<PAGE>
As filed with the Securities and Exchange Commission on August 11, 1999.
Registration No. 333-66333
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 4
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
Nolbo, Inc.
---------------------
(Name of small business issuer in its charter)
Delaware 5812 59-3518685
- ---------------------------- --------------------------- -------------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of organization) Classification Code No.) Identification No.)
8426 Sunstate Street
Tampa, FL 33634
(813) 882-4753
--------------------------------------------------------------------------
(Address and telephone number of principal executive offices and principal
place of business.)
Marvin M. Nolley, President
Nolbo, Inc.
8426 Sunstate Street
Tampa, FL 33634
(813) 882-4753
---------------------------------------------------------
(Name, address and telephone number of agent for service)
Copies to:
Steven Morse, Esq. Henry C. Malon, Esq
Lester Morse P.C. One Battery Park Place
Suite 420 Suite 300
111 Great Neck Road New York, NY 10004
Great Neck, NY 11021 Phone: (212) 483-9600
Phone: (516) 487-1446 Fax: (212) 422-7839
Fax: (516) 487-1452
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Registration
Statement. 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, 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: / /
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.
===============================================================================
<PAGE>
<TABLE>
<CAPTION>
Calculation of Registration Fee
=========================================================================================================
Proposed
Title of Each Amount Maximum Proposed Maximum Amount of
Class of Securities to be Offering Price Aggregate Offering Registration
Being Registered Registered Per Unit Price(1) Fee
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001
par value ...................... 300,000 6.00 1,800,000 $ 531.00
- ---------------------------------------------------------------------------------------------------------
Underwriter's Warrant ........... 30,000 .001 30 .01
- ---------------------------------------------------------------------------------------------------------
Shares of Common Stock, $.001
par value, underlying the
Underwriter's Warrant .......... 30,000 9.00 270,000 79.65
- ---------------------------------------------------------------------------------------------------------
Total Registration Fee .................................................................... $ 610.66(2)
=========================================================================================================
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act of 1933.
(2) Previously paid.
<PAGE>
NOLBO, INC.
Cross-Reference Sheet Showing Location in prospectus of Information Required by
Items in Part I of Form SB-2
Registration Statement
<TABLE>
<CAPTION>
Item Number and Caption Location in prospectus
----------------------- ----------------------
<S> <C> <C>
1. Front of Registration Statement and Outside Outside Front Cover Page of Prospectus
Front Cover of prospectus
2. Inside Front and Outside Bank Cover Pages of Inside Front and Outside Bank Cover Pages of
prospectus Pages of prospectus Prospectus; Additional
Information
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page of Prospectus;
Underwriting
6. Dilution Dilution
7. Selling Security holders Not Applicable
8. Plan of Distribution Outside Front Cover Page of prospectus;
Underwriting
9. Legal Proceedings Business -- Legal Proceedings
10. Directors, Executive Officers, Promoters and Management
Control Persons
11. Security Ownership of Certain Beneficial Owners Principal Stockholders
and Management
12. Description of Securities Description of Securities; Dividends
13. Interest of Named Experts and Counsel Experts and Legal Matters
14. Disclosure of Commission Position on Underwriting
Indemnification for Securities Act Liabilities
15. Organization Within Last Five Years Business; Certain Transactions
16. Description of Business Prospectus Summary; Business
17. Management's Discussion and Analysis or Plan Management's Discussion and Analysis of Financial
of Operation Condition and Results of Operations
18. Description of Property Business
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Equity and Related Risk Factors; Shares Eligible for Future Sale;
Stockholder Matters Description of Securities
21. Executive Compensation Management -- Executive Compensation
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accountants Not Applicable
on Accounting and Financial Disclosure
</TABLE>
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated August 11, 1999
Nolbo, Inc.
Common Stock
This is an initial public offering of up to 300,000 shares of common stock
of Nolbo, Inc. If a minimum of 200,000 shares are not sold, all monies will be
promptly returned to investors without deductions or interest. The offering
period will expire on ________, 1999 and it may be extended by us until
_______, 1999. Arrangements have been made to place the funds of the offering
in escrow.
Before the offering, there has been no public market for the common stock.
Should a public market develop, the offering price of $6.00 per share may not
reflect the market price of the shares after the offering. We plan to seek to
list the common stock on the OTC Electronic Bulletin Board under the symbol
"____."
Before you decide to invest in the Nolbo common stock, carefully read this
Prospectus, especially the risk factors beginning on page 5.
The purchase of Nolbo's common stock involves the purchase of speculative
securities and involves a high degree of risk.
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
==================================================================
Price to Proceeds to
Public Commissions Nolbo
- ------------------------------------------------------------------
Per Share ......... $ 6.00 $ .60 $ 5.40
- ------------------------------------------------------------------
Minimum ........... $1,200,000 $120,000 $1,080,000
- ------------------------------------------------------------------
Maximum ........... $1,800,000 $180,000 $1,620,000
==================================================================
FIRST LEVEL CAPITAL, INC.
Prospectus dated August __, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Summary ....................................................................... 3
Summary Financial Data ................................................................... 4
Risk Factors ............................................................................. 5
We have losses from prior operations and no assurances of future
profitable operations ................................................................ 5
We have limited working capital and may encounter future
liquidity problems ................................................................... 5
Potential difficulties in obtaining suitable sites may hinder our expansion plans ..... 5
Competition from a significant number of fast food chains in
Tampa-St. Petersburg area may adversely affect our
revenues and profitability ........................................................... 5
Possible lack of legal protection for the use of the name Gladstone's
for our restaurants .................................................................. 5
We may need additional capital and may not be able to obtain it ....................... 5
Nolbo could be subjected to significant product liability claims in the future ........ 5
Our common stock has never been publicly traded so we cannot
predict the extent to which a trading market will develop for
our common stock ..................................................................... 6
Lack of at least two independent directors and committees could result
in less objectivity and conflicts of interest ........................................ 6
Dependence upon Marvin Nolley and Bo Grektorp-key man life insurance
may be inadequate to compensate for the loss of their services ....................... 6
Disparity between consideration paid for Nolbo's common stock by
existing shareholders and the consideration paid by the public ....................... 6
"Penny Stock" regulations might in the future adversely affect the
purchasers' resale of common stock ................................................... 6
Forward Looking Statements ............................................................... 6
Use of Proceeds .......................................................................... 7
Dividend Policy .......................................................................... 8
Dilution ................................................................................. 8
Capitalization ........................................................................... 10
Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................................... 10
Business ................................................................................. 12
Management ............................................................................... 18
Principal Stockholders ................................................................... 21
Certain Transactions ..................................................................... 22
Description of Securities ................................................................ 22
Shares Eligible for Future Sale .......................................................... 23
Underwriting ............................................................................. 23
Legal Matters ............................................................................ 26
Experts .................................................................................. 26
Financial Statements ..................................................................... F-1
</TABLE>
2
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. Because
this is a summary, it does not contain all the information that may be
important to you. You should read the entire prospectus before you decide to
invest.
Nolbo
Nolbo is engaged in the business of owning and operating two restaurants in
Tampa, Florida which specialize in high quality, quickly served gourmet grilled
chicken. The restaurants operate under the name "Gladstone's Grilled Chicken."
We intend to use the net proceeds of the offering to open between three and five
additional restaurants in the Tampa -- St. Petersburg, Florida area. Our
executive offices are located at 8426 Sunstate Street, Tampa, FL 33634 and our
telephone number is (813) 882-4753.
The Offering
Securities offered
by Nolbo 300,000 Shares (maximum)
200,000 Shares (minimum)
Offering price........... $6.00 per Share
Escrow agent............. Continental Stock Transfer & Trust Company
Common stock outstanding
prior to the offering... 906,000 Shares
Common stock to be outstanding
after the offering...... 1,206,000 Shares (maximum)
1,106,000 Shares (minimum)
3
<PAGE>
SUMMARY FINANCIAL DATA
The summary financial data is derived from the historical consolidated
financial statements of Nolbo. This summary financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" as well as Nolbo's historical consolidated financial
statements and the related notes thereto, included elsewhere in the prospectus.
<TABLE>
<CAPTION>
Ten Months Ended
Year Ended June 30, April 30,
----------------------------- ---------------------------
1997 1998 1998 1999
------------- ------------- ----------- -------------
(unaudited)
<S> <C> <C> <C> <C>
Statement of Operational Data:
Net Sales ................................... $1,025,162 $1,026,404 $837,739 $ 898,301
Net Income (Loss) ........................... (18,585) 18,942 12,104 (215,866)
Net Income (Loss) per common share .......... (.02) .02 .01 (.24)
Weighted average number of shares outstanding
during the period .......................... 906,000 906,000 906,000 906,000
</TABLE>
<TABLE>
<CAPTION>
June 30, 1998 April 30, 1999
--------------- ---------------
(Unaudited)
<S> <C> <C>
Balance Sheet Data:
Total Assets .......................... $ 88,136 $ 234,836
Net Tangible Assets (Deficit) ......... 922 (49,730)
Working Capital (Deficit) ............. (20,396) 52,279
Total Liabilities .................... 80,722 218,288
Stockholders' Equity ................. 7,414 16,548
</TABLE>
4
<PAGE>
RISK FACTORS
Before you invest in our common stock, you should be aware that there are
various risks, including those described below. You should carefully consider
these risk factors together with all of the other information included in this
prospectus before you decide to purchase shares of our common stock.
We have losses from prior operations and no assurances of future profitable
operations.
Our operations for the ten months ended April 30, 1999 and 1998 and for
years ended June 30, 1998 and 1997, resulted in net income (loss) of
$(215,866), $12,104, $18,942 and $(18,585), respectively. We can provide no
assurances that our operations will be profitable in the future.
We have limited working capital and may encounter future liquidity problems.
Nolbo has historically had limited working capital. Nolbo had working
capital of $52,279 at April 30, 1999 and a working capital deficit of $(20,396)
at June 30, 1998. While we expect the proceeds of this offering to provide us
with sufficient working capital, there is no assurance that future operations
will not encounter capital resource and liquidity problems.
Potential difficulties in obtaining suitable sites may hinder our expansion
plans.
Our objective is to grow more rapidly by opening up between three and five
additional restaurants in the greater Tampa-St. Petersburg Florida area with
the number of restaurants dependent upon the amount of proceeds raised in this
offering. Our ability to successfully expand the number of our restaurants will
depend upon finding and leasing suitable restaurant sites and obtaining permits
and licenses for building restaurants on such sites. Difficulties encountered
in such endeavors will delay our expansion plans and increase costs.
Competition from a significant number of fast food chains in Tampa-St.
Petersburg area may adversely affect our revenues and profitability.
The restaurant industry, and particularly the quick-service segment, is
highly competitive with respect to price, services, food quality including
taste, freshness, healthfulness and nutritional value and location. There are
numerous well-established competitors in the Tampa-St. Petersburg area
possessing substantially greater financial, marketing, personnel and other
resources than us and substantially longer operating histories. We compete with
fast food chains specializing in chicken products. To a lesser extent, our
competitors also include major pizza and hamburger chains, many of which have
introduced chicken products. We can provide no assurances that we will be able
to successfully compete with such competitors.
Possible lack of legal protection for the use of the name Gladstone's for our
restaurants.
Another company that is believed by management to operate one restaurant
in California, has registered the marks "Gladstone's" and "Gladstone 4 Fish and
Design" with the U.S. Patent and Trademark Office and could in the future bring
a trademark infringement action against us in Florida seeking injunctive relief
and damages for our use of the name Gladstone's. While we believe that we have
valid defenses to such an action, no assurances can be given that we would
prevail in such a legal action. Any lawsuit would involve us incurring
significant legal costs in the defense of such a lawsuit and, if unsuccessful,
we could be forced to pay a material damage award and/or change our name which
may adversely effect our operations.
We may need additional capital and may not be able to obtain it.
We believe that the proceeds from this offering together with our current
cash balances and anticipated cash to be generated from operations will be
sufficient to meet our expected operating and capital requirements for at least
one year. However, we may need to raise additional funds in order to support
further expansion, meet competitive pressures, or respond to unanticipated
requirements. We cannot assure you that additional financing will be available
if needed on terms favorable to us.
Nolbo could be subjected to significant product liability claims in the future.
We may be liable if the consumption of any of our products cause injury,
illness or death. While we are not aware of the occurrence of any injury,
illness or death relating to our restaurants, a product liability claim or
judgment against us could cause serious losses.
5
<PAGE>
Our common stock has never been publicly traded, so we cannot predict the
extent to which a trading market will develop for our common stock.
There has not been a public market for our common stock. We cannot predict
the extent to which a trading market will develop or how liquid that market
might become. We plan to list the common stock for trading on the OTC
Electronic Bulletin Board. We can provide no assurance that such listing will
be obtained.
Lack of at least two independent directors and committees could result in less
objectivity and conflicts of interest.
Our board of directors consists of four directors. Three of the directors
also serve as executive officers. The absence of at least two outside or
disinterested directors and committees composed of such disinterested
directors, could result in less objectivity and an increased risk for conflicts
of interest with respect to decisions made by Nolbo's board of directors.
Dependence upon Marvin Nolley and Bo Grektorp-key man life insurance may be
inadequate to compensate for the loss of their services.
We believe that our ability to successfully operate our existing
operations, implement expansion plans and to operate profitably depends on the
continued employment of Marvin Nolley and Bo Grektorp. If they become unable or
unwilling to continue in their present positions, our business and financial
results could be materially adversely effected. We will attempt to obtain a $1
million key man life insurance policy on the lives of each of Messrs. Nolley
and Grektorp. We can provide no assurances that such insurance would adequately
compensate us for the loss of their services or that we would be able to
recruit and retain new management personnel should the need arise.
Disparity between consideration paid for Nolbo's common stock by existing
shareholders and the consideration paid by the public.
The investors in this offering will pay $6.00 per share for shares of
Nolbo's common stock which is substantially higher than the $.12 per share
previously paid by current stockholders.
"Penny Stock" regulations might in the future adversely affect the
purchasers' resale of common stock.
The SEC has adopted "penny stock" regulations which apply to certain
securities with a market price of under $5.00. These regulations could
adversely impact the ability of the purchasers in the offering to resell the
shares of common stock purchased if the market price of common stock drops
below $5.00. See "Description of Securities" for a discussion of some of these
rules.
FORWARD LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking
statements. Such statements can be identified by the use of forward-looking
terminology such as "may," "will," "expect," "anticipate," "estimate,"
"continue" or other similar words. These statements discuss future
expectations, contain projections of results of operations or of financial
condition or state other "forward-looking" information. When considering such
forward-looking statements, you should keep in mind the risk factors and other
cautionary statements in this prospectus. The risk factors noted in the prior
section and other factors noted throughout this prospectus, including certain
risks and uncertainties, could cause our actual results to differ materially
from those contained in any forward-looking statement.
6
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the sale of the shares offered by
Nolbo (after payment of estimated offering expenses) will be approximately
$800,000 (minimum) and $1,310,000 (maximum). As reflected in the table below,
the proceeds will be used to open additional restaurants, to repay indebtedness
and for working capital. The number of restaurants to be opened will depend
upon the number of shares sold in the offering and can range from three
restaurants if only the minimum number of shares is sold to a maximum of five
restaurants if all shares are sold. In 1998, Nolbo completed a $150,000 bridge
financing. The proceeds of the bridge financing were used to commence
refurbishing and installing a point of sales system that will enable customer
information to be tracked, to finance the expenses of this offering and for
general working capital. Nolbo has allocated $163,000 to repay the notes
(including estimated interest) on the basis that the holders of the notes
demand payment. Any monies not used to repay the notes would be re-allocated to
working capital. The following table sets forth the Company's intended use of
the net proceeds:
<TABLE>
<CAPTION>
Minimum Maximum
----------- -------------
<S> <C> <C>
Lease and build up to five additional restaurants .......... $540,000 $ 900,000
Repayment of bridge financing .............................. 163,000 163,000
Working capital ............................................ 97,000 247,000
-------- ----------
TOTAL ...................................................... $800,000 $1,310,000
======== ==========
</TABLE>
Based on currently proposed plans and assumptions relating to the
implementation of its business plans, Nolbo believes that the proceeds from the
sale of the minimum offering will be sufficient to satisfy its contemplated
cash requirements for at least 12 months following the consummation of such
offering. In the event that the Nolbo's plans change, its assumptions change or
prove to be inaccurate or if the proceeds of the offering otherwise prove to be
insufficient to implement its business plan, Nolbo may find it necessary or
desirable to reallocate a portion of the proceeds within the above described
categories, use proceeds for other purposes, seek additional financing or
curtail its operations. There can be no assurance that any additional financing
will be available to Nolbo on acceptable terms, or at all.
Proceeds not immediately required for the purposes described above will be
invested principally in United States government securities, short-term
certificates of deposit, money market funds or other short-term interest
bearing investments.
Bridge Financing
Between July 29 and September 18, 1998, Nolbo raised $150,000 in bridge
financing from non-affiliated investors. In exchange for such loans, Nolbo
issued to the bridge lenders non-convertible notes due the earlier of the
completion of the offering or two years from the date of issuance in the
principal amount of $120,000 and convertible notes in the principal amount of
$30,000 due two years from the date of issuance. Each note bears interest at
the rate of ten percent per annum. The principal of the convertible notes is
convertible at the option of the holder into shares of Nolbo's common stock at
$1.00 per share at anytime from the date of issuance until the convertible
notes are retired. At the option of the holders of the notes, such holders may
demand prepayment of the notes in the event that Nolbo raises gross proceeds of
at least $1,000,000 through either public or private financing. The shares
underlying the convertible notes are subject to a lock-up agreement.
7
<PAGE>
DIVIDEND POLICY
Nolbo currently intends to retain any earnings to finance the development
and expansion of Nolbo's business and does not anticipate paying any cash
dividends on its common stock in the foreseeable future. The declaration and
payment of cash dividends by Nolbo are subject to the discretion of the board
of directors of Nolbo. Any future determination to pay cash dividends will
depend on Nolbo's results of operations, financial condition, capital
requirements, contractual restrictions and other factors deemed relevant at the
time by the board of directors. Nolbo is not currently subject to any
contractual arrangements which restricts its ability to pay cash dividends.
DILUTION
The net tangible book value (deficit) per share of Nolbo as of April 30,
1999 was approximately $(.05) per share of common stock. Net tangible book
value (deficit) per share is determined by dividing the tangible net worth of
Nolbo (tangible assets less all liabilities) by the total number of outstanding
shares of common stock. Nolbo's tangible assets consists of all of its assets
as shown on its balance sheet, except for intangible assets consisting of
$66,278 as of April 30, 1999. After giving effect to the sale by Nolbo of
200,000 Shares (minimum), the adjusted net tangible book value per share of
Nolbo as of April 30, 1999 would have been approximately $.68. This represents
an immediate increase in the adjusted net tangible book value per share of $.73
to existing common stockholders and an immediate dilution (the difference
between the $6.00 price to the public per share of common stock and the
adjusted net tangible book value per share of common stock after the offering)
in the adjusted tangible book value of $5.32 per share of common stock
(representing a dilution percentage of approximately 89%) to new investors.
After giving effect to the sale by Nolbo of 300,000 Shares (maximum), the
adjusted net tangible book value per share of Nolbo as of April 30, 1999 would
have been approximately $1.05. This represents an immediate increase in the
adjusted net tangible book value per share of $1.10 to existing common
stockholders and an immediate dilution (the difference between the $6.00 price
to the public per share of common stock and the adjusted net tangible book
value per share of common stock after the offering) in the adjusted tangible
book value of $4.95 per share of common stock (representing a dilution
percentage of approximately 82%) to new investors.
8
<PAGE>
The following table illustrates this per share of common stock dilution:
<TABLE>
<CAPTION>
Minimum Maximum
--------- ----------
<S> <C> <C>
The initial price of a share of common stock paid by new investors .......... $ 6.00 $ 6.00
Adjusted net tangible book value per share of common stock before the
Offering ................................................................... (.05) (.05)
Increase in adjusted net tangible book value per share of common stock
attributable to new investors .............................................. .73 1.10
------- -------
Adjusted net tangible book value per share of common stock after the
offering ................................................................... .68 1.05
------- -------
Dilution in adjusted net tangible book value per share of common stock to
new investors .............................................................. $ 5.32 $ 4.95
======= =======
</TABLE>
The following tables summarize, as of the completion of the offering, the
differences between existing stockholders and new investors with respect to the
number of shares of common stock purchased from Nolbo and the total and average
cash consideration paid per share. (Cash consideration includes cash and cost
basis of property contributed to Nolbo.)
TABLE I (Minimum)
<TABLE>
<CAPTION>
Approximate Approximate Average
Percentage Percentage Price
Shares of Total Total Cash of Total Per
Purchased Shares Consideration $ Consideration % Share $
----------- ------------- ----------------- ----------------- --------
<S> <C> <C> <C> <C> <C>
Public Stockholders .......... 200,000 18 1,200,000 92 6.00
Present Stockholders ......... 906,000 82 109,798 8 .12
--------- --- --------- ---
Total ........................ 1,106,000 100 1,309,798 100
========= === ========= ===
</TABLE>
TABLE II (Maximum)
<TABLE>
<CAPTION>
Approximate Approximate Average
Percentage Percentage Price
Shares of Total Total Cash of Total Per
Purchased Shares Consideration $ Consideration % Share $
----------- ------------- ----------------- ----------------- --------
<S> <C> <C> <C> <C> <C>
Public Stockholders .......... 300,000 25 1,800,000 94 6.00
Present Stockholders ......... 906,000 75 109,798 6 .12
--------- --- --------- ---
Total ........................ 1,206,000 100 1,909,798 100
========= === ========= ===
</TABLE>
9
<PAGE>
CAPITALIZATION
The following table sets forth, as of April 30, 1999, (i) the actual
capitalization of Nolbo, and (ii) the pro forma capitalization of Nolbo,
including the issuance of 200,000 shares of common stock (minimum) and 300,000
shares (maximum).
The table below should be read in conjunction with the financial
statements of Nolbo and notes thereto included elsewhere in the prospectus. The
table does not reflect options to purchase 50,000 shares of common stock which
may be granted under Nolbo's Stock Option Plan, underwriter's warrants to
purchase up to 30,000 shares of common stock, and notes owned by certain bridge
lenders convertible into a total of 30,000 shares of common stock.
<TABLE>
<CAPTION>
April 30, 1999
----------------------------------------------
Pro Pro
Actual Forma Forma
------------- ------------ ---------------
Minimum Maximum
<S> <C> <C> <C>
Stockholders' Equity:
Preferred Stock, $.001 par value, 5,000,000 shares
authorized, no shares outstanding ............... 0 0 0
Common Stock, $.001 par value 20,000,000 shares
authorized, 906,000 shares issued, 1,106,000
shares issued and outstanding pro forma
minimum and 1,206,000 shares issued and
outstanding pro forma maximum ................... 906 1,106 1,206
Additional Paid-in-capital ....................... 333,892 1,133,692 1,643,592
Retained Earnings (deficit) ...................... (318,250) (318,250) (318,250)
---------- --------- -----------
Total Stockholders' Equity .................... $ 16,548 $816,548 $ 1,326,548
========== ========= ===========
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
This discussion should be read in conjunction with the information in the
financial statements of Nolbo and notes thereto appearing elsewhere in this
prospectus.
Results of Operations
Ten Months Ended April 30, 1999 vs. Ten Months Ended April 30, 1998
During the ten months ended April 30, 1999, our net sales were $898,301 as
compared to $837,739 for the prior year, an increase of approximately 7%. Our
net sales grew due to stronger sales in Nolbo's catering business and an
increase in the number of customers at our restaurants. In future periods, our
sales are not expected to significantly increase until or unless additional
stores are opened.
During the ten months ended April 30, 1999, our gross profit was $605,785,
representing an increase of $53,387 or 9.7% from the comparable period of the
prior year. During the ten months ended April 30, 1999, our gross profit
percentage was approximately 67.4% as compared to approximately 65.9% for the
comparable period of the prior year. During the ten months ended April 30,
1999, we successfully reduced food and labor costs in order to increase gross
margins.
During the ten months ended April 30, 1999, our operating expenses
consisted of selling, general and administrative expenses and depreciation of
$659,454 as compared to $538,938 for the comparable period of the prior year.
This increase resulted from increased management compensation under three
employment agreements with officers, two of whom are principal stockholders
(the approximate $75,000 liability for this compensation was, however, forgiven
by the officers and was recorded as a capital contribution). Selling, general
and administrative expenses as a percentage of net sales was approximately
73.4% for the ten months ended April 30, 1999 as compared to 62.3% for the
comparable period of the prior year.
10
<PAGE>
During the ten months ended April 30, 1999, our net loss was $(215,866) as
compared to a net income of $12,104 for the comparable period of the prior
year. The increased net loss for the ten months ended April 30, 1999 was due to
previously discussed management compensation and interest charges of $162,197
as compared to $3,856 for the comparable period of the prior year. The ten
months ended April 30, 1999 include $150,000 of interest expense to recognize
the complete charge-off of loan discount related to the conversion feature of
our convertible notes sold during this period.
Year Ended June 30, 1998 Compared to Year Ended June 30, 1997
During fiscal 1998, our net sales were $1,026,404 as compared to
$1,025,162 for the prior year. Our net sales remained constant during the past
two years and are not expected to significantly increase until or unless
additional stores are opened.
During fiscal 1998, our gross profit was $681,917, representing an
increase of $28,406 or 4.3% from the comparable period of the prior year.
During fiscal 1998 our gross profit percentage was approximately 66.4% as
compared to approximately 63.7% for the comparable period of the prior year.
During fiscal 1998, we successfully reduced food and labor costs in order to
increase gross margins. The improved margins resulted in us achieving income
from operations of $20,555 as compared to a loss from operations of ($14,167)
for the comparable period of the prior year.
During fiscal 1998, our operating expenses remained constant with selling,
general and administrative expenses of $631,384 as compared to $632,103 for the
comparable period of the prior year. Selling, general and administrative
expenses as a percentage of net sales was approximately 61.5% for the past two
years.
During fiscal 1998, our net income was $18,942 as compared to a net loss
of ($18,585) for the comparable period of the prior year. The improved results
for fiscal 1998 are attributable to reduced food and labor costs.
