Robert A. Forrester
Attorney at Law
1215 Executive Drive West, Suite 102
Richardson, Texas 75081
(972) 437-9898
(972) 480-8406 Fax
[email protected]
January 15, 1999
Richard K. Wulff, Chief
Office of Small Business Review
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Re: Massimo Enterprises, Inc.
Form SB-2
File No. 333-67919
Dear Mr. Wulff:
On behalf of the Company, I am filing contemporously herewith Amendment No. 1 to
the above referenced registration statement. The following discussion follows
that set forth in your comment letter of December 29, 1998.
I am enclosing a copy of this letter and your comment letter with the hard copy
of the Amendment transmitted separately in response to item 11 below. In
addition, I am enclosing with the same package two spread sheets that set forth
the calculations confined in the registration statement.
Calculation of Registration Fee Table
1. The size of the offering has been increased, and the registration fee
table has been revised, the separate transmittal reflects those
calculations. The amounts of common stock, warrants and common stock
underlying the warrants and the price of the common stock underlying
the warrants has also been revised. Please note that the exercise price
is 60% of the price per unit. Since the price per unit is anticipated
to be $8.50, the exercise price is $5.10 per share.
Prospectus
Comments That Apply to the Entire Prospectus
2. Requires no comment.
3. Requires no comment.
4. Requires no comment.
5. Requires no comment.
6. We have written the Summary and Business Sections as self contained
wholes. The purpose of the Summary section is to give the investor a term sheet
of the deal, financial statements and business. The investor will, consequently,
have the key points of the business and offering in one convenient place. We
draft the Business Section to provide detail for the earlier information among
other purposes. Of necessity, the Business section will repeat summary
information because if the Business Section is self contained, some of the
information will repeat that contained in the summary. The Plain English
Handbook states at page 13, "Overwhelmed with memorizing a new and unnatural
vocabulary, and bothered by constantly having to flip back and hunt for first
time the term's definition appears, many an investor will not stick with the
document." While this language is specifically discussing definitions, we
believe it applies equally to other contexts. Specifically, we believe the
reader should be able to read a complete story in the section's context without
having to refer back and forth. Accordingly, some information is repeated but we
believe the section would lack clarity without it. We have, nonetheless,
attempted to tighten language throughout the document, including the section to
which you refer.
7. Complied with.
8. Complied with.
9. Complied with.
10. Complied with.
11. Complied with.
Cover Page
12. We have removed the pricing in the table labeled "The Offering."
13. We have inserted blanks before the text questioned and set the
questioned language off in parentheticals. For the purpose of the use
of any preliminary prospectus, we believe that a potential investor
should be informed about the basis for calculating the exercise price
and the method for determining when the Company's right to call the
warrants first becomes available. Although the unit offering price is
assumed to be $8.50, it will be determined when the offering is priced.
14. In the summary section under the offering, we have changed the
questioned language to conform to that set forth on the cover and have
modified other language to conform to the cover also.
15. Requires no response.
16. We are working actively with an underwriter and anticipate that we
shall define at the time we file an amendment containing a red herring
that we anticipate printing.
17. Although we have included the requested disclosures, we anticipate
distributing a hard copy of the registration statement only to the SEC,
Nasdaq, and the Boston Stock Exchange.
Inside front Cover Page
18. Complied with.
Additional Information, page 2
19. This information has been moved to follow the Experts Section.
Prospectus Summary, page 3
20. As with other plain English prospectuses, we have moved this language
to the inside front cover of the prospectus. We have also redrafted it.
21. We note that footnotes are used in several plain English prospectuses
such as the Boddie-Noell Properties, Inc. prospectus dated December 16,
1997, and Dollar Thrifty Automotive Group, Inc., also dated December
16, 1997, among other prospectuses following similar conversation. We
believe footnotes to be particularly appropriate in instances involving
calculation so that the reader can understand the basis for the
calculation without the clutter of abstraction in the text.
22. See response to comment 14.
Risk Factors, page 6
23. Complied with.
24. Complied with.
25. Complied with. . 26. Complied with.
27. Complied with.
28. Complied with.
29. Complied with.
Use of Proceeds, page 1
30. Complied with.
31. