facility is due in March 2005 with a renewal option by the
Syndicate and the Company. Principal payments are made quarterly and amortized
over seven years. The interest rate under the term facility varies depending on
the underlying debt instrument selected and the debt/EBITDA ratio of the
Company. The Company intends to renew the facility when it matures in March
2005.
In May, 2003, the Company amended its February, 2003 facility to increase its
Canadian line of credit by CDN $2,500,000 to CDN $7,500,000. The additional line
was used to repay Kettle Valley's bank debt and will be used to complete the
expansion of Kettle Valley into a third facility.
Subscription Agreement
On August 29, 2003, the Company completed an agreement with a trust of which
Robert Fetherstonhaugh and Michael Vineberg are the trustees and Stephen
Bronfman is the beneficiary, whereby the Company sold 285,714 Common Shares to
the trust from treasury by way of a private placement at a price of $7.00 per
share for total proceeds of $2,000,000. Mr. Fetherstonhaugh and Mr. Bronfman are
two of our directors.
6
Convertible Debenture
In December 2002, Stake issued to Claridge Israel LLC ("Claridge"), the
Company's largest shareholder, a $5 million convertible debenture due November
30, 2004 (the "Debenture"). The Debenture bore interest at the rate of 5.5% per
annum and was convertible into Common Shares at a price of $3.00 per share on
and after November 30, 2003. The conversion price could be reduced to as low as
$2.55 if the Company had issued Common Shares at a price less than $3.00 per
share at any time before it matured. The funds were specifically used for the
acquisition of Opta. In conjunction with the Debenture, the Company issued
warrants to Claridge to purchase up to 250,000 Common Shares at an exercise
price of $3.25 per share, expiring November 30, 2004.
This Debenture was repaid on August 29, 2003 using proceeds from the previously
referenced public offerings. The Debenture was secured by second mortgages on
certain of the Company's properties in Norval, Hamilton and Flamborough,
Ontario. These mortgages are in the process of being discharged.
RISK FACTORS
The Common Shares offered hereby are speculative in nature and involve a high
degree of risk. Accordingly, in analyzing an investment in these securities,
prospective investors should carefully consider, along with other matters
referred to herein, the risk factors set forth below. Prospective investors
should carefully consider the following risk factors, together with all of the
other information appearing, or incorporated by reference, in this Prospectus,
in light of his or her particular financial circumstances and/or investment
objectives.
We Need Additional Capital to Maintain Current Growth Rates
Our two facilities in Alexandria, Minnesota operate at, or near, capacity on
many of their processing lines. Continued growth in these operations is reliant
upon our ability to increase capacity through internal capital projects, new
facilities or acquisition. Our ability to raise capital, through equity and/or
debt financing, is directly related to our ability to continue to grow and
improve returns from operations. Additional capital through equity financing may
also result in additional dilution to our current shareholders and a decrease in
our share price if we are unable to realize returns equal to or above our
current rate of return. We will not be able to maintain our growth rate and our
strategy as a consolidator within the natural and organic food industries
without further capital.
We Operate in a Highly Competitive Industry
We carry on businesses in highly competitive product and geographic markets in
the U.S. and Canada. The Food Group's specialty grains and inputs and food
ingredients compete with large companies in the U.S. commercial grain
procurement market, major chemical companies with food ingredient divisions,
other food ingredient companies, stabilizer companies and consumer food
companies that also engage in the development and sale of food ingredients. The
Food Group's consumer products operation competes against conventional food
distributors, providers of organic meat and organic dairy products and
significantly larger food companies that provide specialty or high end products.
Many of these competitors have financial resources and staff larger than ours
and may be able to benefit from economics of scale, pricing advantages and
greater resources to launch new products that compete with our offerings. We
have little control over and cannot otherwise affect these competitive factors.
If we are unable to effectively respond to these competitive factors or if the
competition in any of our product markets results in price reductions or
decreased demand for our products, our business, results of operations and
financial condition will be materially impacted.
Product Liability Suits, if Brought, Could Have a Material Adverse Effect on Our
Business
As a manufacturer and marketer of natural and organic food products and
environmental mineral products, we are subject to the risk of claims for product
liability. If a product liability claim exceeding our insurance coverage were to
be successfully asserted against us, it could harm our business.
Technological Innovation by Competitors Could Make Our Products Less Competitive
Competitors include major chemical companies, other food ingredient companies
and consumer food companies that also engage in the development and sale of food
ingredients. Many of these companies are engaged in the development of
texturizers and other food ingredients and have introduced a number of
texturizers into the market. Existing products or products under development by
our competitors could prove to be more effective or less costly than any
products which have been or are being developed by us.