Possible Fluctuations in Future Quarterly Results
We expect that quarterly results in the future may fluctuate due to
certain factors including:
o the timing of the opening of new restaurants;
o the expenses associated with our expansion;
o the timing of the completion of this offering and our receipt of the net
proceeds; and
o discount pricing offered by Nolbo or its local competitors.
Liquidity and Capital Resources
We have over the past two years and ten months funded our cash needs from
operations and modest borrowings to occasionally fund furniture and equipment
purchases.
At the present two restaurant level of operations, we expect to continue
to be able to fund all of our cash requirements, including repayment of
existing long-term debt, from operations. Any increase in the number of
restaurant units and the attendant increased working capital requirements are
expected to be funded by the proceeds of the offering contemplated by this
prospectus. We may also attempt to obtain bank line-of-credit financing within
the next twelve to fifteen months, but there can be no assurance that we will
be successful in that regard.
Plan of Operations
After the completion of the offering, we intend to increase the number of
"Gladstone's Grilled Chicken" restaurants from two to as many as seven. The
number of additional restaurants will depend upon the amount of net proceeds
received by us from the offering. The establishment of each restaurant is
anticipated to cost approximately $180,000. Nolbo's payroll is anticipated to
grow as we expand our operations and acquire new staff to manage and operate
each facility.
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<PAGE>
BUSINESS
General
Nolbo is a Delaware corporation formed on June 22, 1998. The first
Gladstone restaurant opened in January 1988 in a Publix supermarket anchored
strip center in the University South Florida/Temple Terrace area of Tampa. This
store has approximately 1,600 square feet of space. Annual sales of the first
Gladstone restaurant have reached an average of approximately $600,000 per
annum over the past three years. The second Gladstone restaurant opened in
downtown Tampa, Florida in 1991. This store has approximately 2,800 square feet
of space. Sales at the downtown location have averaged approximately $425,000
per annum over the last three years. Nolbo intends to use the proceeds of the
offering to establish between three and five additional five restaurants in the
greater Tampa-St. Petersburg, Florida area.
The success of Nolbo is dependent upon the success of Gladstone's Grilled
Chicken restaurants, Nolbo's ability to create awareness and acceptance of such
restaurants in the geographical markets in which it enters. Nolbo's proposed
expansion to own and operate additional restaurants is dependent upon the
availability of suitable restaurant sites, the construction and development of
the restaurants within projected time frames, the hiring of skilled restaurant
management and other personnel, the ability to successfully manage growth
(including cost and quality controls) and the availability of adequate
financing. The opening and success of Nolbo's restaurants will depend on
various factors, including the availability of suitable sites and negotiations
of acceptable lease terms for new locations; the ability to obtain construction
and any other necessary permits in a timely manner; the ability to meet
construction schedules; the ability of Nolbo to manage this anticipated
expansion and to hire and train personnel, and general economic and business
conditions. Not all of the foregoing factors are within the control of Nolbo.
Nolbo operates its business through its two wholly-owned subsidiaries
incorporated under the laws of the State of Florida, Flame Broiled Chicken,
Inc. and Gladstone's Grilled Chicken, Inc., which were formed on July 27, 1987
and April 30, 1990, respectively.
Nolbo intends to merge and consolidate its subsidiaries into Nolbo (or to
transfer the assets and liabilities to Nolbo and to dissolve the two
corporations) to reduce overhead and operating costs.
Restaurant Concept
Various factors affect the quick service restaurant industry in which we
operate. These include:
o changes in consumer preferences, tastes and eating habits;
o demographic trends and traffic patterns;
o increases in food and labor costs; and
o national, regional and local economic conditions.
We can provide no assurance that the foregoing factors will be favorable
in the future.
Management believes that the demographics of Tampa, Florida closely
resemble what the United States as a whole will be in the near future. Many
restaurant concepts have therefore been tested in the Tampa, Florida market and
some like Outback, Hooters, Checkers, Shells and Hops have started, survived
and prospered in the Tampa region. For over ten years, the Gladstone concept of
high quality, quickly served marinated and grilled gourmet chicken has survived
in the Tampa proving ground and management believes that Nolbo is positioned to
expand in primarily the greater Tampa-St. Petersburg Florida area. Nolbo
intends to focus on developing 1,400-1,700 square feet restaurants with 25 to
40 seats set up for eat-in, take out and catering. The investment per
restaurant is approximately $180,000 with break even estimated at $375,000 in
annual sales. No specific sites have been definitively selected as of the date
of this prospectus, although certain potential sites in Tampa have been
identified as suitable locations.
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Corporate Strategy
Nolbo believes that excellence in operations, quality of food and service,
ambiance, location and price-value relationship are keys to success in the
restaurant industry. Nolbo intends to differentiate its restaurants by
emphasizing the following strategic elements:
o Positioning in the moderately priced, high quality, gourmet chicken
segment of the restaurant industry.
o Generous portions offered at moderate prices.
o High quality and attentive service.
o Consistent high-quality products through careful ingredient selection
and food preparation.
o Personalized marketing program.
o Strong and well organized catering organization.
o Well recognized "Healthy" and "Health Smart" grilled (vs. fried) food.
Nolbo offers value priced meals, combination meals and discount coupons,
in order to attract customers and compete with other restaurants.
Expansion of Operations
After the completion of the offering, we intend to locate between three
and five sites establishing new restaurants with the first two anticipated to
be located in Tampa and additional restaurants in the greater
Tampa-St. Petersburg Florida area. Nolbo considers the location of each
restaurant to be critical to its long-term success and intends to devote
significant effort to the investigation and evaluation of potential sites. The
site selection process will focus on visibility, accessability, traffic volume
and the availability of adequate parking. In selecting locations, we will
carefully review potential competition and customer activity at other fast food
restaurants in the area.
Nolbo anticipates that the cost of opening each new restaurant will be
approximately $180,000. Such amount includes leasehold improvements, furniture,
fixtures, equipment, food and beverage inventory and other pre-opening
expenses. There can be no assurances that Nolbo's cost of opening additional
restaurants will not exceed its present estimate.
The opening and success of Nolbo's restaurants will depend on various
factors. Such factors include the following:
o the availability of suitable sites and negotiations of acceptable lease
terms for new locations;
o the ability to obtain construction and any other necessary permits
and/or licenses in a timely manner;
o the ability to meet construction schedules;
o the ability of Nolbo to generate sales at new restaurants;
o to effectively manage new restaurants to hire and train additional
personnel; and
o general economic and business conditions.
Not all of the foregoing factors are within the control of Nolbo.
Previously, Nolbo had operated a third restaurant under the name
"Gladstone's Grilled Chicken" in the "Town and Country" area of Tampa, Florida
for the period November 1992 to November 1994. This store was closed due to the
lack of sales and a large overhead.
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Menu
Gladstone's menu features its unique marinated Grilled Chicken. A full
chicken is split and the wings are notched in order to facilitate marinating.
The chickens are marinated for 18 hours in a secret citrus and herb based
marinade. The chickens are cooked on an open flamed grill. Chickens are then
taken directly from the grill and cut to order for every customer.
Gladstone's restaurants currently offer seven different chicken
combination meals and two chicken sandwiches, featuring a side dish selection
of nine items including such items as baked beans, whipped potatoes and gravy,
macaroni and cheese and five different speciality salads. Hot pita and homemade
honey butter are also served with each meal. Customers can also choose from a
variety of Coca Cola products and iced tea. Nolbo owns a delivery van which is
specially painted to insure high recognition and function effectively as a
rolling advertisement.
Restaurant Operations and Management
Nolbo maintains quality and consistency in its restaurants through the
careful hiring, training and supervision of personnel and the establishment of
standards relating to food and beverage preparation, maintenance of facilities
and conduct of personnel.
Nolbo maintains financial and accounting controls for each of its
restaurants through the use of centralized accounting and management
information systems. Sales information is collected on a daily basis from each
restaurant, and restaurant managers are provided with monthly operating
statements for their locations. Nolbo's downtown location is open Monday
through Saturday from 11:00 a.m. to 6:00 p.m. and its other restaurant is open
from 11:00 a.m. to 9:00 p.m., seven days a week.
The management team for each restaurant consists of one general manager
and between one and two assistant managers. Each restaurant employs a staff
consisting of between three to seven hourly employees, some of whom work
part-time. As the number of Gladstone's restaurants expands, Nolbo intends to
have new restaurant managers complete an extensive training program during
which they will be instructed in areas of food quality and preparation,
customer satisfaction, beverage service, governmental regulations compliance,
and employee relations. Restaurant managers are provided with an operations
manual relating to food and beverage preparation, all areas of restaurant
management and compliance with governmental regulations. Working in concert
with the individual restaurant managers, Nolbo's executive officers define
operations and performance objectives for each restaurant and monitor
operations. Nolbo's executive officers regularly visit each Gladstone's
Restaurant and meet with the respective management teams to ensure compliance
with Nolbo's strategies and standards of quality in all respects of restaurant
operations and personnel development.
Each new restaurant employee of Nolbo participates in a training program
during which the employee works under the close supervision of a restaurant
manager, or an experienced employee. Management continuously solicits employee
feedback concerning restaurant operations and strives to be responsive to the
employees' concerns.
Purchasing
Food and supplies are shipped directly to the restaurants, although
invoices for purchases are sent to Nolbo for payment. Nolbo's emphasis on
first-quality food requires frequent deliveries of fresh food supplies. Because
of the need for freshness of products, Nolbo does not maintain a central
product warehouse or commissary. Nolbo's operations, results and financial
condition may be adversely affected by fluctuations in the cost of Nolbo's
primary food supplies. Such costs are determined by constantly changing market
forces over which Nolbo has no control. Nolbo has no long-term contracts with
any of its suppliers. Nolbo negotiates directly with suppliers for food and
beverage products to ensure consistent quality and freshness of products and to
obtain competitive prices.
Marketing
Nolbo has positioned itself as being a bistro style, upscale, quickly
served grilled chicken restaurant that focuses on moderately priced and high
quality gourmet chicken, casual dining or take-out market segments. Nolbo
relies principally on its commitment to customer service, excellent price value
relationship, and providing a pleasant dining atmosphere.
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<PAGE>
Nolbo's restaurants rely on positive word-of-mouth for references,
in-store promotions, billboards, direct mail, newspaper and specialty
advertisements to generate customer interest. A major marketing tool is a
computerized customer program called V.I.P. The program consists of a data base
of customers along with their name, address, phone number and date of birth.
Mass mailings take place at least every six months. Each month each customer
with a birthday receives a birthday card that he/she can redeem for a free
meal. During fiscal 1998 and 1997, Nolbo expended approximately $19,500 and
$17,500, respectively, on advertising, promotion and related matters.
A costumed "Gladstone Chicken" is also an integral part of Nolbo's
marketing plan. The chicken has been used to distribute coupons, wave to cars,
interact with children and generally create an awareness at restaurant sites
and special events.
In fiscal 1999, Nolbo spent $6,300 of the proceeds of a bridge loan to
commence refurbishing and installing a point of sales system that will enable
customer information to be tracked when the system is completed at a total
estimated cost of $30,000. For example, customers can be rewarded with personal
gift certificates when they spent a certain amount of money. To create
additional name recognition, Nolbo sells T-shirts, hats and other items bearing
Nolbo's restaurant's name and logo.
For each new restaurant, Nolbo intends to conduct a pre-opening
advertising program prior to the opening of a restaurant. Nolbo anticipates
that a given program would typically include special promotions, site signs,
coupons, billboard, newspaper and direct mail advertisements. Sponsorship of a
fund raising event for a local charity to establish ties to local community
leaders and increase awareness of the new restaurant, and pre-opening trial
operations, to which family and friends of new employees would be invited, may
also be considered in the future.
Government Regulation
Nolbo's restaurants are subject to numerous federal, state and local laws
affecting health, sanitation and safety standards, as well as to state and
local licensing regulations. Each restaurant currently has appropriate food
service licenses from local health authorities. Nolbo is required to renew
these licenses annually. Such licenses may be suspended or revoked at any time
for cause. The failure of Nolbo to retain food service licenses would have a
material adverse effect on its operations. In order to reduce this risk, each
of Nolbo's restaurants is operated in accordance with strict standardized
procedures designed to assure compliance with all applicable codes and
regulations. Difficulties in obtaining or failures to obtain the required
licenses or approvals could delay or prevent the development of a new
restaurant in a particular area. Nolbo carries liability coverage as part of
its comprehensive general liability insurance.
Nolbo's future restaurant operations are and will be subject to federal
and state minimum wage laws governing such matters as working conditions,
overtime and tip credits and other employee matters. Significant numbers of
Nolbo's food service and preparation personnel will be paid at rates related to
the federal minimum wage. Government-imposed increases in minimum wages, paid
leaves of absence and mandated health benefits, or increased tax reporting and
tax payment requirements for employees who receive gratuities, could be
detrimental to the economic viability of Nolbo's restaurants.
The development and construction of additional restaurants will be subject
to compliance with applicable zoning, land use and environmental regulations.
We are not aware of any environmental regulations that have had a material
effect on Nolbo or its restaurants to date.
