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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CAFE ODYSSEY, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 31-1487885
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
4801 West 81st Street, Suite 112
Bloomington, MN 55437
(612) 837-9917
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Stephen D. King
Chairman and Chief Executive Officer
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
(612) 837-9917
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With copies to:
William M. Mower, Esq.
Maslon Edelman Borman & Brand, LLP
3300 Norwest Center
Minneapolis, Minnesota 55402-4140
(612) 672-8200
Approximate date of the commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ____________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE (1) REGISTRATION FEE
--------------------------- ------------------ ----------------
<S> <C> <C>
Common Stock, $.01 par value (2) $ 2,000,000 $ 556.00
Common Stock, $.01 par value (3) $ 800,000 $ 222.40
Common Stock, $.01 par value (4) $ 1,725,000 $ 479.55
================================================================================
TOTAL $ 4,525,000 $ 1,257.95
================================================================================
</TABLE>
(1) Fee calculated pursuant to Rule 457(o) using the actual consideration
received, or to be received, by the Registrant.
(2) Issuable upon exercise of outstanding Series A 8% Convertible Preferred
Stock.
(3) Issuable as payment of dividends with respect to the Series A 8%
Convertible Preferred Stock. Represents the maximum amount of dividends
payable for five years.
(4) Issuable upon exercise of Warrants. (Fee calculated pursuant to Rule
457(g).)
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.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION; DATED JUNE 8, 1999
PROSPECTUS
CAFE ODYSSEY, INC.
2,304,374 SHARES OF
COMMON STOCK
This prospectus relates to a maximum of 2,304,374 shares of common
stock of Cafe Odyssey, Inc. issuable upon the exercise of Series A 8%
Convertible Preferred Stock (the "Preferred Shares"), certain shares of common
stock issuable in lieu of payment of dividends and exercise of warrants granted
to the selling shareholders listed on page 12 of this prospectus. The total
proceeds to us from the exercise of the warrants, if the warrants are exercised
in full, would be a maximum of $1,350,000. We will receive no proceeds from the
sale of the common stock by selling shareholders.
Our common stock is listed on the Nasdaq SmallCap Market under the
symbol "CODY." On June 7, 1999, the last sale price for the Common Stock as
reported on the Nasdaq SmallCap Market was $2.47.
The shares offered by this prospectus involve a high degree of risk.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DESCRIPTION OF FACTORS WHICH SHOULD
BE CONSIDERED BY INVESTORS BEFORE PURCHASING THE SHARES OFFERED BY THIS
PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. A REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE, AND MAY BE
CHANGED. THIS PROSPECTUS IS INCLUDED IN THE REGISTRATION STATEMENT THAT WAS
FILED BY CAFE ODYSSEY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE SELLING
SHAREHOLDERS CANNOT SELL THEIR SHARES UNTIL THAT REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THE SHARES OR THE
SOLICITATION OF AN OFFER TO BUY THE SHARES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
The date of this Prospectus is _________, 1999.
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TABLE OF CONTENTS
PROSPECTUS SUMMARY..................................................3
RISK FACTORS........................................................4
USE OF PROCEEDS....................................................11
SELLING SHAREHOLDERS...............................................12
PLAN OF DISTRIBUTION...............................................13
WHERE YOU CAN FIND MORE INFORMATION................................14
NOTE REGARDING FORWARD-LOOKING STATEMENTS..........................16
LEGAL MATTERS......................................................16
EXPERTS............................................................16
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES.....................16
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus. You must not rely on any information or representations not
contained in this prospectus, if given or made, as having been authorized by us.
This prospectus is not an offer or solicitation in respect to these securities
in any jurisdiction in which such offer or solicitation would be unlawful. The
delivery of this prospectus shall not under any circumstances, create any
implication that there has been no change in our affairs or that the information
contained in this prospectus is correct as of any time subsequent to the date of
this prospectus. However, in the event of a material change, this prospectus
will be amended or supplemented accordingly.
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PROSPECTUS SUMMARY
As used in this prospectus, the terms "Company", "we", "us" and "our"
refer to Cafe Odyssey, Inc. and its consolidated subsidiaries.
THE COMPANY
Cafe Odyssey, Inc. develops, owns and operates restaurants with
multiple themed dining rooms designed to appeal to the upscale casual dining
market. We have a Cafe Odyssey restaurant at the Mall of America in Bloomington,
Minnesota, a suburb of Minneapolis, which opened in June 1998, and a second Cafe
Odyssey restaurant in the Denver Pavilions, an urban retail/entertainment
complex in Denver, Colorado which opened on March 15, 1999. Our first
restaurant, in the Kenwood Shopping Center in Cincinnati, Ohio, which operates
under the name "Hotel Discovery," opened in December 1996.
We began operations as Hotel Mexico, Inc., which was incorporated in
Ohio in January 1994. The Kenwood Restaurant Limited Partnership, an Ohio
limited partnership was formed in June 1995 to own and operate the Kenwood Unit.
Hotel Mexico's operations and the net assets of the Kenwood Restaurant Limited
Partnership were combined in November 1996, and in August 1997 Hotel Mexico was
reorganized as Hotel Discovery, Inc., a Minnesota corporation. In May 1998,
the Company's Board of Directors and shareholders approved a change in its
corporate name from Hotel Discovery, Inc. to Cafe Odyssey, Inc. Our executive
offices are located at 4801 West 81st Street, Suite 112, Bloomington, Minnesota
55437 and our telephone number is (612) 837-9917.
RECENT DEVELOPMENTS
On May 13, 1999, we signed a letter of intent to acquire popmail.com.,
inc., a Delaware corporation based in Irving, Texas ("Popmail"). Through
partnerships with radio stations nationwide, Popmail provides email to
radio stations.
On June 1, 1999, we signed an Agreement and Plan of Merger (the
"Agreement") with Stephen D. King (our principal shareholder, Chairman and Chief
Executive officer), Popmail, each of the common shareholders of Popmail and Cafe
Odyssey Acquisition Subsidiary, Inc., a Delaware coporation and our wholly-owned
subsidiary ("Acquisition Sub"), providing for the merger of Popmail with and
into Acquisition Sub upon the satisfaction of certain conditions.