7
We Rely on Protection of Our Intellectual Property and Proprietary Rights
We and particularly our Food Group and Steam Explosion Technology Group depend,
in part, on our ability to protect intellectual property rights. We rely
primarily on patent, copyright, trademark and trade secret laws to protect our
proprietary technologies. The failure of any patents or other intellectual
property rights to provide protection to our technologies would make it easier
for our competitors to offer similar products, which could result in lower sales
or gross margins.
The Food Group has developed a number of new ingredients and alternatives to
accommodate new product adaptation of these and other ingredients into various
food items. The nature of a number of the Food Groups products and processes
requires us to create and maintain a number of patents and trade secrets. The
Food Group's policy is to protect its technology by, among other things, filing
patent applications for technology relating to the development of its business
in the U.S. and in selected foreign jurisdictions.
Our trademarks and brand names are registered in the United States, Canada and
other jurisdictions and we intend to keep these filings current and seek
protection for new trademarks to the extent consistent with business needs. We
rely on trade secrets, proprietary know-how and confidentiality agreements to
protect certain of the technologies and processes used by the Food Group.
In addition, the Steam Explosion Technology Group holds a number of patents on
its steam explosion process and is marketing a clean pulping system with a
special focus on China. We recognize that there exists a threat of others
attempting to copy our proprietary steam explosion technology. To mitigate this
risk, the normal business practice of the Steam Explosion Technology Group
includes the signing of confidentiality agreements with all parties to which
confidential information is supplied including all customers and licensees. We
also hold several patents on our equipment and process technology.
We Are Subject to Substantial Environmental Regulation and Policies
We are, and expect to continue to be, subject to substantial federal, state,
provincial and local environmental regulation. Specific to the Environmental
Industrial Group are regulations governing the recycling of solid waste material
regulated by the Ontario Ministry of Environment and Energy and the Commonwealth
of Virginia, Department of Environment Quality. Some of the key regulations
include:
o Air Quality - regulated by Environmental Protection Agency (EPA) and
certain city/state air pollution control groups.. Emission reports
are filed annually;
o Waste Treatment/Disposal - solid waste is either disposed of by a
third-party or in some cases the Company has a permit to haul and
land apply the sludge. Agreement exists with local city sewer
districts to treat waste at specified levels of biochemical oxygen
demand (BOD) and total suspended solids (TSS);
o Sewer - agreements with the local city sewer districts to treat
waste as specified limits of BOD and TSS, which requires
weekly/monthly reporting as well as annual inspection; and
o Hazardous Chemicals - various reports are filed with local
city/state emergency response agencies to identify potential
hazardous toxic chemicals being used, including Department of Public
Safety Emergency Response Commission in Minnesota, and the Kentucky
Emergency Response Commission.
Permits are required from certain States and Provinces including the Minnesota
Pollution Control Agency, the Commonwealth of Virginia, Department of
Environmental Quality and the Ontario Ministry of Environment related to air
quality, storm water discharge, solid waste, land spreading and hazardous waste.
In the event that our safety procedures for handling and disposing of
potentially hazardous materials in certain of our businesses were to fail, we
could be held liable for any damages that result and any such liability could
exceed our resources. We may be required to incur significant costs to comply
with environmental laws and regulations in the future. In addition, changes to
environmental regulations may require us to modify our existing plant and
processing facilities and could significantly increase the cost of those
operations.
Our soymilk processing facility and aseptic packaging facility, both located in
Alexandria, Minnesota, are currently not in complete compliance with the
industrial permit limits for the discharge of industrial wastewater. To regain
compliance, we will apply for increased and/or consolidated discharge limits. We
will also re-engineer certain processes, including the installation of
pretreatment equipment at one or both of the facilities within the next 18
months. The estimated capital cost for both facilities is $1,200,000, however
operational cost savings will be derived from these capital expenditures. If we
fail to regain compliance through the foregoing actions, we could be required to
reduce our discharge of such industrial wastewater to approved levels, which may
force us to reduce production and/or transfer part of our production
capabilities to other facilities.
8
The foregoing environmental regulations, as well as others common to the
industries in which we participate, can present delays and costs that can
adversely affect business development and growth. If we fail to comply with
applicable laws and regulations, we may be subject to civil remedies, including
fines, injunctions, recalls or seizures, as well as potential criminal
sanctions, which could have a material adverse effect on our business, results
of operations and financial condition. In addition, any changes to current
regulations may impact the development, manufacturing and marketing of our
products, and may have a negative impact on our future results.
The Food Group Is Subject to Significant Food Regulations
The Food Group is affected by state and federal fertilizer, pesticide, food
processing, grain buying and warehousing, and wholesale food regulations.
Government-sponsored price supports and acreage set aside programs are two
examples of policies that may affect the Food Group. The Food Group is currently
in compliance with all state and federal regulations. Because the Food Group is
involved in the manufacture, supply, processing and marketing of organic seed
and food products, it is voluntarily subject to certain organic quality
assurance standards.
Certain food ingredient products are regulated under the 1958 Food Additive
Amendments to the Federal Food, Drug and Cosmetic Act of 1938 (FDCA), as
administered by the United States Food and Drug Administration (FDA). Under the
FDCA, pre-marketing approval by the FDA is required for the sale of a food
ingredient which is a food additive unless the substance is generally regarded
as safe (GRAS) under the conditions of its intended use by qualified experts in
food safety. We believe that most products for which the Food Group has retained
commercial rights are GRAS. However, such status cannot be determined until
actual formulations and uses are finalized. As a result, the Food Group may be
adversely impacted if the FDA determines that our food ingredient products do
not meet the criteria for GRAS.
In December 2000, the USDA adopted regulations with respect to a national
organic labeling and certification program which became fully effective in
October 2002. These regulations, among other things, set forth the minimum
standards producers must meet in order to have their products labelled as
"certified organic." We currently manufacture and distribute a number of organic
products that are covered by these new regulations. While we believe our
products and our supply chain are in compliance with these regulations, changes
to food regulations may increase our costs to remain in compliance. In addition,
in January 2001, the FDA proposed new policy guidelines regarding the labeling
of genetically engineered foods. These guidelines, if adopted, could require us
to modify the labeling of our products, which could affect the sales of our
products and thus harm our business. We could lose our "organic" certification
if a facility becomes contaminated with non-organic materials or if we do not
use raw materials that are certified organic. The loss of our "organic"
certifications could materially harm our business, results of operations and
financial condition.
Acceptance of Steam Explosion Technology
The Steam Explosion Technology Group has yet to gain wide acceptance within the
industry and consequently earnings can fluctuate from quarter to quarter. Its
patented steam technology, while proven, has yet to develop a firm customer
base. The success of this division will depend upon its ability to promote
commercial acceptance of our steam explosion technology.
Exercise of Warrants and Stock Options and Issuance of Additional Securities
Could Dilute the Value of Our Common Shares
As of September 18, 2003, there are approximately 5,109,989 warrants and stock
options outstanding to purchase our Common Shares, with exercise prices ranging
from $1.06 to $7.49 per Common Share. The exercise of our warrants and stock
options could result in dilution in the value of our Common Shares and the
voting power represented thereby. Furthermore, to the extent the holders of our
warrants and stock options exercise such securities and then sell the Common
Shares they receive upon exercise, our share price may decrease due to the
additional amount of Common Shares available in the market. The subsequent sales
of these shares could encourage short sales by our shareholders and others which
could place further downward pressure on our share price. Moreover, the holders
of our warrants and stock options may hedge their positions in our Common Shares
by short selling our Common Shares, which could further adversely affect our
stock price.
In addition, to attract and retain key personnel or to raise capital, we may
issue additional securities, including stock options. No prediction can be made
as to the effect, if any, that future issuance of stock options or sales of our
Common Shares, or the availability of Common Shares for future sale, will have
on the market price of our Common Shares prevailing from time to time. Sales of
substantial amounts of our Common Shares in the public market, or the perception
that such sales could occur, may adversely affect the market price of our Common
Shares and may make it more difficult for us to sell our equity securities in
the future at a time and price which we deem appropriate.
9
Our Operating Results and Share Price are Subject to Significant Volatility
Our net sales and operating results may vary significantly from period to period
due to:
o changes in our operating expenses;
o management's ability to execute our business and growth strategies;
o personnel changes;
o demand for natural products;
o supply shortages;
o general economic conditions;
o changes in customer preferences and demands for natural and organic
food products;
o volatility in commodity prices resulting from poor growing
conditions, natural disasters or otherwise; and
o future acquisitions, particularly in periods immediately following
the consummation of such acquisition transactions while the
operations of the acquired businesses are being integrated into our
operations.
In addition, our share price is more volatile than other larger public
companies. Announcements regarding:
o fluctuations in financial performance from period to period;
o mergers and acquisitions;
o strategic partnerships or arrangements;
o litigation and governmental inquiries;
o changes in governmental regulation and policy;
o patents or proprietary rights;
o changes in consumer preferences and demand;
o new financings; and
o general market conditions
may have a significant impact on our share price. Higher volatility increases
the chance of larger than normal price swings which reduces predictability in
the share value of our stock and could impair investment decisions. In addition,
price and volume trading volatility in the U.S. stock markets can have a
substantial effect on our share price, frequently for reasons other than our
operating performance. These broad market fluctuations could adversely affect
the market price of our Common Shares.
We Are Subject to Dividend Restrictions and Potential Withholding Taxes on
Dividends
We have not paid dividends on our Common Shares since our inception and have
used available cash resources to fund growth. Moreover, we are precluded under
the terms of various agreements with our creditors from paying dividends until
the related indebtedness has been satisfied. It is our intention to retain
future earnings to fund growth. We will consider paying dividends on our Common
Shares in the future when circumstances permit, having regard to, among other
things, our earnings, cash flow and financial requirements, as well as relevant
legal and business considerations. Accordingly, investors should not expect to
receive a return on investment in our Common Shares through the payment of
dividends in the foreseeable future and may not realize a return on investment
even if they sell their shares. Any future payment of dividends to holders of
our Common Shares will depend on decisions that will be made by the Board of
Directors and will depend on then existing conditions, including our financial
condition, contractual restrictions, capital requirements and business
prospects. Also, if we pay dividends, the receipt of cash dividends by United
States shareholders from a Canadian corporation may be subject to a 5% to 15%
Canadian withholding tax.
Loss of Our Key Customer Could Materially Reduce Sales and Earnings
We have one customer, The Hain Celestial Group, whose purchases from Stake in
fiscal 2002 amounted to more than 10% of our revenue. As a result of this
concentration of our customer base, the loss or cancellation of business from
The Hain Celestial Group could materially and adversely affect our business,
financial condition or results of operations.
We May Not Be Able to Effectively Manage Our Growth and Integrate Acquired
Companies
Our growth strategy inherently assumes that we will be able to identify suitable
acquisition candidates on terms acceptable to us and that these acquisitions, if
pursued and completed, will be integrated successfully. Our ability to
effectively integrate current and future acquisitions, including our ability to
realize potentially available marketing opportunities and cost savings in a
timely and efficient manner will have a direct impact on our future results. We
may encounter problems in connection with the integration of any new businesses,
such as:
10
o integration of an acquired company's products into our product mix;
o amount of cost savings that may be realized as the result of our
integration of an acquired brand or business;
o unanticipated quality and production issues with acquired products;
o adverse effects on business relationships with our suppliers and
customers;
o diversion of management attention;
o difficulty with personnel and loss of key employees;
o compatibility of financial control and information systems; and
o exchange rate risk with respect to our acquisitions in Canada.
We Are a Canada Corporation and it May Be Difficult to Enforce Civil Liability
Provisions of the United States Federal Securities Laws
We are a Canada corporation and a majority of our officers and directors, as
well as certain of the experts named herein are residents of Canada and a
substantial portion of our assets and the assets of such persons are located
outside the United States. As a result, it may be difficult for investors to
effect service of process within the United States upon the Company or such
persons, or to enforce in United States Courts judgments against them obtained
in such courts predicated upon the civil liability provisions of the United
States Federal security laws. ( See "ENFORCABILITY OF CIVIL LIABILITIES", page
14).
USE OF PROCEEDS
The 196,809 Shares being offered were issued to the selling security holders in
connection with our acquisition of 100% of the outstanding shares of Integrated
Drying Systems Inc. and its wholly-owned subsidiaries, Kettle Valley Dried
Fruits Ltd. and Kettle Valley Dried Fruits Inc. We will not receive any of the
proceeds from the sale of the Shares by the selling security holders.
DESCRIPTION OF SECURITIES
The Company is authorized to issue an unlimited number of Common Shares without
par value and an unlimited number of special shares without par value. As of
September 18, 2003 Stake had 52,042,441 Common Shares outstanding, including the
Common Shares proposed for registration herein. There are no special shares
issued and outstanding. The following is a brief summary of certain of the
rights of the holders of the Company's capital stock.
Common Shares
The holder of each common share is entitled to one vote, either in person or by
proxy, on all matters submitted to shareholders. Holders of Common Shares are
entitled to share pro rata in such dividends as may be declared by the Board of
Directors. In the event of liquidation, dissolution or winding up of the
Company, holders of Common Shares are entitled to share pro rata in the assets
of the Company available for distribution. Since shareholders do not have
cumulative voting rights, holders of more than 50% of the outstanding voting
shares can elect all of the directors of the Company if they choose to do so. In
such event, holders of the remaining shares will be unable to elect any
director. The Common Shares do not have conversion, subscription or preemptive
rights, are not subject to redemption and do not have the benefit of any sinking
fund provisions. All outstanding Common Shares are fully paid and
non-assessable.
Special Shares
The special shares are issuable in series. Subject to the Company's Articles of
Amalgamation, the Board of Directors is authorized to fix, before issuance, the
designation, rights, privileges, restrictions and conditions attached to the
shares of each series. The special shares would rank prior to the Common Shares
with respect to dividends and return of capital on dissolution. Except with
respect to matters as to which the holders of special shares are entitled to
vote as a class, the holders of special shares will not be entitled to vote at
meetings of shareholders.
The Articles of Amalgamation, as amended, and the By-Laws of the Company and the
Canada Business Corporations Act govern the rights of holders of the Common
Shares. The Articles of Amalgamation and By-Laws may be amended so as to modify
such rights and major corporate changes (such as amalgamation, reorganization
and sale of all or substantially all assets) may be effected, by not less than
two-thirds of the votes cast by the shareholders voting in person or by proxy at
a general meeting of the Company.