The Federal Americans With Disabilities Act prohibits discrimination on
the basis of disability in public accommodations and employment. Our
restaurants are in full compliance with the Disabilities Act, and we intend to
ensure continued compliance. Our restaurants are designed to be accessible to
the disabled. Nolbo believes that it is in substantial compliance with all
current applicable regulations relating to restaurant accommodations for the
disabled. We do not anticipate that such compliance will require Nolbo to
expend substantial funds.
Competition
The restaurant industry, and particularly the quick-service segment, is
highly competitive with respect to price, services, food quality (including
taste, freshness, healthfulness and nutritional value) and location. There
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<PAGE>
are numerous well-established competitors possessing substantially greater
financial, marketing, personnel and other resources than Nolbo and
substantially longer operating histories. Nolbo competes with fast food chain
specializing in chicken products, such as Boston Market, KFC, and the combined
Popeye's Famous Fried Chicken and Church's Chicken chains. To a lesser extent,
Nolbo's competitors also include major pizza and hamburger chains, such as
Pizza Hut, McDonald's, Burger King and Wendy's, many of which have introduced
chicken products. Other competitors include independent chicken establishments
in our area. Nolbo competes on the basis of providing quality foods, quick
service and competitive prices. There can be no assurance that consumers will
regard Nolbo's products as sufficiently distinguishable from competitive
products, that substantially equivalent products will not be introduced by
Nolbo's competitors or that Nolbo will be able to compete successfully.
Lack of Trademarks and Servicemark Protection.
Nolbo has not filed for service mark or trademark protection of Nolbo's
name "Gladstone's Grilled Chicken" with the United States Patent and Trademark
Office and it does not intend doing so in the future. Another corporation that
Management believes operates one restaurant in California, has registered the
marks "Gladstone's" and "Gladstone 4 Fish and Design" with such office and
could in the future bring a trademark infringement action against Nolbo in
Florida seeking injunctive relief and damages. Management believes that such
corporation has perfected an incontestible right to its marks with the United
States Patent and Trademark Office. Nevertheless, management believes that it
may be difficult for such corporation to prevail in a trademark infringement in
Florida in which injunctive relief is sought to deny Nolbo's use of the mark
"Gladstone's Grilled Chicken" since:
o such corporation has failed to contest the use of Nolbo's mark for a
period of over ten years;
o there is no actual confusion between customers of such corporation and
customers of Nolbo as to the respective products offered by each entity;
and
o such corporation will be unable to demonstrate that it has a famous or
distinctive mark that is easily recognized in Florida by the consuming
public.
No assurances can be given, however, that Nolbo would prevail in such a
legal action. Further, any lawsuit would involve Nolbo incurring significant
legal costs in the defense of such a lawsuit and, if unsuccessful, Nolbo could
be forced to pay a material damage award and/or change its name which may
adversely effect Nolbo and its operations.
Product Liability Insurance
As a seller of restaurant food, Nolbo is exposed to potential liability.
There is a possibility that someone could claim personal injury resulting from
eating Nolbo's food. Nolbo maintains product liability insurance. Currently,
the amount of coverage is $1,000,000 per occurrence and $2,000,000 in the
aggregate. The policy is for a period of one year, currently expiring December
20, 1999. Although Nolbo believes that its present insurance coverage is
sufficient for its current level of business operations, there is no assurance
that such insurance will be sufficient to cover potential claims, or that
adequate, affordable insurance coverage will be available to Nolbo in the
future. An uninsured successful claim against Nolbo or a successful claim in
excess of the liability limits or relating to an injury excluded under the
policy could have a material adverse effect on Nolbo.
Employees
At April 30, 1999, Nolbo employed approximately 25 individuals, of which
five occupy executive or managerial positions and 20 hold non-managerial
restaurant related positions and clerical and office positions. None of Nolbo's
employees are covered by a collective bargaining agreement. Nolbo considers its
relations with its employees to be good and has not experienced any
interruption of operations due to labor disputes.
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Facilities
Nolbo's executive office and warehouse facility are located at 8426
Sunstate Street, Tampa, FL 33634. Nolbo leases these facilities from
Amenitique, Inc., an affiliate of Nolbo. Nolbo pays Amenitique $400 per month.
The term of the lease expires on June 30, 1999 and is expected to be renewed
for an additional two years at the same rent. Nolbo shares office suites and a
warehouse facility with Amenitique. See "Management."
One of Nolbo's restaurants is located at 5203 East Fowler Avenue, Temple
Terrace-Tampa, Florida in the Terrace Ridge Plaza Shopping Center. The Terrace
Ridge restaurant is composed of approximately 1,660 square feet and is leased
through February 28, 2000. Nolbo currently pays an annual fixed rent of
approximately $27,000 and its proportionate share of the cost of operating and
maintaining the shopping center.
Nolbo's other restaurant is located in downtown Tampa at 110 Madison
Avenue, Tampa, FL 33602. The restaurant has been leased since 1990 and its
current five-year extension began on October 1, 1995 and terminates on
September 30, 2000. The current base rent is $3,000 per month, net of a $200
credit for food allowance each month. The base rent will increase or decrease
each year by an amount equal to one-half of the increase or decrease in the
consumer price index. Nolbo also pays additional rent for tax increases and is
responsible for its monthly utility charges. In 1995, Nolbo was in arrears in
the amount of $50,000 for back rent on one of its restaurants. In November
1995, the lease agreement was renegotiated to reduce monthly rental payments
and provides for the prospective forgiveness of $10,000 per calendar year of
the $50,000 debt provided Nolbo remains in full compliance with the terms of
the new lease agreement. In addition, all of the assets were pledged as
collateral on this obligation. As of May 24, 1999, the balance is approximately
$16,000.
Legal Proceedings
While Nolbo may become involved in suits, proceedings, or claims in the
ordinary course of business, Nolbo is not currently a party to any material
legal proceedings.
Additional Information
At your request, Nolbo will provide you, without charge, a copy of any
exhibits to its registration statement. If you want more information, write or
call us at:
Nolbo, Inc.
8426 Sunstate Street
Tampa, FL 33634
Telephone: (813) 882-4753
Fax: (813) 888-7287
Nolbo's fiscal year ends on June 30. Nolbo intends to furnish its
shareholders annual reports containing audited financial statements and other
appropriate reports. In addition, Nolbo intends to become a reporting company
and file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any reports, statements or other information Nolbo files at the SEC's public
reference room in Washington, D.C. You can receive copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC
at 1-800-SEC-0330 for further information on the operation of the public
reference rooms. Nolbo's SEC filings are also available to the public on the
SEC Internet site at http://www.sec.gov.
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MANAGEMENT
Directors and Executive Officers
The names and ages of the directors and executive officers of Nolbo are
set forth below:
Name Age Position
- --------------------------- ----- ------------------------------------
Marvin M. Nolley .......... 56 President, Director
Bo G. Grektorp ............ 57 Vice President, Director
Hans Bremstrom ............ 67 Director
Sean Flaherty ............. 48 Chief Financial Officer, Treasurer,
Secretary, Director
The term of office for each of Nolbo's directors is one year until their
respective successors are elected and qualify. Executive officers serve at the
pleasure of the board of directors.
Marvin M. Nolley, has been an officer, director and full-time employee of
Nolbo since its inception in June 1998. Mr. Nolley is a founder, president and
a director of Gladstone's Grilled Chicken, Inc., a wholly-owned subsidiary of
Nolbo, from 1990 until the present time. Mr. Nolley is the founder, president
and director of Flame Broiled Chicken, Inc., a wholly-owned subsidiary of
Nolbo, from 1987 until the present time. From 1979 through 1986, he was a
Director of Sales and Marketing for the Performing Arts Abroad, Inc., where he
supervised the marketing and on-site operation of nonprofessional judged music
festivals worldwide.
Bo G. Grektorp, has been an officer and director of Nolbo since its
inception in June 1998. Mr. Grektorp is a founder, director and Vice President
of Gladstone's Grilled Chicken, Inc. from 1990 until the present time. Since
1993, he has been a board member, president and principal of Amenitique Inc., a
company engaged in the business of manufacturing and distribution of high-end
hotel and resort bath amenities. Mr. Grektorp founded Amenitique Inc. in 1993.
Since 1993, he has served as a board member of Scandinavian Amenities A/S, a
company engaged in the business of Hotel Amenities. From 1989 until 1993, he
was a founder, president and principal of City Towers of Florida Inc., a real
estate company. Mr. Grektorp devotes such time to the affairs of Nolbo as is
necessary for the performance of his duties which is estimated to be 20 hours
per week.
Hans Bremstrom, has been a director of Nolbo since its inception in June
1998. Since 1994, he has been an owner and president of Web Street Inc., a
company engaged in the business of developing and managing a website and
production of advertising banners and web sites and international listing of
hospitality products and services on the internet. From 1992 to 1994, he was
president of Barkman and Co., a company that developed a 250-room luxury room
hotel in New York City.
Sean Flaherty, has been an officer and director of Nolbo since its
inception in June 1998. Since October 1994, Mr. Flaherty has served as vice
president of operations of Amenitique, Inc. At Amenitique, Inc., he coordinates
the processing of client order, purchasing, manufacturing, import of products,
warehousing, inventory control, distribution and financial collection. From
October 1992 through October 1994, he was an officer, director and principal of
Impact International, Inc., a company engaged in the business of manufacturing
and sales of custom soap gift and promotional products. Mr. Flaherty was in
charge of purchasing, manufacturing, legal and distribution of this
corporation. During this time, he also worked with attorneys and Florida
investors as a consultant to review and analyze the feasibility of potential
business opportunities and their legal, financial, development and
administrative strengths. Mr. Flaherty devotes such time to the affairs of
Nolbo as is necessary for the performance of his duties.
In the event that Nolbo has two outside directors after the completion of
the offering, of which no assurances can be given in this regard, the board of
directors will establish a compensation committee and an audit committee, each
consisting of at least a majority of outside directors. If established, the
audit committee will among other things, make recommendations to the board of
directors regarding the independent auditors for Nolbo, approve the scope of
the annual audit activities of the independent auditors and review audit
results
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and have general responsibility for all auditing related matters. If
established, the compensation committee will review and recommend to the board
of directors the compensation structure for Nolbo's officers and other
management personnel, including salary rates, participation in incentive
compensation and benefit plans, fringe benefits, non-cash perquisites and other
forms of compensation.
Executive Compensation
The following table sets forth the total compensation paid to the named
Chief Executive Officer for the fiscal years ended June 30, 1999, 1998 and
1997. During 1999, Nolbo did not have any executive officers earning $100,000
or more in salaries and bonuses.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------------------------
Annual Compensation Awards Payouts
- --------------------------------------------------------------------- -------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Number Other
and Compen- Stock of LTIP Compen-
Principal sation Award(s) Options / Payouts sation
Position Year Salary ($) Bonus ($) ($) ($) Warrants ($) ($)
- ------------------- ------ ------------ ----------- --------- -------------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Marvin M. Nolley, 1999 51,450 0 0 0 0 0 0
Chief Executive 1998 46,300 0 0 1,000 (1) 0 0 --
Officer(2) 1997 46,300 0 0 0 0 0 0
</TABLE>
- ------------
(1) Does not include 620,000 shares of Nolbo's common stock issued to Mr.
Nolley in 1998 in exchange for his equity interests in Gladstone's Grilled
Chicken, Inc. and Flame Broiled Chicken, Inc., Nolbo's two subsidiaries.
(2) Salaries and bonuses for 1999 would have been $75,000 and $12,500,
respectively, had Mr. Nolley not waived all monies above his $51,450
salary.
Stock Option Plan
Nolbo has a 1998 Stock Option Plan, as amended, covering 50,000 shares of
common stock. These shares are subject to adjustment to cover stock splits,
stock dividends, recapitalizations and other capital adjustments for employees,
including officers and directors and consultants of Nolbo. The plan provides
that options to be granted under the plan will be designated as incentive stock
options or non-incentive stock options by the board of directors or a committee
thereof, which also will have discretion as to the persons to be granted
options, the number of shares subject to the options and the terms of the
options. Options designated as incentive stock options are intended to receive
incentive stock option tax treatment pursuant to Section 422 of the Internal
Revenue Code of 1986.
The plan provides that all options granted thereunder shall be exercisable
during a period of no more than 10 years from the date of grant (five years for
incentive stock options granted to holders of 10% or more of the outstanding
shares of common stock), depending upon the specific stock option agreement and
that the option exercise price for incentive stock options shall be at least
equal to 100% of the fair market value of common stock on the date of grant
(110% for options granted to holders of 10% or more of the outstanding shares
of common stock). Pursuant to the provisions of the plan, the aggregate fair
market value (determined on the date of grant) of the shares of the common
stock for which incentive stock options are first exercisable under the terms
of the plan by an option holder during any one calendar year cannot exceed
$100,000.
Currently, the plan provides that if the employment of an optionee is
terminated other than by reason of death, disability or retirement at age 65,
any incentive stock options granted to the optionee will immediately terminate.
If employment is terminated by reason of disability or retirement at age 65,
the optionee may, within one year from the date of termination, in the event of
termination by reason of disability, or three months from the date of
termination, in the event of termination by reason of retirement at age 65,
exercise the incentive stock option (but not after the normal termination date
of the option). If employment is terminated by death, the person or persons to
whom the optionee's rights under the incentive stock option are transferred by
will or the laws of descent and distribution have similar rights of exercise
within three months after such death (but not after the normal termination date
of the option). Any termination provisions of non-statutory stock options will
be fixed by the board of directors or a committee thereof.
19
<PAGE>
Options are not transferable otherwise than by will or the laws of descent
and distribution and during the optionee's lifetime are exercisable only by the
optionee. Shares subject to options which expire or terminate may be the
subject of future options. The plan provides that no new options may be granted
by the board of directors of Nolbo after ten years from the establishment of
the plan by the board of directors. As of the date of this prospectus, no
options were issued and outstanding under the plan.
Employment Agreements
Each of Nolbo's three executive officers have entered into employment
agreements dated as of July 1, 1998 with Nolbo. The agreements, which are
nearly identical, provide for a term of three years expiring June 30, 2001. The
employment agreements have fixed the annual salaries of Marvin M. Nolley, Bo G.
Grektorp and Sean Flaherty at $75,000, $25,000 and $15,000, respectively. The
board of directors shall annually review the salaries of each executive
officer, and it has the right to increase such salaries based upon various
factors including, without limitation, the performance of Nolbo and the
executive officers' contributions to same. In addition, the employment
agreements provided for bonuses for the period June 1, 1998 through May 31,
1999. Marvin M. Nolley was entitled to a bonus of 10% of cash flow from
operations with an amount to be received of not less than $12,500 and a maximum
of $30,000; Bo G. Grektorp was entitled to a bonus of 5% of cash flow from
operations with an amount to be received of not less than $5,000 and a maximum
of $15,000; and Sean Flaherty was entitled to a bonus of 21/2% of cash flow
from operations with an amount to be received of not less than $2,000 and a
maximum of $6,000. Pursuant to an amendment to the employment agreements of
Messrs. Nolley, Grektorp and Flaherty, bonuses for fiscal 1999 have been waived
and salaries for the period July 1, 1998 through June 30, 1999 have been
retroactively reduced to $52,000 for Mr. Nolley, $-0- for Grektorp and $10,000
for Mr. Flaherty.
Nolbo has the right to terminate any of its executive officers for cause
after giving the officer 30-days prior written notice with an opportunity to
comply with his obligations under the employment agreement. Nolbo has the
option to terminate the executive officer without cause upon giving at least
60-days prior written notice. In the event of cause, the officer is entitled to
receive his salary through the date of termination, any unpaid but promised
bonuses and all benefits due under stock option and other employee benefit
plans. For termination without cause, the officer is entitled to receive the
same payments for termination with cause plus the remaining salary that is due
for the full term of the employment contract, calculated based upon the
officer's existing salary at the time of termination. In the event of
termination without cause, payments will be made to the officer in equal
monthly installments over the balance of the employment contract without
interest. The agreement also provides for certain benefits in the event of
termination for disability where the disability exists for at least six months
in any 12 month consecutive period. Such benefits include, without limitation,
salary to the date of termination, promised bonuses and six months severance
pay. In the event of death, Nolbo is required to pay an amount equal to the
executive's total annual compensation for the last year of employment for a
period of three years from the officers' date of death. The agreements continue
in effect on a year-to-year basis beyond June 30, 2001 unless on party gives
written notice to the other to terminate the extended agreement in effect for
at least 120 days prior to the end of the calendar year, 2001 and not less than
60 days prior to the end of any following year.
Limitation of Liability and Indemnification Matters
Nolbo's certificate of incorporation contains a provision eliminating the
personal monetary liability of directors to the extent allowed under the
General Corporation Law of the State of Delaware. Under the provision, a
stockholder is able to prosecute an action against a director for monetary
damages only if he can show a breach of the duty of loyalty, a failure to act
in good faith, intentional misconduct, a knowing violation of law, an improper
personal benefit or an illegal dividend or stock repurchase, as referred to in
the provision, and not "negligence" or "gross negligence" in satisfying his
duty of care. In addition, the provision applies only to claims against a
director arising out of his role as a director or not, if he is also an
officer, his role as an officer or in any other capacity or to his
responsibilities under any other law, such as the federal securities laws. In
addition, Nolbo's Bylaws provide that Nolbo will indemnify its directors,
officers, employees and other agents to the fullest extent permitted by
Delaware law. Insofar as indemnification for
20
<PAGE>
liabilities arising under the Securities Act may be permitted to directors,
officers and controlling persons of Nolbo pursuant to the foregoing provisions,
or otherwise, Nolbo has been advised that, in the opinion of the SEC, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
Directors Compensation
Nolbo intends to pay its directors who are not also employees of Nolbo
$500 for each meeting attended and will reimburse such directors for travel and
other expenses incurred by them in connection with attending board of directors
meetings. All directors of Nolbo are eligible to receive the grant of options
to purchase shares of Nolbo's common stock pursuant to the plan.
Anti-takeover measures
The certificate of incorporation allows Nolbo to issue preferred stock
without stockholder approval. The issuance of shares of preferred stock under
certain circumstances could make it more difficult for a third party to acquire
control of Nolbo, even if such change in control would be beneficial to
stockholders.
PRINCIPAL STOCKHOLDERS
The following table sets forth as of the date of this prospectus certain
information with respect to the record and beneficial ownership of common stock
by each person or entity known by Nolbo to be the beneficial owner of 5% or
more of such shares, each officer and director of Nolbo, and all officers and
directors of Nolbo as a group. Beneficial ownership as reported in the table
above has been determined in accordance with Rule 13d-3 of the Exchange Act.
All addresses for the officers and directors are c/o Nolbo, Inc., 8426 Sunstate
Street, Tampa, FL 33634.
The percentages are calculated based upon 906,000 shares of common stock
outstanding before the offering and 1,106,000 shares (minimum) and 1,206,000
shares (maximum) outstanding after the offering. Shares of common stock shown
in the table below as owned by Mr. Grektorp are held by him as trustee for the
benefit of his two minor children under a trust called Bonita Trust.
<TABLE>
<CAPTION>
Shares of
Common
Stock Percentage Beneficial Ownership
Beneficially -----------------------------------
Owned After After
Before Before Offering Offering
Name and Address Offering Offering Minimum Maximum
- ---------------------------------------------------- -------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Marvin M. Nolley ................................... 621,000 68.5 56.1 51.5
Bo G. Grektorp, as Trustee ......................... 280,000 30.9 25.3 23.2
Hans Bremstrom ..................................... 0 0 0 0
Sean Flaherty ...................................... 0 0 0 0
All four officers and directors as a group ......... 901,000 99.4 81.4 74.7
</TABLE>
Nolbo's officers and directors will control between 74.7% and 81.4% of
Nolbo's common stock after the offering and will have the power to elect a
majority of the directors, appoint management and approve actions requiring the
approval of a majority of stockholders.
21
<PAGE>
CERTAIN TRANSACTIONS
Effective June 30, 1998, Nolbo acquired its two operating subsidiaries,
namely, Flame Broiled Chicken, Inc. and Gladstone's Grilled Chicken, Inc., in
exchange for 905,000 shares of Nolbo's common stock. In connection with such
transactions, Nolbo issued the following:
o 280,000 shares to Bo Grektorp as trustee under the Bonita Trust for the
benefit of his two minor children in exchange for his interest in
Gladstone's Grilled Chicken, Inc.; and
o 5,000 shares to Kenneth Hansen in exchange for his interest in Flame
Broiled Chicken, Inc., and an aggregate of 620,000 shares to Marvin Nolley
in exchange for his interest in Flame Broiled Chicken, Inc. and
Gladstone's Grilled Chicken, Inc.
Nolbo also issued at $1.00 per share an additional 1,000 shares to Marvin
Nolley in connection with Nolbo's incorporation.
Nolbo leases its executive office and warehouse facility from Amenitique,
Inc., an affiliate of Nolbo. Nolbo pays $400 per month for such space.
DESCRIPTION OF SECURITIES
Common Stock
Nolbo has 20,000,000 shares of authorized common stock, $.001 par value.
Immediately prior to the offering, 906,000 shares of common stock were issued
and outstanding to three stockholders.
Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Stockholders do not
have non-cumulative voting rights. Subject to preferences that may be
applicable to any then outstanding preferred stock, holders of common stock are
entitled to receive ratably such dividends as may be declared from time to time
by the board of directors out of funds legally available therefor. In the event
of a dissolution, liquidation or winding-up of Nolbo, holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any then outstanding preferred
stock. Holders of common stock have no right to convert their common stock into
any other securities. The common stock has no preemptive or other subscription
rights. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are, and the common stock
to be outstanding upon completion of the offering will be, duly authorized,
validly issued, fully paid and nonassessable.
Preferred Stock
The certificate of incorporation provides Nolbo's board of directors with
the authority, without further action by the stockholders, to issue up to
5,000,000 shares of preferred stock in one or more series and to fix the
rights, preferences, privileges and restrictions thereof, including dividend
rights, conversion rights, voting rights, terms of redemption, liquidation
preferences and the number of shares constituting any series or the designation
of such series. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and could have the effect of delaying,
deferring or preventing a change in control of Nolbo. Nolbo has no present
plans to issue any shares of preferred stock.
Underwriter's Warrants
In connection with the offering, Nolbo has agreed to sell to the
Underwriter, for a purchase price of $.001 per warrant, the underwriter's
warrants, which entitles the holders to purchase one share of Nolbo's common
stock for each ten shares sold in the offering at an exercise price of $9.90
per share. The underwriter's warrants are exerciseable for a period of five
years from the date of this prospectus.
22
<PAGE>
Transfer Agent and Registrar
The transfer agent and registrar for Nolbo's common stock is Continental
Stock Transfer & Trust Company, Two Broadway, 19th Floor, New York, NY 10004.
"Penny Stock" Regulations
The SEC has adopted "penny stock" regulations which apply to securities
traded over-the-counter. These regulations generally define "penny stock" to be
any equity security that has a market price of less than $5.00 per share or an
equity security of an issuer with net tangible assets of less than $5,000,000
as indicated in audited financial statements, if the corporation has been in
continuous operations for less than three years. Subject to certain limited
exceptions, the rules for any transaction involving a "penny stock" require the
delivery, prior to the transaction, of a risk disclosure document prepared by
the SEC that contains certain information describing the nature and level of
risk associated with investments in the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Monthly
account statements must be sent by the broker-dealer disclosing the estimated
market value of each penny stock held in the account or indicating that the
estimated market value cannot be determined because of the unavailability of
firm quotes. In addition, the rules impose additional sales practice
requirements on broker-dealers who sell such securities to persons other than
established customers and institutional accredited investors (generally
institutions with assets in excess of $5,000,000). These practices require
that, prior to the purchase, the broker-dealer determined that transactions in
penny stocks were suitable for the purchaser and obtained the purchaser's
written consent to the transaction. If a market for Nolbo's common stock does
develop after the offering and Nolbo's shares trade below $5.00 per share after
the offering, it will be a penny stock. Consequently, the "penny stock" rules
may restrict the ability of broker-dealers to sell the shares and may affect
the ability of purchasers in the offering to sell Nolbo's shares in the
secondary market.
SHARES ELIGIBLE FOR FUTURE SALE
There will be between 1,106,000 and 1,236,000 shares of our common stock
outstanding after the offering. The exact number will depend upon the number of
shares sold in the offering and the possible issuance of up to 30,000 shares of
common stock upon conversion of certain notes. Of these shares, between 200,000
and 300,000 shares sold in the offering will be freely transferable without
restriction or further registration under the Securities Act of 1933. The
remaining shares of common stock outstanding will be restricted securities as
that term is defined by Rule 144 of the Securities Act of 1933. These shares
may be sold commencing 90 days after the date of this prospectus without
registration under the Securities Act of 1933 to the extent permitted by Rule
144. The present stockholders of Nolbo have agreed not to sell or otherwise
transfer their shares of common stock or shares of common stock issuable upon
conversion of certain outstanding notes for three years (one year in the case
of convertible note holders) from the initial closing date of the offering
without the prior written consent of the underwriter, except that (i) each such
person, who is subject to a three-year lock-up, may sell up to 10,000 shares
during each of the second and third years and (ii) each person who is subject
to a three-year lock-up, may sell shares without such restriction if the common
stock of the Company is trading at a price of $7.50 per share or higher. The
possible or actual future sales of the Nolbo common stock may negatively impact
the market price for Nolbo's common stock.
If a market for our common stock should develop in the future, the market
price of our common stock could drop as a result of sales of a large number of
shares of common stock in the market after the offering, or the perception that
such sales could occur. These factors also could make it more difficult for us
to raise funds through future offerings of common stock.
UNDERWRITING
First Level Capital, Inc., as underwriter of the offering, has agreed to
offer the shares to the public, as agent for Nolbo, pursuant to an underwriting
agreement which is summarized below. The shares are offered
23
<PAGE>
by Nolbo on a "best efforts 200,000 shares minimum, 300,000 shares maximum"
basis, subject to approval of certain legal matters by counsel for Nolbo and
the underwriter. The underwriter and Nolbo reserve the right to withdraw,
cancel or modify the offering and to reject any order in whole or in part.
The offering period will terminate on _______, 1999 unless extended by
Nolbo and the underwriter for an additional 60-day period until the close of
business on _________, 1999. If at least 200,000 shares are sold, Nolbo may have
an initial closing on the sale of such shares and then continue offering the
balance of the shares through the end of the offering period unless the offering
is earlier terminated by Nolbo and the underwriter. Nolbo will have a final
closing on the sale of any additional shares at the end of the offering period
or earlier if all the shares are sold or if it is determined by Nolbo and the
underwriter that no additional shares will be sold. Until the closing on the
sale of 200,000 shares, the proceeds from the sale of shares will be held in an
escrow account with Continental Stock Transfer & Trust Company, Two Broadway,
19th Floor, New York, NY 10004. All checks shall be made payable to "Continental
Stock Transfer & Trust Company f/b/o Nolbo." Broker/dealers will transmit such
checks directly to the escrow agent by noon of the next business day after
receipt. If at least 200,000 shares are not sold during the offering period,
all funds received will be promptly repaid in full without interest thereon or
deduction therefrom. During the offering period, investors' funds may not be
returned unless state law indicates otherwise.
Nolbo has agreed to pay the underwriter a commission of 10% of the price
of the shares sold ($.60 per share) upon the closing. The underwriter may
authorize selected securities brokers who are members of the National
Association of Securities Dealers, Inc. to offer the shares for sale and allow
a concession to them. Such dealers may reallow to other members. In any event,
such concessions and reallowances will not exceed the commission the
underwriter is to receive.
Nolbo has agreed to enter into a one-year consulting agreement with the
underwriter. Such agreement provides that the underwriter will render
consulting services to Nolbo. The aggregate fee due to the underwriter for such
consulting services will be an amount equal to two (2%) percent of the gross
proceeds of the offering and shall be paid in full upon the closing date of the
offering.
The underwriting agreement provides that Nolbo will pay to the underwriter
a non-accountable expense allowance of three percent of the proceeds of this
offering less the sum of $15,000, which was paid to a previously intended
underwriter (or $21,000 to the underwriter if the minimum is sold and $39,000
if the maximum is sold), which amount will be used to reimburse the underwriter
for its expenses, including fees and disbursements of counsel and such other
due diligence and customary expenses as are normally incurred by an
underwriter.
In addition to the underwriter's commissions, non-accountable expense
allowance and financial consulting fee, Nolbo is required to pay the costs of
qualifying this offering under federal and state securities laws, together with
legal and accounting fees, printing and other costs in connection with this
offering, estimated to total approximately $220,000.
Nolbo and the underwriter have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933. To
the extent that the underwriting agreement may purport to provide exculpation
from possible liabilities arising under the federal securities laws, it is the
opinion of the Securities and Exchange Commission that such indemnification is
contrary to public policy and therefore unenforceable.
Subject to the sale of the minimum number of shares offered hereby and
closing of this offering, Nolbo has agreed to sell to the underwriter, for a
nominal consideration, underwriter's warrants to acquire one share of common
stock for each ten shares sold in he offering, or a total of 20,000 shares of
common stock if the minimum is sold, and 30,000 shares if the maximum is sold.
The underwriter's warrants are exercisable at a price of $9.90 per share and
for a period of five years commencing on the date of this prospectus. Each of
the underwriter's warrants shall represent the right to purchase one share of
common stock.
The underwriter's warrants may not be sold, assigned, transferred,
pledged, hypothecated or delivered except to officers of the underwriter,
selected dealers and their officers and/or partners, for a period of twelve
24
<PAGE>
months from the date of this prospectus, and, in no event will such
underwriter's warrants (or the underlying shares of common stock issuable upon
exercise thereof) be offered or sold except in compliance with the Securities
Act of 1933. Accordingly, no public offering of the underwriter's warrants or
the underlying shares will be made until a new registration statement or
post-effective amendment to this registration statement covering the
underwriter's warrants or underlying shares has become effective. The
underwriter's warrants provide for certain registration rights for the
underwriter's warrants and/or underlying shares thereof. Such registration
rights may be exercised at any time during the four-year period commencing one
year after the date of this prospectus upon written request of the holders of
not less than 50% of the underwriter's warrants or underlying shares. In no
event shall Nolbo bear the expense of registration of the underwriter's
warrants and underlying shares more than once for any registration initiated by
the holders of the underwriter's warrants. Under certain conditions, Nolbo may
also be required to include, at Nolbo's sole expense, the underwriter's
warrants or underlying shares in any post-effective amendment to the
registration statement and any other registration statement (except on Form S-8
or any other inappropriate form) filed by Nolbo, occurring during the four-year
period (six-year period if the underwriter's warrants are exercised prior to
their expiration) commencing one year from the date of this prospectus. Any
profits realized by the underwriter upon the sale of the underwriter's warrants
or the underlying shares may be deemed to be additional compensation.
The underwriter's warrants contain anti-dilution provisions regarding
certain events, including but not limited to, stock dividends, split-ups, and
reclassifications. Holders of the underwriter's warrants will have no voting
power and will not be entitled to any dividends. In the event of any
dissolution or winding up of Nolbo, the holders of the underwriter's warrants
will not be entitled to any dividends. In the event of any dissolution or
winding up of Nolbo, the holders of the underwriter's warrants will not be
entitled to participate in a distribution of Nolbo's assets. For the life of
the underwriter's warrants, the underwriter is given, at a nominal cost, the
opportunity to profit from a rise in the market price of the common stock with
a resulting dilution in the interest of existing security holders. The terms
upon which Nolbo could obtain additional capital during that period may be
adversely affected. The underwriter might be expected to exercise the
underwriter's warrants at a time when Nolbo would, in all likelihood, be able
to obtain any needed capital by a new offering of securities on terms more
favorable than those provided for by the underwriter's warrants.
The underwriter has been engaged in the securities business for less than
one year and has not previously underwritten any public offerings of
securities. Prospective purchasers of the shares being offered should consider
this limited experience of the underwriter in evaluating the securities being
offered.
The underwriter has been granted by the Company the option to nominate two
individuals to serve on the company's board of directors for a period of three
years from the date of this prospectus. The individuals must be reasonably
satisfactory to the Company's board of directors. As of the date hereof, no
such person has been designated for nomination. Any person appointed to the
board will receive the same compensation as any other non-executive and will be
entitled to indemnification to the full extent permitted by law.
Subject to the sale of the minimum number of shares, the Company has
agreed not to sell or issue any shares of common stock for a period of 12
months without the prior written consent of the underwriter, which consent will
not be unreasonably withheld, except for the issuance of shares pursuant to the
exercise of options, warrants or convertible securities outstanding upon the
completion of this offering.
Arbitrary public offering price.
Our initial public offering price for our shares of common stock was
arbitrarily determined through negotiations between the underwriter and us. Our
initial public offering price is not necessarily related to Nolbo's assets,
book value or other established criterion of value and is not indicative of the
price at which it may trade in the future.
25
<PAGE>
LEGAL MATTERS
The validity of the sale of common stock in this offering will be passed
upon for Nolbo by Lester Morse P.C., Suite 420, 111 Great Neck Road, Great
Neck, NY 11021. Certain legal matters will be passed upon for the underwriter
by Henry C. Malon, Esq., One Battery Park Plaza, Suite 300, New York, NY 10004.
Lester Morse P.C. has in the past represented the underwriter in connection
with matters unrelated to the offering.
EXPERTS
The financial statements as of June 30, 1998 and for the years ended June
30, 1998 and 1997 appearing in this prospectus, have been audited by Aidman,
Piser & Company, P.A., 401 East Jackson Street, Suite 3400, Tampa, Florida
33602 independent auditors, and are included herein in reliance upon the
authority of said firm as experts in auditing and accounting.
26
<PAGE>
Independent Auditors' Report
To the Board of Directors
Nolbo, Inc. and Subsidiaries
Tampa, Florida
We have audited the accompanying consolidated balance sheet of Nolbo, Inc. and
Subsidiaries (the "Company"), as of June 30, 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the two-year period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the consolidated financial position of the
Company, as of June 30, 1998, and the consolidated results of their operations
and their cash flows for each of the years in the two-year period then ended in
conformity with generally accepted accounting principles.
/s/ Aidman, Piser & Company, P.A.
September 1, 1998, except for Note 3,
as to which the date is September 18,
1998 Tampa, Florida
F-1
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS (Note 6)
<TABLE>
<CAPTION>
April 30, 1999
(Unaudited) June 30, 1998
--------------- --------------
<S> <C> <C>
Current assets:
Cash ................................................................. $ 73,314 $ 10,262
Accounts receivable .................................................. 3,528 3,033
Inventory ............................................................ 12,438 11,871
Due from related party (Note 4) ...................................... 11,123 --
---------- ----------
Total current assets ............................................... 100,403 25,166
Property and equipment, net (Notes 2 and 3) ........................... 50,558 50,131
Deferred offering costs ............................................... 66,278 6,492
Other assets .......................................................... 17,597 6,347
---------- ----------
$ 234,836 $ 88,136
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Note 3) ........................ $ 8,000 $ 7,732
Accounts payable and accrued expenses ................................ 40,124 29,925
Due to related party (Note 4) ........................................ -- 7,905
---------- ----------
Total current liabilities .......................................... 48,124 45,562
Long-term debt, less current maturities, (Note 3) ..................... 153,914 10,577
Deferred lease obligation (Note 6) .................................... 16,250 24,583
---------- ----------
Total liabilities .................................................. 218,288 80,722
---------- ----------
Commitments (Note 6) .................................................. -- --
Stockholders' equity (Note 8):
Preferred stock; $.001 par value, 5,000,000 shares authorized......... -- --
Common stock, $.001 par value, 20,000,000 shares authorized;
906,000 shares issued and outstanding .............................. 906 906
Additional paid-in capital ........................................... 333,892 108,892
Accumulated deficit .................................................. (318,250) (102,384)
---------- ----------
16,548 7,414
---------- ----------
$ 234,836 $ 88,136
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Ten months ended
April 30 Years ended
(Unaudited) June 30
----------------------------- -------------------------------
1999 1998 1998 1997
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Net sales ...................................... $ 898,301 $ 837,739 $ 1,026,404 $ 1,025,162
Cost of sales .................................. 292,516 285,341 344,487 371,651
---------- --------- ----------- -----------
Gross profit ................................... 605,785 552,398 681,917 653,511
---------- --------- ----------- -----------
Operating expenses:
Selling, general and administrative ........... 645,979 522,255 631,384 632,103
Depreciation .................................. 13,475 16,683 29,978 35,575
---------- --------- ----------- -----------
659,454 538,938 661,362 667,678
---------- --------- ----------- -----------
Income (loss) from operations .................. (53,669) 13,460 20,555 (14,167)
---------- --------- ----------- -----------
Other income (expense):
Interest (Note 3) ............................. (162,197) (3,856) (4,113) (4,418)
Gain on disposal of equipment ................. -- 2,500 2,500 --
---------- --------- ----------- -----------
(162,197) (1,356) (1,613) (4,418)
---------- --------- ----------- -----------
Income (loss) before income taxes .............. (215,866) 12,104 18,942 (18,585)
Income taxes (Note 5) .......................... -- -- -- --
---------- --------- ----------- -----------
Historical net income (loss) ................... $ (215,866) $ 12,104 $ 18,942 $ (18,585)
========== ========= =========== ===========
Historical net income (loss) per share ......... $ (.24) .01 $ .02 $ (.02)
========== ========= =========== ===========
Proforma income data:
Net income (loss) as reported ................. $ (215,866) $ 12,104 $ 18,942 $ (18,585)
Proforma adjustment to recognize "C"
corporation provision for income tax
(expense) benefit ........................... -- (5,000) (7,000) 3,100
---------- --------- ----------- -----------
Proforma net income (loss) .................... $ (215,866) $ 7,104 $ 11,942 $ (15,485)
========== ========= =========== ===========
Proforma net income (loss) per share .......... $ (.24) $ .01 $ .01 $ (.02)
========== ========= =========== ===========
Weighted average shares outstanding during
the period .................................. 906,000 906,000 906,000 906,000
========== ========= =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Additional
-------------------- Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- -------- ----------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balances, July 1, 1996 .......... 906,000 $ 906 $ 108,892 $ (94,846) $ 14,952
Distributions ................... -- -- -- (4,059) (4,059)
Net loss ........................ -- -- -- (18,585) (18,585)
------- ----- --------- ---------- ----------
Balances, June 30, 1997 ......... 906,000 906 108,892 (117,490) (7,692)
Distributions ................... -- -- -- (3,836) (3,836)
Net income ...................... -- -- -- 18,942 18,942
------- ----- --------- ---------- ----------
Balances, June 30, 1998 ......... 906,000 906 108,892 (102,384) 7,414
Beneficial conversion feature of
convertible debt (Notes 1 and 3)
(unaudited) .................... -- -- 150,000 -- 150,000
Conversion of salary and bonus
liability to capital ........... 75,000 -- 75,000
Net loss (unaudited) ............ -- -- -- (215,866) (215,866)
------- ----- --------- ---------- ----------
Balances, April 30, 1999
(unaudited) .................... 906,000 $ 906 $ 333,892 $ (318,250) $ 16,548
======= ===== ========= ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Ten months ended
April 30 Years ended
(Unaudited) June 30
--------------------------- ----------------------------
1999 1998 1998 1997
-------------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................ $ (215,866) $ 12,104 $ 18,942 $ (18,585)
---------- -------- --------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities .....................................