The Agreement provides for a closing into escrow on the later of (1)
June 17, 1999 and (2) the fifth day after Popmail delivers to us its audited
financial statements for its 1997 and 1998 fiscal years. At the time of closing
into escrow, Popmail's shareholders will deliver their Popmail stock
certificates into escrow, and we will deliver certificates for Series B
Convertible Preferred Stock ("Series B") to be issued to the Popmail
shareholders when and if the merger is consummated. Upon consummation of the
merger, the Series B will be convertible into at least the same number of shares
of our common stock as are then outstanding. As additional merger
consideration, we will place in escrow a warrant to be issued to the Popmail
shareholders representing the economic equivalent of all of our options,
warrants, and other securities convertible into, or exchangeable for, common
stock which were outstanding on May 3, 1999.
Breaking escrow and consummation of the merger is subject to the
satisfaction of certain conditions set forth in the Agreement, including deposit
by the Registrant into escrow of (1) sufficient funds to repay indebtedness of
Popmail of approximately $5,000,000 to an affiliate of Popmail, LegacyMaker,
Inc. ("LegacyMaker"), (2) a minimum sale price of $2.50 for our common stock on
the business day preceding consummation of the merger and (3) approval by our
shareholders of the merger. The Agreement contemplates that Popmail may acquire,
or obtain an equity interest in, other entities prior to consummation of the
merger.
The Agreement will terminate if escrow is not funded by the date set
forth above or if the merger has not been consummated by August 30, 1999,
except that we may extend the expiration date for consummation of the merger
for up to three 30-day periods upon payment of $100,000 cash to LegacyMaker on
the first day of each extension period. Popmail may also terminate the
Agreement if our common stock is delisted from The Nasdaq SmallCap Market. We
will be liable to LegacyMaker for liquidated damages of $100,000 if the merger
is not consummated by August 30 or if popmail terminates the Agreement in the
event of delisting. LegacyMaker will be entitled to retain any payments made
as liquidated damages or to extend the Agreement if Popmail terminates the
Agreement due to such delisting. The Agreement also provides for termination
upon the happening of certain other events, such as a material adverse change
in the financial or business condition of either Cafe Odyssey or Popmail, in
which case no termination fee will be payable.
Upon consummation of the merger, Popmail shareholders will
collectively hold approximately 50% of the then outstanding shares of Cafe
Odyssey, Inc. and will effectively have control of Cafe Odyssey, Inc.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered (1) ................................... 2,304,374 shares
Common stock outstanding
before the offering....................................... 8,313,435 shares
Common stock outstanding
after the offering (2)................................... 10,617,809 shares
Nasdaq SmallCap Market symbol............................... CODY
</TABLE>
(1) Represents the maximum number of shares that can be issued upon
conversion of the Preferred Shares into common stock, as dividends on the
Preferred Shares and the shares issuable upon exercise of all Warrants.
(2) Does not include shares that may be issued in the Popmail.com acquisition.
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RISK FACTORS
An investment in our common stock is very risky. You may lose the
entire amount of your investment. Prior to making an investment decision, you
should carefully review this entire prospectus and consider the following risk
factors:
WE HAVE INCURRED LOSSES TO DATE AND IF OUR RESTAURANT SALES DO NOT
IMPROVE, WE WILL NEED ADDITIONAL FINANCING IN ORDER TO CONTINUE OPERATIONS.
We incurred net losses of approximately $6.8 million in 1998 and $4.0
million in 1997 and had a working capital deficit of approximately $6.7 million
as of April 4, 1999. Our ability to continue our present operations and
successfully implement our expansion plans is contingent upon our ability to
increase our revenues which is presently limited to our three existing
restaurants. Without additional financing, cash generated from our current
operations may not be adequate to fund operations and make mortgage payments in
1999. There can be no assurances that additional financing to fund current
operations and expansion will be available on terms acceptable or favorable to
us.
WE MAY BE ENTERING INTO A NEW BUSINESS VENTURE IN WHICH WE HAVE NO
EXPERIENCE.
We recently signed an Agreement and Plan of Merger to acquire Popmail,
an email provider to radio stations. If acquired, Popmail's email business would
represent a significant change in our business operations from the restaurant
business. We and our present management also have no experience with the
business of providing email services.
THERE IS SIGNIFICANT POTENTIAL FOR DILUTION OF INVESTORS' INTERESTS DUE
TO THE POPMAIL ACQUISITION AND THE CONVERSION OF PREFERRED SHARES INTO SHARES
OF THE COMPANY'S COMMON STOCK.
If the acquisition of Popmail is completed, the Company's current
shareholders would experience significant dilution of approximately 50%.
Furthermore, this acquisition could require additional financing which could
dilute shareholdings further. We also issued 2,000 shares of Preferred Shares
which is convertible into shares of common stock at a conversion price of 65% of
market price. Although there are limits to the number of shares of common stock
that can be issued upon conversion, a decline in the stock price of common stock
could result in considerable dilution to investors if the holders of Preferred
Shares convert. Currently, we estimate that up to 1,354,374 Shares may be
issued in connection with the conversion of Preferred Shares and payment of
dividends.
THERE IS THE RISK THAT DUE TO THE LIMITATIONS PLACED ON THE CONVERSION
OF THE PREFERRED SHARES, THE PREFERRED SHAREHOLDER'S INVESTMENT MAY NOT BE
CONVERTED INTO COMMON STOCK AND WOULD HAVE TO BE REDEEMED IN CASH.
The total number of shares of common stock (1) issuable upon conversion
of the Preferred Shares, (2) as a dividend on the Preferred Shares, and (3) upon
exercise of the Warrant cannot exceed 20% of our common stock outstanding on May
14, 1999. In the event a holder of Preferred Shares is unable to convert
Preferred Shares into common stock because these limitations have been reached,
we would be required to redeem the Preferred Shares in cash at 135% of the
amount paid per such shares plus any accrued and unpaid dividends. It is
possible that in such case we may not possess sufficient cash and cash
equivalents necessary to redeem the Preferred Shares in cash.
DUE TO OUR LIMITED OPERATING HISTORY, YOU MAY FIND IT DIFFICULT TO
ASSESS OUR ABILITY TO OPERATE PROFITABLY.
We have only been operating our Kenwood restaurant since December 1996,
our Mall of America restaurant since June 1998, and our Denver restaurant since
March 1999. Therefore, in addition to the other
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risks included in this prospectus, we face the added risks, expenses and
difficulties related to developing and operating a new business enterprise.
Given our lack of significant operating history, investors may have difficulty
assessing the many factors which will determine our ability to generate future
profits, including the quality of our restaurants, the viability of our
restaurant theme, and our ability to expand in the restaurant market.
OUR OPERATIONS, PROPOSED ACQUISITION OF POPMAIL, OR CONTEMPLATED
EXPANSION MAY PROVE UNSUCCESSFUL, EITHER OF WHICH COULD RESULT IN CONTINUED
UNPROFITABILITY AND CAUSE OUR STOCK PRICE TO FALL.
To date, we have not generated a profit. Due to a variety of factors,
many of which are discussed in this prospectus, we may never generate
significant revenues or operate profitably. In fact, our management anticipates
that net losses will continue for the foreseeable future. Even if we succeed in
expanding our operations as contemplated, we cannot assure a successful
transition to higher volume operations or to a successful incorporation of the
Popmail business. We may be unable to control our expenses, attract necessary
additional personnel, or procure the capital required to maintain expanded
operations. If our expansion is ultimately unsuccessful, the results of our
operations will suffer accordingly, and the market price of our stock may fall.
POOR OPERATING RESULTS AT ANY OF OUR RESTAURANTS OR A DELAY IN THE
PLANNED OPENING OF NEW RESTAURANTS, COULD ADVERSELY AFFECT OUR PROFITABILITY AS
A WHOLE.
We currently operate only three restaurants. Accordingly, poor
operating results at any one restaurant would materially affect the
profitability and cash flow of our operations as a whole. To a substantial
extent, our ability to increase the number of restaurants we operate and our
choice of locations for such restaurants will determine whether we will
experience future growth in our revenues and profits. However, the significant
financial investment associated with opening our restaurants may create
substantial fluctuations in our operating results. Due to the significance of
such investments, the risk we face in opening any one of our restaurants is much
larger than that associated with most other restaurant companies' venues.
Consequently, a delay in any planned restaurant opening could materially affect
the profitability and cash flow of our operations as a whole.
THEME RESTAURANTS MAY EXPERIENCE SOME DECLINE IN SAME STORE SALES.
Same store sales (sales for restaurants that have been open at least
one year) is one measure of operating results used by stock analysts to analyze
a publicly traded restaurant businesses. Theme restaurants frequently see a
decline in same store sales from the first year to the subsequent year. In
addition to negatively impacting our revenues, declining same store sales has
had a negative impact on the publicly traded theme restaurant's stock price and
resulted in stock price volatility.
DUE TO THE POTENTIAL ACQUIRED NEW BUSINESS VENTURE, RESOURCES AND
ATTENTION COULD BE DIVERTED FROM THE OPERATION OF OUR RESTAURANT BUSINESS.
As our management and executive officers focus their attention on
matters concerning the acquisition of Popmail, their resources and attention
could be diverted from the operations of the restaurant business. While we
believe that our executive officers and managers will be able to complete the
merger and attend to our business, it is possible that their primary focus of
attention may be drawn away from the operation of the business and business
operations may suffer.
WE ARE DEPENDENT ON THE ONGOING SERVICES OF CERTAIN OF OUR EXECUTIVES,
THE LOSS OF WHICH COULD HAVE A DETRIMENTAL EFFECT ON OUR PROFITABILITY AND THE
MARKET PRICE OF OUR STOCK.
Our plan of business development and our day-to-day operations rely
heavily on the experience of Stephen D. King, our Chairman of the Board, Chief
Executive Officer and Chief Financial Officer, and Ronald K. Fuller, our
President and Chief Operating Officer. Each of these executives has significant
experience in managing and guiding the business affairs of companies that
operate multi-location restaurants. The loss of either or both of them could
adversely affect the success of our operations and strategic plans and,
consequently, have a detrimental effect on the market price of our stock.
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WE MAY BE UNABLE TO HIRE QUALIFIED EMPLOYEES TO HELP IMPLEMENT AND
MANAGE OUR EXPANSION PLANS, WHICH INABILITY COULD BE DETRIMENTAL TO THE VALUE OF
YOUR INVESTMENT.
Our success will depend in large part upon our ability to supplement
our existing management team. While both Messrs. King and Fuller have
significant restaurant and multi-location restaurant management experience, we
will need to hire additional corporate level and management employees to help
implement and operate our expansion plans. Any inability or delay in obtaining
additional key employees could have a material adverse effect on our expansion
plans and, consequently, the market value of our stock.
WE MAY BE UNABLE TO OPEN NEW RESTAURANTS OR OPERATE ANY NEWLY-OPENED
RESTAURANTS PROFITABLY.
We are considering potential sites for the opening of additional Cafe
Odyssey restaurants in several major metropolitan areas. However, we might be
unable to enter into contracts for the development of these additional
restaurants on terms satisfactory to us, or even at all. In addition, we may be
unable to operate additional restaurants successfully if we fail to manage our
growth by adequately monitoring our restaurants and controlling our costs, food
quality and customer service. Furthermore, we may experience difficulty in
hiring and training new restaurant-level management due to the increasingly
intense competition for such positions resulting from additional restaurant
chains expanding to new markets. We anticipate that achieving consumer awareness
and market acceptance of additional restaurants will result in additional
expenses associated with managing operations located in multiple markets, as
well as requiring extraordinary amount of management's time. Any or all of these
factors may adversely affect our operating results, and prevent our ability to
open new restaurants or operate any newly-opened restaurants profitably.
OUR ABILITY, OR INABILITY, TO RESPOND TO VARIOUS COMPETITIVE FACTORS
AFFECTING THE RESTAURANT INDUSTRY MAY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.
The restaurant industry is highly competitive and is affected by
changes in consumer preferences, as well as by national, regional and local
economic conditions, and demographic trends. Discretionary spending priorities,
traffic patterns, tourist travel, weather conditions, employee availability and
the type, number and location of competing restaurants, among other factors,
will also directly affect the performance of our restaurants. Changes in any of
these factors in the markets where we currently operate our restaurants could
adversely affect the results of our operations. Furthermore, the restaurant
industry in general is highly competitive based on the type, quality and
selection of the food offered, price, service, location and other factors and,
as a result, has a high failure rate. The themed restaurant industry is is
particularly dependent on tourism and has seen the emergence of a number of new
competitors. We compete with numerous well-established competitors, including
national, regional and local restaurant chains, many of which have greater
financial, marketing, personnel and other resources and longer operating
histories than us. As a result, we may be unable to respond to the various
competitive factors affecting the restaurant industry.
WE HAVE ENTERED INTO NON-CANCELABLE LEASES UNDER WHICH WE ARE OBLIGATED
TO MAKE PAYMENTS FOR TERMS OF 12 TO 15 YEARS.
We have entered into long-term leases relating to the Kenwood, Mall of
America and Denver restaurants. These leases are non-cancelable by us (except in
limited circumstances) and range in term from 12 to 15 years. We will likely be
required to enter into similar long-term, non-cancelable leases for any future
restaurants we develop. If we decide to close any of our existing restaurants or
any other future restaurant, we may nonetheless be committed to perform our
obligations under the applicable lease, which would include, among other things,
payment of the applicable base rent for the balance of the respective lease
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term. Such continued obligations increase our chances of closing a restaurant
without receiving an adequate return on our investment.
UNPREDICTABLE RISKS ASSOCIATED WITH THE CONSTRUCTION OF ADDITIONAL
RESTAURANTS COULD RESULT IN DELAYS AND COST OVERRUNS IN THE CONTEMPLATED
EXPANSION OF OUR OPERATIONS.
As with all construction projects, we face many risks related to the
opening of additional restaurants, any of which could result in delays and cost
overruns which would negatively impact the success of any restaurant openings.
Such risks may include:
- shortages of materials or skilled labor;
- unforeseen environmental, engineering or geological problems;
- work stoppages;
- weather interference;
- floods;
- difficulties with regulatory agencies; and
- unanticipated cost increases.
IN ORDER TO FINANCE THE FUTURE DEVELOPMENT OF ADDITIONAL RESTAURANTS WE
MAY BE REQUIRED TO RAISE ADDITIONAL FUNDS BY ISSUING SECURITIES ON TERMS WHICH
WOULD DILUTE YOUR INTERESTS IN CAFE ODYSSEY.
The cost of developing our restaurants has ranged from $4.5 to $5.1
million per unit. We may be unable to develop future restaurants at similar
costs. In order to fund our future restaurant development, we may need
to obtain financing through an additional offering of our equity securities or
by incurring indebtedness. If we do need additional funds to develop
restaurants, such funds may not be available on terms acceptable to us or our
shareholders. Furthermore, future investors may seek and obtain, and we may be
required to offer, investment terms which are substantially better than those
granted to existing investors. The issuance of securities on such terms would
dilute the interests of existing shareholders.
AMONG OTHER ECONOMIC FACTORS OVER WHICH WE HAVE NO CONTROL, THE SUCCESS
OF OUR RESTAURANTS WILL DEPEND ON CONSUMER PREFERENCES AND THE PREVAILING LEVEL
OF DISCRETIONARY CONSUMER SPENDING.
Our success, and consequently any investment in our common stock,
depends to a significant degree on a number of economic conditions over which we
have no control, including:
<TABLE>
<S> <C>
- discretionary consumer spending - economic conditions affecting disposable
consumer income
- the overall success of the malls, - the continued popularity of
themed entertainment centers and other restaurants in general and the Cafe
venues where our restaurants are or Odyssey concept in particular
will be located
</TABLE>
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\
Furthermore, most themed restaurants are especially susceptible to
shifts in consumer preferences because they open at or near capacity and
frequently respond to such shifts by experiencing a decline in revenue growth or
of actual revenues. An adverse change in any or all of these conditions would
have a negative effect on our operations and the market value of our common
stock.
OUR PRINCIPAL EXECUTIVE OFFICER CONTROLS A SUBSTANTIAL AMOUNT OF OUR
COMMON STOCK AND MAY INFLUENCE OUR AFFAIRS.
As of May 26, 1999, Stephen D. King, our Chairman of the Board, Chief
Executive Officer and Chief Financial Officer, controlled approximately 17.2% of
our outstanding common stock. Accordingly, Mr. King has the ability to
substantially influence the election of members of the Board of Directors and
influence significantly the approval of corporate transactions and other matters
requiring shareholder approval. Unless and until Mr. King substantially
decreases his percentage ownership in our common stock, he will continue to have
significant influence over our affairs. If the Popmail aquisition is
consummated, the existing shareholders of Popmail would have the ability to
control our affairs.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION WHICH COULD
NEGATIVELY IMPACT OUR BUSINESS.
The restaurant industry, and to a lesser extent, the retail
merchandising industry, are subject to numerous federal, state, and local
government regulations, including those relating to:
<TABLE>
<S> <C>
- the preparation and sale of food - the sale of alcoholic beverages
- building and zoning requirements - sanitation
- environmental protections - relationships with employees
- minimum wage requirements - unemployment
- overtime - workers compensation
- working and safety conditions - citizenship requirements
</TABLE>
Any change in the current status of such regulations, including an
increase in employee benefits costs, workers' compensation insurance rates, or
other costs associated with employees, could substantially increase our
compliance and labor costs. Because we pay many of our restaurant-level
personnel rates based on either the federal or the state minimum wage, increases
in the minimum wage would lead to increased labor costs. In addition, our
operating results would be adversely affected in the event we fail to maintain
our food and liquor licenses. Furthermore, restaurant operating costs are
affected by increases in unemployment tax rates, sales taxes and similar costs
over which we have no control.
We may also be subject in certain states to "dram-shop" statutes, which
provide a person injured by an intoxicated person the right to recover damages
from an establishment that wrongfully served alcoholic beverages to the
intoxicated person.
THERE IS A RISK THAT THE VALUE OF OUR TRADEMARKS AND OTHER PROPRIETARY
RIGHTS COULD BE DIMINISHED BY IMPROPER USE BY OTHERS.
We believe that our trademarks and other proprietary rights are
important to our success and our competitive position. Accordingly, we have
filed trademark applications with the United States Patent and
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Trademark Office to register both the "Hotel Discovery" and the "Cafe Odyssey"
marks and designs. However, the actions we have taken to establish and protect
our trademarks and other proprietary rights may be inadequate to prevent others
from imitating our products or claiming violations of their trademarks and
proprietary rights by us. For instance, we may not be granted trademark
registration for any or all of the proposed uses in our applications. Even if
our marks are granted registration, we may still be unable to protect such marks
against prior users in areas where we conduct or will conduct operations. We may
also be unable to prevent competitors from using the same or similar marks,
concepts or appearance.
WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK, IN WHICH EVENT YOUR ONLY
RETURN ON INVESTMENT, IF ANY, WILL OCCUR ON THE SALE OF OUR STOCK.
To date, we have not paid any cash dividends on our common stock, and
we do not intend to do so in the foreseeable future. Rather, we intend to use
any future earnings to fund our operations and the growth of our business.
Accordingly, the only return on an investment in our common stock will occur
upon its sale.
PURSUANT TO ITS AUTHORITY TO DESIGNATE AND ISSUE SHARES OF OUR STOCK AS
IT DEEMS APPROPRIATE, OUR BOARD OF DIRECTORS MAY ASSIGN RIGHTS AND PRIVILEGES TO
CURRENTLY UNDESIGNATED SHARES WHICH COULD ADVERSELY AFFECT YOUR RIGHTS AS A
COMMON SHAREHOLDER.
Our authorized capital consists of 100,000,000 shares of capital stock.
Our Board of Directors, without any action by the shareholders, may designate
and issue shares in such classes or series (including classes or series or
preferred stock) as it deems appropriate and establish the rights, preferences
and privileges of such shares, including dividends, liquidation and voting
rights. We currently have 8,313,435 shares of common stock and 2,000 shares of
Series A 8% Convertible Preferred Stock outstanding. As of June 3, 1999, a
further 9,328,458 shares of common stock have been reserved as follows:
- 1,354,374 shares issuable upon exercise of the Preferred Shares and
reserved for payment of dividends;
- 2,600,000 shares issuable upon the exercise of the Class A warrants
issued as part of our initial public offering and the partial exercise
of the underwriter's over-allotment;
- 3,815,750 shares issuable upon the exercise of warrants;
- 1,250,000 shares for issuance under our 1997 Stock Option and
Compensation Plan, of which options relating to 911,633 shares are
currently outstanding,
- 250,000 shares for issuance under our 1998 Director Stock
Option Plan, of which options relating to 40,000 shares are
currently outstanding, and
- 58,334 shares issuable upon exercise of certain directors' stock
options.
The rights of holders of preferred stock and other classes of common
stock that may be issued could be superior to the rights granted to holders of
the Units issued in our initial public offering. Our Board's ability to
designate and issue such undesignated shares could impede or deter an
unsolicited tender offer or takeover proposal. Further, the issuance of
additional shares having preferential rights could adversely affect the voting
power and other rights of holders of common stock.
9
<PAGE> 11
MINNESOTA LAW MAY INHIBIT OR DISCOURAGE TAKEOVERS, WHICH COULD REDUCE
THE MARKET VALUE OF OUR STOCK.
Being a corporation organized under Minnesota law, we are subject to
certain Minnesota statutes which regulate business combinations and restrict the
voting rights of certain persons acquiring shares of our stock. By impeding a
merger, consolidation, takeover or other business combination involving Cafe
Odyssey or discouraging a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company, these regulations could
adversely affect the market value of our stock.
OUR COMMON STOCK COULD BE DELISTED FROM THE NASDAQ SMALLCAP MARKET,
WHICH DELISTING COULD HINDER YOUR ABILITY TO OBTAIN ACCURATE QUOTATIONS AS TO
THE PRICE OF OUR COMMON STOCK, OR DISPOSE OF OUR COMMON STOCK IN THE SECONDARY
MARKET.
Although our common stock is currently listed on the Nasdaq SmallCap
Market, we cannot guarantee that an active public market for our common stock
will continue to exist. During most of December 1998 and through April 27, 1999,
our common stock failed to maintain the minimum bid price criteria of $1.00 per
share as is required in order to trade on the Nasdaq SmallCap Market.
Accordingly, our securities may be delisted from the Nasdaq SmallCap Market.
Additional factors giving rise to such delisting could include, but might not be
limited to (1) a reduction of our net tangible assets to below $2,000,000, (2) a
reduction to one active market maker, or (3) a reduction in the market value of
the public float in our securities to less than $1,000,000.
In the event our securities are delisted from the Nasdaq SmallCap
Market, trading, if any, in our common stock would thereafter be conducted in
the over-the-counter markets in the so-called "pink sheets" or the National
Association of Securities Dealer's "Electronic Bulletin Board." Consequently,
the liquidity of our common stock would likely be impaired, not only in the
number of shares which could be bought and sold, but also through delays in the
timing of the transactions, reduction in the coverage of Cafe Odyssey by
security analysts and the news media, and lower prices for our securities than
might otherwise prevail. In addition, our common stock would become subject to
certain rules of the Securities and Exchange Commission relating to "penny
stocks." These rules require broker-dealers to make special suitability
determinations for purchasers other than established customers and certain
institutional investors and to receive the purchasers' prior written consent for
a purchase transaction prior to sale. Consequently, these "penny stock rules"
may adversely affect the ability of broker-dealers to sell our common stock and
may adversely affect your ability to sell shares of our common stock in the
secondary market.
THE LIMITATIONS ON DIRECTOR LIABILITY CONTAINED IN OUR ARTICLES OF
INCORPORATION AND BYLAWS MAY DISCOURAGE SUITS AGAINST DIRECTORS FOR BREACH OF
FIDUCIARY DUTY.
As permitted by Minnesota law, our Amended and Restated Articles of
Incorporation provide that members of our Board of Directors are not be
personally liable to you or the Company for monetary damages resulting from a
breach of their fiduciary duties. These limitations on director liability may
discourage shareholders from suing directors for breach of fiduciary duty and
may reduce the likelihood of derivative litigation brought against a director by
shareholders on the Company's behalf. Furthermore, our Bylaws provide for
mandatory indemnification of directors and officers to the fullest extent
permitted by Minnesota law. All of these provisions limit the extent to which
the threat of legal action against our directors for any breach of their
fiduciary duties will prevent such breach from occurring in the first instance.
10
<PAGE> 12
USE OF PROCEEDS
We received gross proceeds of $2,000,000 from the sale of the Preferred
Shares but will not receive any proceeds from the conversion of such Preferred
Shares. The gross proceeds to us from the exercise of the warrants, if the
warrants are exercised in full, would be a maximum of $1,275,000. The proceeds
from the exercise of the warrants are intended to be used for working capital
purposes. We will not receive any proceeds from the sale of the common stock by
the selling shareholders.
11
<PAGE> 13
SELLING SHAREHOLDERS
The following table sets forth the number of shares of the common stock
owned by the selling shareholders as of the date hereof and after giving effect
to this offering. We will not receive any proceeds from the sale of the common
stock by the selling shareholders. The shares of common stock received upon
exercise of the warrants may be offered from time to time by the selling
shareholders.
<TABLE>
<CAPTION>
Shares Percentage Number of Percentage
Beneficially Beneficial Shares Offered by Beneficial
owned before Ownership Selling Ownership After
Name Offering Before Offering Shareholder Offering
- --------------------- ---------- --------------- ------------- ---------
<S> <C> <C> <C> <C>
Stephen D. King 1,543,243(1) 17.2% 87,500 14.9%
Michael A. Bird 25,000(2) * 25,000 0%
John E. Feltl 87,500(2) 1% 87,500 0%
Timothy I. Maudlin 50,000(2) * 50,000 0%
Wayne W. Mills 450,000(2) 5.3% 250,000 1.8%
The Shaar Fund, Ltd. 1,654,374(3) 16.6% 1,654,374 0%
Progressive Group 150,000(2) 1.8% 150,000 0%
</TABLE>
- ------------
*Less than 1%.
(1) Includes 165,743 shares as to which Mr. King holds options to purchase from
various individuals and 477,500 shares issuable upon exercise of warrants.
(2) Represents shares issuable upon exercise of warrants.
(3) Represents the maximum number of shares to be issued pursuant to the
Securities Purchase Agreement. Includes shares issuable upon conversion of
the Preferred Shares; shares issuable upon payment of dividends and 300,000
shares issuable upon the exercise of warrants.
On March 10, 1999, we issued a promissory note for $825,000 which matures
on March 10, 2000. The note is secured by the personal guarantees of the selling
shareholders listed in the following table. In exchange for such guarantees, the
Company issued five-year warrants to those selling shareholders at an exercise
price of $.75 per share. The number of shares as to which each warrant is
exercisable is also shown in the table. The aggregate of 250,000 shares being
offered by Messrs. Bird, Feltl, Maudlin and King, and 250,000 of the shares
being offered by Mr. Mills, are issuable upon the exercise of those warrants.
<TABLE>
<CAPTION>
Number of Shares
Amount of Issuable upon Exercise
Name Guarantee of Warrant
- ------------------ --------- ----------------------
<S> <C> <C>
Michael A. Bird $ 50,000 25,000
John E. Feltl 175,000 87,500
Stephen D. King 175,000 87,500
Timothy I. Maudlin 100,000 50,000
Wayne W. Mills 500,000 250,000
</TABLE>
12
<PAGE> 14
On May 14, 1999, we issued 2,000 shares of Series A 8% Convertible
Preferred Stock with a stated value of $1,000 per share in a private placement
for total proceeds of $2,000,000 and net proceeds after expenses of
approximately $1,700,000. In addition, we issued a warrant (the "Warrant") to
the holder of Preferred Shares to purchase 300,000 shares of our common stock at
$3.00 per share in connection with the private placement. The Warrant is
exercisable for five years. In addition to a 10% placement fee and a 3%
unallocable expense allowance, the placement agent received a warrant to acquire
150,000 shares of common stock at $3.00 per share.
The annual dividend of 8% is cumulative and is payable quarterly in
arrears either in cash or in registered shares of our common stock. Each
Preferred Share is convertible into shares of our common stock at a conversion
price equal to 65% of the average closing bid price for the common stock five
days prior to the conversion. The total number of shares of common stock
issuable (1) upon conversion of the Preferred Stock, (2) as a dividend on the
Preferred Shares, and (3) upon exercise of the Warrant cannot exceed 1,662,687
shares (20% of the number of outstanding shares of common stock on May 14,
1999), unless we obtain shareholder approval as required by the Nasdaq SmallCap
Market. In the event a holder of Preferred Shares is unable to convert shares of
Preferred Shares into common stock because 1,662,687 shares have already been
issued as described in the preceding sentence, we must redeem any
unconverted Preferred Shares presented for conversion for cash at a price equal
to 125% of the stated value. We have the right to redeem the Preferred Shares in
cash at 135% of stated value plus accrued and unpaid dividends. All Preferred
Shares which is still outstanding on May 14, 2004 is mandatorily converted at
the conversion price.
We are not required to convert Preferred Shares, whether upon request
for conversion by the holder or upon the May 14, 2004 mandatory conversion date,
if and to the extent that such holder would then own in excess of 5% of our
common stock. If, notwithstanding the foregoing, such holder is deemed by a
court to be the beneficial owner of more than 5% of our common stock, we are
required to redeem for cash such number of shares of Preferred Shares as will
reduce such holder's ownership to not more than 5% at a redemption price equal
to 125% of the stated value plus accrued and unpaid dividends. In the case of
mandatory conversion, we may elect to pay a redemption price in cash equal to
135% of the stated value plus accrued and unpaid dividends or may extend the
mandatory conversion date for one year.
PLAN OF DISTRIBUTION
We are registering the shares offered by this prospectus on behalf of
the selling shareholders. We agreed to file a registration statement under the
Securities Act of 1933, as amended (the "Securities Act") covering resale by the
selling shareholders of the shares and to use our best efforts to cause such
registration statement to be declared effective as soon as possible thereafter.
As used in this section, the term "selling shareholders" includes donees,
pledgees, transferees and other successors in interest selling shares received
from a selling shareholder after the date of this prospectus. We will pay all
costs and expenses in connection with the preparation of this prospectus and the
registration of the shares offered by it. Any brokerage commissions and similar
selling expenses attributable to the sale of shares will be borne by the selling
shareholders. Sales of shares may be effected by the selling shareholders at
various times in one or more types of transactions (which may include block
transactions) on the Nasdaq SmallCap Market, in negotiated transactions, through
put or call options transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale at market prices prevailing at
the time of sale or at negotiated prices. Such transactions may or may not
involve brokers or dealers. The selling shareholders have advised us that
13
<PAGE> 15
they have not entered into any agreements, understandings or arrangements with
any underwriters or broker-dealers regarding the sale of the shares, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling shareholders.
We have agreed to indemnify the selling shareholders and their
officers, directors, employees and agents, and each person who controls any
selling shareholder, in certain circumstances against certain liabilities,
including liabilities arising under the Securities Act. Each selling shareholder
has agreed to indemnify the Company and its directors and officers in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
The selling shareholders and any broker-dealers that act in connection
with the sale of securities might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act, and any commissions received by
such broker-dealers and any profit on the resale of the securities sold by them
while acting as principals might be deemed to be underwriting discounts or
commissions under the Securities Act.
Because selling shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Securities Act, the selling shareholders
will be subject to the prospectus delivery requirements of the Securities Act.
We have informed the selling shareholders that the anti-manipulative provisions
of Regulation M promulgated under the Securities Exchange Act of 1934, as
amended, may apply to their sales in the market.
Selling shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided they meet the criteria and conform to the requirements of that Rule.
MINNESOTA ANTI-TAKEOVER LAW
We are governed by the provisions of Sections 302A.671 and 302A.673 of
the Minnesota Business Corporation Act. In general, Section 302A.671 provides
that the shares of a corporation acquired in a "control share acquisition" have
no voting rights unless voting rights are approved in a prescribed manner. A
"control share acquisition" is an acquisition, directly or indirectly, of
beneficial ownership of shares that would, when added to all other shares
beneficially owned by the acquiring person, entitle the acquiring person to have
voting power of 20% or more in the election of directors. In general, Section
302A.673 prohibits a publicly-held Minnesota corporation from engaging in a
"business combination" with an "interested shareholder" for a period of four
years after the date of transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
"Business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested shareholder. An "interested
shareholder" is a person who is the beneficial owner, directly or indirectly, or
10% or more of the corporation's voting stock or who is an affiliate or
associate of the corporation and at any time within four years prior to the date
in question was the beneficial owner, directly or indirectly, of 10% or more of
the corporation's voting stock.
WHERE YOU CAN FIND MORE INFORMATION
Federal securities law requires Cafe Odyssey to file information with
the Securities and Exchange Commission concerning its business and operations.
Accordingly, we file annual, quarterly, and special reports, proxy statements
and other information with the Commission. You can inspect and copy this
information at the Public Reference Facility maintained by the Commission at
Judiciary Plaza, 450 5th Street,
14
<PAGE> 16
N.W., Room 1024, Washington, D.C. 20549. You can also do so at the following
regional offices of the Commission:
(1) New York Regional Office, 7 World Trade Center, Suite 1300, New York, New
York 10048
(2) Chicago Regional Office, Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661.
You can receive additional information about the operation of the
Commission's Public Reference Facilities by calling the Commission at
1-800-SEC-0330. The Commission also maintains a website at http://www.sec.gov
that contains reports, proxy and information statements and other information
regarding companies that, like Cafe Odyssey, file information electronically
with the Commission.
The Commission allows us to "incorporate by reference" information that
has been filed with it, which means that we can disclose important information
to you by referring you to the other information we have filed with the
Commission. The information that we incorporate by reference is considered to be
part of this prospectus, and related information that we file with the
Commission will automatically update and supersede information we have included
in this prospectus. We also incorporate by reference any future filings we make
with the Commission under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, as amended, until the selling shareholders sell all of
their shares or until the registration rights of the selling shareholders
expire. This prospectus is part of a registration statement that we filed with
the Commission (Registration No. 333-______). The following are specifically
incorporated herein by reference:
1. Annual Report on Form 10-KSB for the fiscal year ended January 3,
1999;
2. Quarterly Report on Form 10-QSB filed on May 19, 1999;
3. Current Reports on Form 8-K filed on May 4, 1999 and June 7,
1999; and
4. The description of common stock included under the caption
"Securities to be Registered" in the Company's registration
statement on Form 8-A, File No. 0-23243, dated October 21, 1997,
including any amendments or reports filed for the purpose of
updating such description.
You can request a free copy of the above filings or any filings
subsequently incorporated by reference into this prospectus by writing or
calling us at the following address:
Cafe Odyssey, Inc.
Attention: Mark Dacko, Controller
4801 West 81st Street, Suite 112
Bloomington, Minnesota 55437
(612) 837-9917
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement or amendment to this prospectus.
We have not authorized anyone else to provide you with different information or
additional information. Selling shareholders will not make an offer of our
common stock in any state where the offer is not permitted. You should not
assume that the information in this prospectus, or any supplement or amendment
to this prospectus, is accurate at any date other than the date indicated on the
cover page of such documents.
15
<PAGE> 17
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this prospectus and in the documents
incorporated by reference in this prospectus are "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. These forward-looking statements can be
identified by the use of predictive, future-tense or forward-looking
terminology, such as "believes," "anticipates," "expects," "estimates," "may,"
"will" or similar terms. Forward-looking statements also include projections of
financial performance, statements regarding management's plans and objectives
and statements concerning any assumption relating to the foregoing. Important
factors regarding Cafe Odyssey's business, operations and competitive
environment which may cause actual results to vary materially from these
forward-looking statements are discussed under the caption "Risk Factors."
LEGAL MATTERS
Legal matters in connection with the validity of the shares offered by
this Prospectus will be passed upon for the Company by Maslon Edelman Borman &
Brand, LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of Cafe Odyssey, Inc. as of
January 3, 1999 and December 28, 1997 and for the years then ended incorporated
by reference in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report with respect
thereto, and are incorporated herein in reliance upon the authority of that firm
as experts in giving said report.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
Minnesota Statutes Section 302A.521 provides that a corporation shall
indemnify any person made or threatened to be made a party to any proceeding by
reason of the former or present official capacity of such person against
judgments, penalties, fines, including, without limitation, excise taxes
assessed against such person with respect to an employee benefit plan,
settlements, and reasonable expenses, including attorney's fees and
disbursements, incurred by such person in connection with the proceeding, if,
with respect to the acts or omissions of such person complained of in the
proceeding, such person has not been indemnified by another organization or
employee benefit plan for the same expenses with respect to the same acts or
omissions; acted in good faith; received no improper personal benefit and
Section 302A.255, if applicable, has been satisfied; in the case of a criminal
proceeding, had no reasonable cause to believe the conduct was unlawful; and in
the case of acts or omissions by persons in their official capacity for the
corporation, reasonably believed that the conduct was in the best interests of
the corporation, or in the case of acts or omissions by persons in their
capacity for other organizations, reasonably believed that the conduct was not
opposed to the best interests of the corporation. Subdivision 4 of Section
302A.521 of the Minnesota
16
<PAGE> 18
Statutes provides that a corporation's articles of incorporation or bylaws may
prohibit such indemnification or place limits upon the same. The Company's
articles and bylaws do not include any such prohibition or limitation. As a
result, the Company is bound by the indemnification provisions set forth in
Section 302A.521 of the Minnesota Statutes. As permitted by Section 302A.251 of
the Minnesota Statutes, the Articles of Incorporation of the Company provide
that a director shall, to the fullest extent permitted by law, have no personal
liability to the Company and its shareholders for breach of fiduciary duty as a
director.