11
DIVIDEND POLICY
We have not paid any cash dividends on our Common Shares since our inception and
we intend to retain future earnings to fund growth. Moreover, we are precluded
under the terms of various agreements with our creditors from paying dividends
until the related indebtedness has been satisfied. We will consider paying
dividends on our Common Shares in the future when circumstances permit, having
regard to, among other things, earnings, cash flow and financial requirements,
as well as relevant legal and business considerations.
SELLING SECURITY HOLDERS
We originally issued the Shares offered by this Prospectus to the selling
security holders in connection with our acquisition of 100% of the outstanding
shares of Integrated Drying Systems Inc. and its wholly-owned subsidiaries,
Kettle Valley Dried Fruits Ltd. and Kettle Valley Dried Fruits Inc. This
Prospectus registers the Shares. We will not receive any of the proceeds from
the possible sale of the Shares by the selling security holders. (See "USE OF
PROCEEDS", page 11). The following table sets forth information with respect to
Shares owned by such selling security holders. The information regarding Common
Shares to be owned after the offering assumes the sale of all Shares offered by
the selling security holders by this Prospectus.
-------------------------------------------------------------------------------------------------------------------------
Name of Selling Security Holder Number of Shares Held Number of Shares Number of Shares to
Prior to Offering being Offered be Owned After
Offering
-------------------------------------------------------------------------------------------------------------------------
John L. Boot 44,573 44,573 0
-------------------------------------------------------------------------------------------------------------------------
Linda Joy Boot 53,096 53,096 0
-------------------------------------------------------------------------------------------------------------------------
Russell Visser 35,272 35,272 0
-------------------------------------------------------------------------------------------------------------------------
Bill Gortemaker 3,885 3,885 0
-------------------------------------------------------------------------------------------------------------------------
Jake and Carolyn Kulk 3,885 3,885 0
-------------------------------------------------------------------------------------------------------------------------
Ben and Kathy Kulk 3,885 3,885 0
-------------------------------------------------------------------------------------------------------------------------
Bill and Henrietta Raap 3,885 3,885 0
-------------------------------------------------------------------------------------------------------------------------
John and Audrey Toet 3,885 3,885 0
-------------------------------------------------------------------------------------------------------------------------
Lawrence Toet 2,838 2,838 0
-------------------------------------------------------------------------------------------------------------------------
Allan and Anita Vanderveen 2,838 2,838 0
-------------------------------------------------------------------------------------------------------------------------
Marilyn Toet 1,048 1,048 0
-------------------------------------------------------------------------------------------------------------------------
Debra Klamut 13,436 13,436 0
-------------------------------------------------------------------------------------------------------------------------
Ian Kennedy 3,792 3,792 0
-------------------------------------------------------------------------------------------------------------------------
Barb Kennedy 3,792 3,792 0
-------------------------------------------------------------------------------------------------------------------------
James Edward Clark 1,572 1,572 0
-------------------------------------------------------------------------------------------------------------------------
Kelvin Vanderveen 3,772 3,772 0
-------------------------------------------------------------------------------------------------------------------------
Leslie Vanderveen 3,772 3,772 0
-------------------------------------------------------------------------------------------------------------------------
866864 Alberta Ltd (Lorne and Wendy White) 7,583 7,583 0
-------------------------------------------------------------------------------------------------------------------------
Total 196,809 196,809 0
-------------------------------------------------------------------------------------------------------------------------
PLAN OF DISTRIBUTION
Resales by the Selling Security Holders and Others
The selling security holders may offer the Shares from time to time either in
increments or in a single transaction. These sales may be made on or at prices
related to the then current market price or at negotiated prices.
The selling security holders may also decide not to sell any or all of the
Shares allowed to be sold under this Prospectus. The selling security holders
will act independently of Stake in making decisions with respect to the timing,
manner and size of each sale.
The term "selling security holders" includes donees, persons who receive Shares
from the selling security holders after the date of this Prospectus by gift. The
term also includes distributees who receive Shares from selling security holders
after the date of this Prospectus as a distribution to members or partners of
the selling security holders.
12
The methods by which the Shares may be sold may include, but are not limited to,
the following:
|_| Block trades in which the broker or 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;
|_| Purchases by a broker or dealer as principal and resale by the
broker or dealer for its account pursuant to this Prospectus;
|_| Over-the-counter distributions in accordance with the rules of the
Nasdaq Market or the Toronto Stock Exchange;
|_| Ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
|_| Privately negotiated transactions; and
|_| A combination of any of these methods of sale.
In effecting sales, brokers or dealers engaged by the selling security holder
may receive commissions or discounts from the selling security holder or from
the purchasers in amounts to be negotiated immediately prior to the sale.
Costs and Commissions
We will pay all costs, expenses and fees in connection with the registration of
the Shares being offered by this Prospectus. The selling security holders will
pay all brokerage commissions and similar selling expenses, if any, attributable
to the sale of the Shares.
We have agreed to indemnify the selling security holders, against specified
liabilities and expenses arising out of or based upon the information set forth
or incorporated by reference in this Prospectus, and the registration statement
of which this Prospectus is a part, including liabilities under the Securities
Act and the Exchange Act. The selling security holders and any brokers
participating in the sales of the Shares may be deemed to be underwriters within
the meaning of the Securities Act.
Any commissions paid or any discounts or concessions allowed to any broker,
dealer, underwriter, agent or market maker and, if any broker, dealer,
underwriter, agent or market maker purchases any of the Shares as principal, any
profits received on the resale of those Shares, may be deemed to be underwriting
commissions or discounts under the Securities Act.
Prospectus Delivery Requirements
Because the selling security holders may be deemed an underwriter, the selling
security holders must deliver this Prospectus and any supplements to this
Prospectus in the manner required by the Securities Act.
Regulation M
The selling security holders and any other persons participating in the sale or
distribution of the Shares will be subject to applicable provisions of the
Exchange Act and the rules and regulations under such act, including, without
limitation, Regulation M. These provisions may restrict certain activities of,
and limit the timing of purchases and sales of any of the Shares by, the selling
security holders or any other such person. Furthermore, under Regulation M,
persons engaged in a distribution of securities are prohibited from
simultaneously engaging in market making and certain other activities with
respect to such securities for a specified period of time prior to the
commencement of such distributions, subject to specified exceptions or
exemptions. All of these limitations may affect the marketability of the Shares
offered by this Prospectus.
Compliance With State Law
In jurisdictions where the state securities laws require it, the selling
security holders' Shares offered by this Prospectus may be sold only through
registered or licensed brokers or dealers. In addition, in some states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and has been complied with.
Sales Under Rule 144
The selling security holders may also resell all or a portion of the Shares
offered by this Prospectus in open market transactions in reliance upon Rule 144
under the Securities Act. To do so, the selling security holder must meet the
criteria and comply with the requirements of Rule 144.
13
LEGAL MATTERS
Messrs. Basman Smith LLP, Toronto, Ontario, the Company's Canadian counsel have
passed upon the validity of the issuance of the Shares offered by this
Prospectus.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 2002, have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP, Chartered
Accountants, given on the authority of said firm as experts in auditing and
accounting.
TRANSFER AGENT AND REGISTRAR
The transfer agent and the registrar for the Common Shares in Canada is Equity
Transfer Services Inc., at its principal office in Toronto, Ontario and American
Stock Transfer and Trust Company in the United States, at its principal office
in New York, New York.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our officers and directors are governed by the provisions of the Canada Business
Corporations Act ("CBCA"), the Articles of Amalgamation, the bylaws and
insurance policies, which serve to indemnify them against liabilities, which
they may incur in such capacities. These various provisions are described below.
Indemnification and Insurance - Under the CBCA, we have the right to indemnify a
present or former director or officer of the corporation or another individual
who acts or acted at our request as a director or officer, or an individual who
acts in a similar capacity of another entity, against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a judgment
reasonably incurred if such individual acted honestly and in good faith with a
view to our best interests and, in the case of a criminal or administrative
action or proceeding that is enforced by a monetary penalty, if she or he had
reasonable grounds for believing her or his conduct was lawful. In the latter
case, we have the obligation to indemnify such person if he or she complies with
the foregoing requirements and was not judged by the court or other competent
authority to have committed any fault or omitted to do anything that such
individual ought to have done. We also have the right, with the approval of a
court, to indemnify such persons in respect of an action by or on behalf of the
corporation or other entity to procure a judgment in its favour, to which the
individual is made a party because of his or her association with the
corporation or such other entity or to advance monies to such person for the
costs, charges and expenses of such proceeding if he or she fulfills the
foregoing requirements. If such person does not fulfill such requirements, he or
she is required to repay the monies so advanced.
However, no such indemnification relieves a director or officer from the duty to
act in accordance with the requirement of the CBCA, honestly and in good faith
with a view to our best interests, and to exercise the care, diligence and skill
that a reasonably prudent person would exercise in comparable circumstances. The
bylaws generally provide for mandatory indemnification of our directors and
officers to the full extent provided by the CBCA.
We have purchased and intend to maintain insurance on behalf of any person who
is or was a director or officer of Stake, or is or was a director or officer of
Stake serving at our request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, so long as the
director or officer acted honestly and in good faith with a view to our best
interests.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or controlling persons pursuant to
the foregoing provisions, those provisions are, in the opinion of the SEC,
against public policy as expressed in the Securities Act of 1933 and are
therefore unenforceable.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a Canada corporation. A majority of its officers and directors,
as well as certain of the experts named herein, are residents of Canada and a
substantial portion of the assets of the Company and of such persons are located
outside the United States. As a result, it may be difficult for investors to
effect service of process within the United States upon the Company or such
persons or to enforce, in United States courts judgments against them obtained
in such courts predicated upon the civil liability provisions of the United
States federal securities laws. The Company has been advised
14
by its Canadian counsel Basman Smith LLP of Toronto, Ontario, that there is
doubt as to whether Canadian courts would: (a) enforce judgments of United
States courts obtained in actions against the Company or such persons predicated
upon the civil liability provisions of the United States federal securities
laws; or (b) enforce, in original actions, liabilities against the Company or
such persons predicated solely upon the United States federal securities laws.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange Act
of 1934 ("Exchange Act") and therefore we file annual, quarterly and current
reports, proxy statements and other information with the Securities and Exchange
Commission ("SEC" or "Commission") and since the Company's listing on the
Toronto Stock Exchange on November 6, 2001 these type of documents are also
filed with the Ontario Securities Commission and the Toronto Stock Exchange.
You may read and copy any of the reports, proxy statements and any other
information that we file at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Copies can be obtained at prescribed rates from
the Public Reference Branch of the Commission 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. You may also access
filed documents at the SEC's Website at www.sec.gov .
Reports, proxy and information statements and other information about us may
also be inspected at the National Association of Securities Dealers, Inc. at
1735 K Street, N.W., Washington, D.C. 20006.
You may also read and copy any of the reports, proxy statements and any other
information that we file with the Ontario Securities Commission and the Toronto
Stock Exchange at the Canadian Depository's Website at www.sedar.com .
The Company's Common Shares are quoted on the Nasdaq Smallcap Market under the
trading symbol "STKL" and on the Toronto Stock Exchange as "SOY".
We have filed with the SEC a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended ("Securities Act"), with respect to the
Shares offered in this Prospectus. This Prospectus is part of that Registration
Statement and, as permitted by the Commission's rules, does not contain all of
the information set forth in the Registration Statement. For further information
about our Common Shares, and us, we refer you to those copies of contracts or
other documents that have been filed as exhibits to the Registration Statement,
and statements relating to such documents are qualified in all respects by such
reference. You can review and copy the Registration Statement and its exhibits
and schedules from the SEC at the address listed above or from its Internet
site. Requests should be directed to:
Stake Technology Ltd.
2838 Highway 7, Norval, Ontario, Canada L0P 1K0
Attention: Steven R. Bromley, Executive Vice President
and Chief Financial Officer
Telephone number (905) 455-1990 Fax (905) 455-2529
Email: info@staketech.com
15
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated expenses (in US$) to be incurred in
connection with the issuance and distribution of the securities being registered
hereby:
SEC registration fee....................................................$161.80
Accounting fees and expenses..........................................$2,500.00*
Legal fees and expenses...............................................$5,000.00*
Miscellaneous...........................................................$338.20*
TOTAL......................................................$8,000.00*
* Estimated
Item 15. Indemnification of Directors and Officers
Section 124 of the Canada Business Corporations Act ("CBCA") provides, in
pertinent part, as follows:
(1) Indemnification A corporation may indemnify a director or officer of the
corporation, a former director or officer of the
corporation or another individual who acts or acted at
the corporation's request as a director or officer, or
an individual acting in a similar capacity, of another
entity, against all costs, charges and expenses,
including an amount paid to settle an action or satisfy
a judgment, reasonably incurred by the individual in
respect of any civil, criminal, administrative,
investigative or other proceeding in which the
individual is involved because of that association with
the corporation or other entity.
(2) Advance of costs A corporation may advance moneys to a director, officer
or other individual for the costs, charges and expenses
of a proceeding referred to in subsection (1). The
individual shall repay the moneys if the individual does
not fulfill the conditions of subsection (3).
(3) Limitation A corporation may not indemnify an individual under
subsection (1) unless the individual
(a) acted honestly and in good faith with a view to
the best interests of the corporation, or, as the
case may be, to the best interests of the other
entity for which the individual acted as director
or officer or in a similar capacity at the
corporation's request; and
(b) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary
penalty, the individual had reasonable grounds for
believing that the individual's conduct was
lawful.
(4) Indemnification in derivative actions A corporation may with the approval
of a court, indemnify an individual referred to in
subsection (1), or advance moneys under subsection (2),
in respect of an action by or on behalf of the
corporation or other entity to procure a judgment in its
favour, to which the individual is made a party because
of the individual's association with the corporation or
other entity as described in subsection (1) against all
costs, charges and expenses reasonably incurred by the
individual in connection with such action, if the
individual fulfils the conditions set out in subsection
(3).
(5) Right to indemnity Despite subsection (1), an individual referred to in
that subsection is entitled to indemnity from the
corporation in respect of all costs, charges and
expenses reasonably incurred by the individual in
connection with the defence of any civil, criminal,
administrative, investigative or other proceeding to
which the individual is subject because of the
individual's association with the corporation or other
entity as described in subsection (1), if the individual
seeking indemnity
(a) was not judged by the court or other competent
authority to have committed any fault or omitted
to do anything that the individual ought to have
done; and
(b) fulfils the conditions set out in subsection (3).
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(6) Insurance A corporation may purchase and maintain insurance for
the benefit of an individual referred to in subsection
(1) against any liability incurred by the individual
(a) in the individual's capacity as a director or
officer of the corporation; or
(b) in the individual's capacity as a director or
officer, or similar capacity, of another entity,
if the individual acts or acted in that capacity
at the corporation's request.
Pursuant to its By-Laws, the Company shall indemnify any person, and his or her
heirs and legal representatives who is or was a director or officer of the
Company, or who acts or acted at the request of the Company as a director or
officer of a body corporate of which the Company is or was a shareholder or
creditor, against all costs, charges and expenses, including an amount paid to
settle an action or satisfy a judgment, reasonably incurred by such person in
respect of any civil, criminal or administrative action or proceeding to which
such person is made a party by reason of being or having been a director or
officer of the Company or such body corporate, if such person acted honestly and
in good faith with a view to the best interests of the Company, and, in the case
of a criminal or administrative action or proceeding that is enforced by a
monetary penalty, such person had reasonable grounds for believing that his or
her conduct was lawful. No director or officer of the Company shall be
indemnified by the Company in respect of any liability, costs, charges or
expenses that such person sustains or incurs in or about any action, suit or
other proceeding as a result of which he or she is adjudged to be in breach of
any duty or responsibility imposed upon him or her under the CBCA or under any
other statute unless, in an action brought against him or her in their capacity
as director or officer, he or she have achieved complete or substantial success
as a defendant. Subject to the limitations contained in the CBCA, the Company
may purchase, maintain or participate in such insurance for the benefit of such
persons as the board of directors may, from time to time, determine.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing provisions, or
otherwise, the Company has been advised that in the opinion of the United States
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore unenforceable. The Company is subject,
insofar as its Articles of Amalgamation and internal affairs are concerned, to
the laws of Canada, and it has been advised by its Canadian counsel, Messrs.
Basman Smith LLP, that, in their opinion, Canadian courts would allow
indemnification for liabilities arising under the Act, provided that the
indemnification came within the limits of the above quoted sections of the CBCA,
since such provisions are not contrary to the public policy of Canada. (See
"Enforceability of Civil Liabilities.")
Item 16. Exhibits
5 Opinion of Basman Smith LLP
23.1 Consent of Basman Smith LLP, included in Exhibit 5
23.2 Consent of PricewaterhouseCoopers LLP
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(2) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
Prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement;
II-2
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(l)(i) and (a)(l)(ii) do
not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section
13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby further 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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) 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
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 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.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, 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, thereto duly
authorized, in the Town of Norval, Province of Ontario, Canada, on this 19th day
of September , 2003.
STAKE TECHNOLOGY LTD.
By: /s/ Steven Bromley
--------------------------------
Steven R. Bromley
Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, each person whose signature appears below
constitutes and appoints Jeremy N. Kendall and Steven R. Bromley as his or her
true and lawful attorneys-in-fact, each acting alone, with full power of
substitution and resubstitution, for such person and in his or her name, place
and stead in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully for all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact, or their substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Jeremy Kendall Chairman and Chief Executive Officer September 19, 2003
--------------------------- (Principal Executive Officer)
Jeremy N. Kendall
/s/ Steven Bromley Executive Vice President and Chief September 19, 2003
--------------------------- Financial Officer (Principal Financial Officer)
Steven R. Bromley
/s/ Cyril Ing Director September 19, 2003
---------------------------
Cyril A. Ing
/s/ Joseph Riz Director September 19, 2003
---------------------------
Joseph Riz
/s/ James Rifenbergh Director and Authorized September 19, 2003
--------------------------- Representative in the United States
James K. Rifenbergh
/s/ Dennis Anderson Director September 19, 2003
---------------------------
Dennis W. Anderson
/s/ Allan Routh Director and President of the Grains September 19, 2003
--------------------------- and SoyProducts Group
Allan Routh
/s/ Katrina Houde Director September 19, 2003
---------------------------
Katrina Houde
/s/ Camillo Lisio Director September 19, 2003
---------------------------
Camillo Lisio
/s/ Stephen Bronfman Director September 19, 2003
---------------------------
Stephen R. Bronfman
/s/ Robert Fetherstonhaugh Director September 19, 2003
---------------------------
Robert Fetherstonhaugh
II-4
EXHIBITS
Exhibit # Page #
--------- ------
23.1 Consent of Basman Smith LLP II-6
23.2 Consent of PricewaterhouseCoopers LLP II-8
II-5