Depreciation ................................... 13,475 16,683 29,978 35,575
Gain on disposal of equipment .................. -- (2,500) (2,500) --
Amortization of discount on notes
payable ....................................... 150,000 -- -- --
Increase (decrease) in
cash due to changes in:
Accounts receivable ........................... (495) (2,008) 1,587 (2,124)
Inventory ..................................... (567) (1,653) (3,127) 1,599
Accounts payable and accrued
expenses .................................... 85,199 (7,650) (10,422) 10,076
Deferred lease obligation ..................... (8,333) (8,333) (10,000) (10,000)
---------- -------- --------- ---------
Total adjustments ........................... 239,279 (5,461) 5,516 35,126
---------- -------- --------- ---------
Net cash provided by operating activities ......... 23,413 6,643 24,458 16,541
---------- -------- --------- ---------
Cash flows from investing activities:
Acquisition of property and equipment ............ (13,902) -- (2,194) (14,004)
Proceeds from disposal of property and
equipment ...................................... -- 1,869 2,500 --
Advance to related party ......................... (11,123) (3,000) -- --
---------- -------- --------- ---------
Net cash provided by (used in) investing
activities ....................................... (25,025) (1,131) 306 (14,004)
---------- -------- --------- ---------
Cash flows from financing activities:
Repayment of notes payable ..................... (6,395) (7,468) (8,388) (8,777)
Increase (decrease) in bank overdraft .......... -- 3,638 (4,689) 4,689
Distributions paid to stockholders ............. -- (3,836) (3,836) (4,059)
Proceeds from (repayment of) related
party payable ................................. (7,905) 2,154 2,411 (1,792)
Issuance of notes payable ...................... 150,000 -- -- --
Payment of offering costs ...................... (59,786) -- -- --
Loan costs paid ................................ (11,250) -- -- --
---------- -------- --------- ---------
Net cash provided by (used in) financing
activities ....................................... 64,664 (5,512) (14,502) (9,939)
---------- -------- --------- ---------
Net change in cash ................................ 63,052 -- 10,262 (7,402)
Cash at beginning of period ....................... 10,262 -- -- 7,402
---------- -------- --------- ---------
Cash at end of period ............................. $ 73,314 $ -- $ 10,262 $ --
========== ======== ========= =========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest ............................ $ 947 $ 3,856 $ 4,113 $ 4,418
========== ======== ========= =========
</TABLE>
NON CASH FINANCING ACTIVITY
During the ten months ended April 30, 1999, the Company has recorded a $75,000
forgiveness of salaries and bonuses payable to officers, two of whom are
principal stockholders, as a contribution of capital.
See notes to consolidated financial statements.
F-5
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED)
1. Nature of business and summary of significant accounting policies:
Nature of business, business combination, and basis of presentation:
Nolbo, Inc. (the "Company") was organized on June 22, 1998 as a Delaware
corporation for the purpose of acquiring all of the outstanding capital
stock of Gladstone's Grilled Chicken, Inc. ("GGCI") and Flame Broiled
Chicken, Inc. ("FBCI"), two corporations under substantially common
ownership with that of the Company. On June 30, 1998 the Company acquired
the stock of GGCI and FBCI in exchange for the issuance by the Company of
905,000 shares of its common stock. The transaction was accounted for in a
manner similar to a pooling of interests and, as such, the Company recorded
the underlying acquired assets at GGCI's and FBCI's cost basis. GGCI and
FBCI own and operate two restaurants in Tampa, Florida under the trade name
of "Gladstone's Grilled Chicken".
GGCI and FBCI prepared their financial statements on a May 31 fiscal-year
basis. Accordingly, the accompanying audited financial statements include
the accounts of GGCI and FBCI as of May 31, 1998 and for each of the two
years then ended. Similarly, the accompanying unaudited financial
statements include the accounts of GGCI and FBCI as of March 31, 1999 and
for the ten months ended March 31, 1999 and 1998. Intervening events from
June 1 through June 30, 1998 and from April 1 through April 30, 1999
(unaudited) did not have a significant effect on GGCI's or FBCI's financial
position or results of operations.
Details of results of operations of the previously separate enterprises
that are included in consolidated statements of operations and certain
other changes in stockholders' equity are as follows:
<TABLE>
<CAPTION>
GGCI and
Nolbo, Inc FBCI Total
------------ --------------- --------------
Year ended June 30, 1998
-----------------------------------------------
<S> <C> <C> <C>
Net sales ....................... -- $ 1,026,404 $ 1,026,404
----------- --------------- -------------
Net income (loss) ............... $ (2,411) $ 21,353 $ 18,942
----------- --------------- -------------
Other changes in stockholders'
equity (distributions) ......... -- $ (3,836) $ (3,836)
----------- ---------------- -------------
Year ended June 30, 1997
--------------------------------------------
Net sales ....................... -- $ 1,025,162 $ 1,025,162
----------- ---------------- -------------
Net loss ........................ -- $ (18,585) $ (18,585)
----------- ---------------- -------------
Other changes in stockholders'
equity (distributions) ......... -- $ (4,059) $ (4,059)
----------- ---------------- -------------
</TABLE>
Principles of consolidation:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.
Use of estimates:
Preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and contingent
assets and liabilities at the dates of the financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.
F-6
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED) -- (Continued)
1. Nature of business and summary of significant accounting policies:
-- (Continued)
Deferred offering costs:
Deferred offering costs, consisting of legal, accounting and underwriting
expenses, will be 1) amortized over the life of the related debt if related
to debt instruments, or 2) if related to an equity offering, either charged
directly against stockholders' equity upon completion of a successful
offering or charged to operations if the offering is aborted.
Inventory:
Inventory, consisting of food purchases and food production supplies, is
stated at the lower of cost or market. Cost is determined generally on a
first-in, first-out method.
Property and equipment:
Property and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets. Useful
lives for property and equipment are as follows: Furniture, equipment, and
signs - 7 years; leasehold improvements - 15 years; vehicles - 5 years.
Convertible long-term debt (unaudited):
As discussed in Note 3, from July through September, 1998, the Company
issued certain convertible notes payable with a beneficial conversion
feature. In accordance with guidance provided in Emerging Issues Task Force
Topic D-60 "Accounting for the Issuance of Convertible Preferred Stock and
Debt Securities with a Non-detachable Conversion Feature", the Company
recognized the value of the beneficial conversion feature by allocating a
portion of the debt proceeds equal to the intrinsic value of the conversion
feature to additional paid-in capital. The intrinsic value is equal to the
difference between the conversion price per share and the fair market value
per share of the common stock into which the debt is convertible,
multiplied by the number of shares into which the debt is convertible. The
resulting debt discount was immediately charged to interest expense since
the debt is immediately convertible at the lender's option.
The staff of the Securities and Exchange Commission has advised the Company
that, for purposes of determining the intrinsic value of the conversion
feature, the fair market value of the common stock into which the debt is
convertible should be equal to the offering price of the common stock
contemplated by this prospectus. Accordingly, the Company recorded interest
expense and additional paid-in capital of $150,000 (30,000 shares subject
to conversion multiplied by the $5 per share difference between $1 per
share conversion price and $6 per share fair market value of common stock).
Advertising costs:
The costs associated with producing and communicating advertising are
expensed in the period incurred. Advertising costs were approximately
$19,500 and $17,500 during the years ended June 30, 1998 and 1997,
respectively.
Income taxes:
The Company and each of its subsidiaries have filed separate federal and
state income tax returns.
Prior to June 30, 1998, FBCI elected, under the Internal Revenue Code, to
be treated as an S Corporation for income tax purposes. As such, FBCI did
not record any income tax expense or tax benefits in its financial
statements since such taxes or tax benefits are recognized by FBCI's
shareholders in their individual income tax returns.
F-7
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED) -- (Continued)
1. Nature of business and summary of significant accounting policies:
-- (Continued)
The Company recognizes deferred income taxes for the tax consequences of
applying enacted statutory tax rates applicable to future years to
differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. Effective with the reorganization
on June 30, 1998 (see Nature of business, business combination and basis of
presentation), FBCI's S Corporation status was terminated and, as such,
deferred income taxes were provided on that date for the accumulated
temporary differences between the tax basis and financial reporting basis
of FBCI's assets and liabilities.
Net income (loss) per share:
Net income (loss) per share was computed based on the weighted average
number of shares outstanding during the periods presented.
New accounting pronouncements:
In 1997, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information", and in 1998 the American Institute of Certified
Public Accountants issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities". All of these standards will be effective for
the Company's 1999 fiscal year. Future adoption of these new accounting
standards are not expected to have a significant effect on the Company's
financial position or results of operations.
Unaudited interim financial statements:
The unaudited balance sheet as of April 30, 1999, and the unaudited
statements of operations, stockholders' equity and cash flows and footnote
disclosures for the ten months ended April 30, 1999 and 1998 ("interim
financial information") have been prepared by the Company, and are
unaudited. In the opinion of the Company, the interim financial information
includes all adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of results of interim periods.
The interim financial information should be read in conjunction with the
Company's June 30, 1998 and 1997 audited financial statements appearing
herein. The results of operations for the periods ended April 30, 1999 and
1998 may not be indicative of the operating results for the full year.
2. Property and equipment:
Property and equipment at June 30, 1998 consists of the following:
Furniture and equipment ............... $ 205,610
Leasehold improvements ................ 31,453
Signs ................................. 14,202
Vehicles .............................. 39,992
---------
291,257
Less accumulated depreciation ......... 241,126
---------
$ 50,131
=========
F-8
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED) -- (Continued)
3. Long term debt:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
April 30,
1999 June 30,
(Unaudited) 1998
------------- -----------
<S> <C> <C>
Notes payable, bank, bearing interest at 8.75%, collateralized by
equipment ......................................................... $ 11,914 $ 18,309
Notes payable bearing interest at 10%; interest-only payable
semi-annually in January and July; principal payable in August
2000, but immediately callable by the noteholders if the
Company raises at least $1,000,000 in connection with any
subsequent private or public offering of securities. $30,000 of
these notes are convertible into 30,000 shares ($1 per share) of
the Company's common stock at any time until maturity.(1) ......... 150,000 --
--------- --------
161,914 18,309
Less current maturities ............................................ 8,000 7,732
--------- --------
$ 153,914 $ 10,577
========= ========
</TABLE>
Future maturities of long term debt are as follows:
Year ending April 30, (unaudited):
----------------------------------
2000 ...................... $ 8,000
2001 ...................... 153,914
---------
$ 161,914
=========
------------
(1) As discussed in Note 1, the Company has recorded interest expense of
$150,000 during the ten months ended April 30, 1999 to recognize the
complete charge-off of loan discount related to this beneficial
conversion feature.
4. Due to/from related party:
At June 30, 1998, due to related party consisted of non-interest bearing
advances (due on demand) to an entity under common ownership control. Due
from related party at April 30, 1999 (unaudited) consisted of non-interest
bearing advances to a shareholder, due on demand.
The Company leases its principal office space from an entity related
through partial common ownership. Total rent expense associated with this
lease was approximately $4,800 during both of the years ended June 30, 1998
and 1997.
F-9
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED) -- (Continued)
5. Income taxes:
Income tax (expense) benefit consists of the following:
<TABLE>
<CAPTION>
Year ended
June 30,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
Current .......................................... $ -- $ --
Deferred: ........................................
Deferred -- other ............................... 1,000 (2,000)
Initial recognition of deferred income taxes
resulting from change in tax status ........... 1,100 --
Benefit of net operating loss carryover ......... (4,000) 4,000
Change in valuation allowance ................... 1,900 (2,000)
-------- --------
$ -- $ --
======== ========
</TABLE>
The proforma income data in the statements of operations provides
information as if the Company and its subsidiaries (including its former
S-Corporation subsidiary) had all been treated as a C-Corporation for
income tax purposes for all periods presented.
The expected income tax (expense) benefit at the statutory tax rate
differed from income taxes in the accompanying statements of operations, as
follows:
<TABLE>
<CAPTION>
Year ended
June 30,
-------------------------
1998 1997
---------- ------------
<S> <C> <C>
Statutory tax rate ................................. 34.0% (34.0%)
Taxes attributable to FBCI's S Corporation
earnings .......................................... (23.5) 10.8
Change in deferred tax valuation allowance ......... (14.0) 24.5
Non-deductible permanent differences ............... 7.3 1.0
Other .............................................. ( 3.8) ( 2.3)
----- ------
Effective tax rate in accompanying statements
of operations ..................................... 0% 0%
===== ======
</TABLE>
Components of deferred tax assets are as follows:
<TABLE>
<CAPTION>
June 30,
--------------------------
1998 1997
------------ -----------
<S> <C> <C>
Net operating loss carryover .................................. $ 6,000 $ 10,000
Different depreciation methods/lives .......................... 10,100 6,000
Pre-opening costs capitalized for income tax purposes ......... 1,000 --
Deferred lease obligation ..................................... 10,000 13,000
Valuation allowance ........................................... (27,100) (29,000)
--------- ---------
$ -- $ --
========= =========
</TABLE>
GGCI has a net operating loss carryover available of approximately $14,700
available to offset future taxable income. This carryover expires in 2012.
6. Commitments:
The Company leases restaurant space under non-cancelable operating leases.