To the extent that indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
17
<PAGE> 19
2,304,374 SHARES
CAFE ODYSSEY, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
__________, 1999
18
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the issuance and distribution
of the securities registered hereby are set forth in the following table:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 1,257.95
Nasdaq SmallCap Market additional listing fee............... 17,500.00
Legal fees and expenses..................................... 20,000.00
Accounting fees and expenses................................ 5,000.00
Misc........................................................ 1,242.05
----------
Total....................................................... $45,000.00
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is governed by Minnesota Statutes Chapter 302A. Minnesota
Statutes Section 302A.521 provides that a corporation shall indemnify any person
made or threatened to be made a party to any proceeding by reason of the former
or present official capacity of such person against judgments, penalties, fines,
including, without limitation, excise taxes assessed against such person with
respect to an employee benefit plan, settlements, and reasonable expenses,
including attorney's fees and disbursements, incurred by such person in
connection with the proceeding, if, with respect to the acts or omissions of
such person complained of in the proceeding, such person has not been
indemnified by another organization or employee benefit plan for the same
expenses with respect to the same acts or omissions; acted in good faith;
received no improper personal benefit and Section 302A.255, if applicable, has
been satisfied; in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful; and in the case of acts or omissions by
persons in their official capacity for the corporation, reasonably believed that
the conduct was in the best interests of the corporation, or in the case of acts
or omissions by persons in their capacity for other organizations, reasonably
believed that the conduct was not opposed to the best interests of the
corporation. Subdivision 4 of Section 302A.521 of the Minnesota Statutes
provides that a company's articles of incorporation or bylaws may prohibit such
indemnification or place limits upon the same. The Company's articles and bylaws
do not include any such prohibition or limitation. As a result, the Company is
bound by the indemnification provisions set forth in Section 302A.521 of the
Minnesota Statutes.
As permitted by Section 302A.251 of the Minnesota Statutes, the
Articles of Incorporation of the Company provide that a director shall have no
personal liability to the Company and its shareholders for breach of his
fiduciary duty as a director, to the fullest extent permitted by law. The Agency
Agreement contains provisions under which the Company, on the one hand, and the
Placement Agent, on the other hand, have agreed to indemnify each other
(including officers and directors of the Company and the Placement Agent, and
any person who may be deemed to control the Company or the Placement Agent)
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
19
<PAGE> 21
ITEM 16. EXHIBITS.
EXHIBIT DESCRIPTION OF DOCUMENT
5 Opinion of Maslon Edelman Borman & Brand, LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Maslon Edelman Borman & Brand, LLP (included in
Exhibit 5).
24 Power of Attorney (included on page II-3).
ITEM 17. UNDERTAKINGS.
(a) 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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has 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 Act and will be governed by the final adjudication of
such issue.
(b) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; and (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;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering; and
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of Bloomington,
State of Minnesota, on June 8, 1999.
Cafe Odyssey, Inc., Registrant
By /s/ Stephen D. King
-------------------
Chairman and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Stephen D. King, Ronald K. Fuller or William M. Mower, each or any of them,
such person's true and lawful attorney-in-fact and agent with full power of
substitution and resubstitution for such person and in such person's name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this registration statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing necessary or desirable to be done in and about the
premises, as fully to all intents and purposes as such person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ---- ----- ----
<S> <C> <C>
/s/ Stephen D. King Chairman of the Board and Chief June 8, 1999
- --------------------------
Stephen D. King Executive Officer
(Principal Executive Officer)
/s/ Ronald K. Fuller President, Chief Operating Officer June 8, 1999
- ---------------------------
Ronald K. Fuller and Director
/s/ Thomas W. Orr Chief Financial Officer, Executive June 8, 1999
- --------------------------- Vice President and Director
Thomas W. Orr (Principal Financial Officer)
/s/ Mark D. Dacko Controller and Secretary June 8, 1999
- --------------------------- (Principal Accounting Officer)
Mark D. Dacko
/s/ Michael L. Krienik Director June 8, 1999
- --------------------------
Michael L. Krienik
Director June 8, 1999
- --------------------------
Jerry L. Ruyan
</TABLE>
21
<PAGE> 23
EXHIBITS
EXHIBIT DESCRIPTION OF DOCUMENT PAGE NO.
5 Opinion of Maslon Edelman Borman & Brand, LLP
23.1 Consent of Arthur Andersen LLP
22
<PAGE> 1
EXHIBIT 5
June 8, 1999
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, Minnesota 55437
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted on behalf of Cafe Odyssey, Inc. (the "Company") in
connection with a Registration Statement on Form S-3 (the "Registration
Statement") to be filed by the Company with the Securities and Exchange
Commission on June 8, 1999 relating to the registration under the Securities Act
of 1933, as amended, of shares of common stock, par value $.01 per share (the
"Common Stock"), issuable by the Company upon conversion of the Series A 8%
Convertible Preferred Stock and shares of Common Stock issuable by the
Company upon exercise of certain warrants to purchase shares of Common Stock as
indicated in the Registration Statement.
Upon examination of such corporate documents and as we have deemed
necessary or advisable for the purposes hereof and including and in reliance
upon certain certificates by the Company, it is our opinion that:
(1) The Company is a validly existing corporation in good
standing under the laws of the State of Minnesota.
(2) The Common Stock has been duly authorized and, when
issued as described in the Registration Statement,
will be legally issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
Maslon Edelman Borman & Brand, LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Registration Statement of our report dated
February 19, 1999 included in Cafe Odyssey, Inc.'s Form 10- KSB for the year
ended January 3, 1999 and to all references to our firm included in this
Registration Statement.
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
June 8, 1999