F-10
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED) -- (Continued)
6. Commitments: -- (Continued)
Future minimum lease payments under non-cancelable operating leases, with
initial or remaining lease terms in excess of one year as of June 30, 1998
are as follows:
Year ending June 30,
--------------------
1999 ............... $ 70,000
2000 ............... 46,000
2001 ............... 14,000
---------
$ 130,000
=========
Rental expense relating to these leases was approximately $73,000 and
$70,000 during the years ended June 30, 1998 and 1997, respectively.
In 1995 GGCI was in arrears in the amount of $50,000 for back rent on one
of its restaurants. In November 1995, the lease agreement was renegotiated
to reduce monthly rental payments and provide for the prospective
forgiveness of $10,000 per calendar year of the $50,000 debt provided GGCI
remains in full compliance with the terms of the new lease agreement. In
addition, all of GGCI's assets were pledged as collateral on this
obligation. Reductions in this liability associated with the annual
forgiveness are recognized as a reduction of rent expense over the life of
the new lease.
On July 1, 1998 the Company entered into three-year employment agreements
with three executive officers which provide for aggregate annual base
compensation of $115,000. In addition, the agreements provide for bonuses
equal to an aggregate of 171/2% of net cash flow, as defined, with
aggregate minimum and maximum annual bonuses of $19,500 and $51,000,
respectively. Pursuant to an amendment to the employment agreements for
fiscal 1999, the liability for a portion of salaries and bonuses under the
agreement has been waived through June 30, 1999. Since the majority of the
waived salaries and bonuses was associated with two officers who are also
principal stockholders, the $75,000 (unaudited) salary/bonus forgiveness
has been recorded as a capital contribution during the ten months ended
April 30, 1999.
7. Financial instruments:
The carrying values of cash, accounts receivable, accounts payable and due
from and to related party approximated fair value due to short-term
maturities of these instruments. In addition, the carrying value of
long-term debt approximated fair value since the stated interest rates
approximate current market interest rates for similar instruments.
8. Stock option plan:
During August 1998, the Company adopted a stock option plan, covering
50,000 shares of common stock, for employees, officers, directors and
consultants of the Company. No options have been granted as of April 30,
1999 (unaudited). Options granted will be exercisable up to 10 years from
date of grant (5 years for incentive options granted to holders of more
than 10% of the Company's outstanding stock). Under the plan, the exercise
price for incentive options will be at least 100% of the fair market value
of the stock at the date of grant (110% for options granted to holders of
10% or more of the Company's outstanding stock). Pursuant to the provisions
of the Plan, the aggregate fair market value (determined on the date of
grant) of the shares of the Common Stock for which incentive stock options
are first exercisable under the terms of the Plan by an option holder
during any one calendar year cannot exceed $100,000.
F-11
<PAGE>
NOLBO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998 AND 1997 AND
TEN MONTHS ENDED APRIL 30, 1999 AND 1998 (UNAUDITED) -- (Continued)
9. Proposed public offering:
The Company is attempting to complete a public offering of its common stock
under Regulation SB of the Securities Act of 1933. In that regard, the
Company proposes to sell from 200,000 (minimum) to 300,000 (maximum) shares
of its common stock at $6 per share, which is expected to yield net
proceeds to the Company of between $800,000 (minimum) and $1,300,000
(maximum). No assurance can be given that the Company will be successful in
completing this offering.
F-12
<PAGE>
===============================================================================
We have not authorized any dealer, salesperson or other person to give
any information or represent anything not contained in this prospectus. You
must not rely on any unauthorized information. This prospectus does not offer
to sell or buy any shares in any jurisdiction where it is unlawful. The
information in this prospectus is current as of _________, 1999.
----------------------
Until __________ , 1999 (90 days after the date of this prospectus), all
dealers that buy , sell or trade these securities, whether or not participating
in this offering, may be required to deliver a prospectus. This is in addition
to the dealers' obligation to deliver a prospectus when acting as underwriters
and with respect to their unsold allotments or subscriptions
===============================================================================
<PAGE>
===============================================================================
300,000 Shares
NOLBO, INC.
Prospectus
FIRST LEVEL CAPITAL, INC.
____________, 1999
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law, as amended, provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that the person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. Section 145 further provides that a
corporation similarly may indemnify any such person serving in any such
capacity who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, against expenses (including
attorneys' fees) actually and reasonably incurred in connection with the
defense or settlement of such action or suit if the person acted in good faith
and in a manner the person reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of chancery or such other court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the Court of Chancery or such other court shall deem proper.
Article IX of the By-Laws of Nolbo provides for indemnification of
officers, directors, employees and agents to the maximum extent permitted under
the Delaware General Corporation Law. The employment agreement with each of
Nolbo's three officers provides for his indemnification to the full extent
permitted by law.
Nolbo's Certificate of Incorporation contains a provision eliminating the
personal monetary liability of directors to the extent allowed under the
General Corporation Law of the State of Delaware. Under the provision, a
stockholder is able to prosecute an action against a director for monetary
damages only if he can show a breach of the duty of loyalty, a failure to act
in good faith, intentional misconduct, a knowing violation of law, an improper
personal benefit or an illegal dividend or stock repurchase, as referred to in
the provision, and not "negligence" or "gross negligence" in satisfying his
duty of care. In addition, the provision applies only to claims against a
director arising out of his role as a director and not, if he is also an
officer, his role, as an officer or in any other capacity or to his
responsibilities under any other law, such as federal securities laws.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering, other than
underwriting commissions, non-accountable expense allowance and financial
consulting fee are as follows:
SEC filing fees ...................... $ 610.66
NASD fees ............................ 707.00
Accounting fees and expenses ......... 20,000.00*
Legal fees ........................... 60,000.00
Blue Sky fees and expenses ........... 50,000.00*
Printing and engraving ............... 70,000.00*
Miscellaneous expenses ............... 18,682.34*
------------
TOTAL ...................................... $220,000.00
============
- ------------
* Estimated
Nolbo will bear all expenses shown above.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
The following shares of unregistered securities have been issued by the
Registrant since its incorporation in Delaware. There were no underwriting
discounts and commissions paid in connection with the issuance of any of said
securities.
Effective June 30, 1998, Nolbo acquired its two operating subsidiaries.
namely, Flame Broiled Chicken, Inc. and Gladstone's Grilled Chicken, Inc., in
exchange for 905,000 shares of Nolbo's common stock. In connection with such
transactions, Nolbo issued the following: 280,000 shares to Bo Grektorp as
trustee under the Bonita Trust for the benefit of his two minor children in
exchange for his interest in Gladstone's Grilled Chicken, Inc; 5,000 shares to
Kenneth Hansen in exchange for his interest in Flame Broiled Chicken, Inc.; and
an aggregate of 620,000 shares to Marvin Nolley in exchange for his interest in
Flame Broiled Chicken, Inc. and Gladstone's Grilled Chicken, Inc. Nolbo also
issued at $1.00 per share an additional 1,000 shares in connection with Nolbo's
incorporation. Exemption is claimed for the foregoing sale pursuant to Section
4(2) of the Securities Act of 1933, as amended (the "Act"), inasmuch as the
transactions did not involve a public offering within the meaning of Section
4(2) of the Act. All purchases were afforded access to information and had
knowledge and experience in financial and business matters that they were
capable of evaluation of the merits and risks of such investment and were able
to bear the economic risk thereof.
Between July 29 and September 18, 1998, Nolbo raised $150,000 in bridge
financing from four non-affiliated investors (the "Bridge Lenders") namely,
Randy Brodsky, Enrique Urrutia, Philip Jahoor and Wilfrid Chalme. In exchange
for such loans, Nolbo issued to the Bridge Lenders non-convertible notes due the
earlier of the completion of the Offering or two years from the date of issuance
in the principal amount of $120,000 (the "Non-Convertible Notes") and
convertible notes in the principal amount of $30,000 due two years from the date
of issuance (the "Convertible Notes"). The Convertible Notes and Non-Convertible
Notes are collectively referred to as the "Notes." Each Note bears interest at
the rate of ten (10%) percent per annum. The principal of the Convertible Notes
is convertible at the option of the holder into shares of Nolbo's common stock
at $1.00 per share at anytime from the date of issuance until the Convertible
Notes are retired. Exemption is claimed for the foregoing sale pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the "Act"), inasmuch as
the transactions did not involve a public offering within the meaning of Section
4(2) of the Act. All purchases were afforded access to information and had
knowledge and experience in financial and business matters that they were
capable of evaluation of the merits and risks of such investment and were able
to bear the economic risk thereof. Exemption is also claimed under Rule 505 and
506 of the Act. All purchasers were accredited investors as that term is defined
under Rule 501. In connection with such financing, Mr. Edwin Jean-Pierre
received a finder's fee in the amount of $12,750 and Caribbean Securities LLC
received a placement agent commission of $2,250.
II-2
<PAGE>
Item 27. Exhibits.
All Exhibits have been previously filed herewith unless otherwise noted.
Exhibit 1.0 Revised Underwriting Agreement
1.1 Revised Selected Dealer Agreement
1.2 Revised Financial Consulting Agreement
1.3 Escrow Agreement
3.0 Certificate of Incorporation
3.1 Certificate of Amendment
3.2 By-Laws
4.0 Specimen of Common Stock
4.3 Revised Form of Underwriter's Warrant
5.0 Opinion of Lester Morse P.C.
10.0 Lease for Downtown Tampa, Florida Restaurant
10.1 Lease for Terrace Ridge Plaza
10.2 Lease for principal executive office
10.3 Employment Contract-Marvin Nolley
10.4 Employment Contract-Bo Grektorp
10.5 Employment Contract-Sean Flaherty
10.6 Form of bridge financing agreement
10.7 Amendment to Employment Contracts of Marvin Nolley, Bo
Grektorp and Sean Flaherty
23.0 Consent of Aidman, Piser & Company, P.A.*
23.1 Consent of Lester Morse P.C. (included in Exhibit 5.0)
- ------------
* Filed herewith.
Item 28. Undertakings.
(a) Rule 415 Offering
Nolbo will:
1. File, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution;
2. For determining liability under the Securities Act, treat each such
post-effective amendment as a new registration statement of the securities
offered, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(b) Equity Offerings of Nonreporting Small Business Issuers Nolbo will
provide to the Underwriter at the closing specified in the Underwriting
Agreement certificates in such denominations and registered in such names as
required by the Underwriter to permit prompt delivery to each purchaser.
II-3
<PAGE>
(c) Indemnification
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or controlling persons of Nolbo
pursuant to the provisions referred to in Item 24 of this Registration
Statement or otherwise, Nolbo has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Nolbo of expenses incurred or paid by a director, officer or
controlling person of Nolbo in the successful defense of any action, suite or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Nolbo 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 and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form SB-2, and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Tampa, State of Florida, on this 11th day of August, 1999.
NOLBO, INC.
By: /s/ Marvin M. Nolley
------------------------------
President and Chief
Operating Officer
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates stated.
Signature Title Date
--------- ----- ----
/s/ Marvin M. Nolley President, Chief Executive August 11, 1999
- ---------------------- Officer, Director
Marvin M. Nolley
/s/ Bo G. Grektorp Vice-President, Director August 11, 1999
- ----------------------
Bo G. Grektorp
/s/ Hans Bremstrom Director August 11, 1999
- ----------------------
Hans Bremstrom
/s/ Sean Flaherty Chief Financial and Accounting August 11, 1999
- ---------------------- Officer, Treasurer, Secretary
Sean Flaherty Director
II-5
<PAGE>
Exhibit Index
All Exhibits have been previously filed herewith unless otherwise noted.
Exhibit
- -------
1.0 Revised Underwriting Agreement
1.1 Revised Selected Dealer Agreement
1.2 Revised Financial Consulting Agreement
1.3 Escrow Agreement
3.0 Certificate of Incorporation
3.1 Certificate of Amendment
3.2 By-Laws
4.0 Specimen of Common Stock
4.3 Revised Form of Underwriter's Warrant
5.0 Opinion of Lester Morse P.C.
10.0 Lease for Downtown Tampa, Florida Restaurant
10.1 Lease for Terrace Ridge Plaza
10.2 Lease for principal executive office
10.3 Employment Contract-Marvin Nolley
10.4 Employment Contract-Bo Grektorp
10.5 Employment Contract-Sean Flaherty
10.6 Form of bridge financing agreement
10.7 Amendment to Employment Contracts of Marvin Nolley, Bo Grektorp and
Sean Flaherty
23.0 Consent of Aidman, Piser & Company, P.A.*
23.1 Consent of Lester Morse P.C. (included in Exhibit 5.0)
- ------------
* Filed herewith.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED ACCOUNTANTS
Nolbo, Inc.
Tampa, FL
As independent certified public accountants for Nolbo, Inc., we hereby
consent to the use in this Amendment No. 4 to Form SB-2 Registration Statement
for Nolbo, Inc. of our report included herein, which has a date of September 1,
1998, except for Note 3 as to which the date is September 18, 1998, relating to
the balance sheet of Nolbo, Inc. as of June 30, 1998 and the related statements
of operations, cash flows, and stockholders' equity for each of the two years
in the period ended June 30, 1998 and to the reference to our firm under the
caption "Experts" in the prospectus.
/s/ Aidman, Piser & Company, P.A.
Tampa, FL
August 11, 1999
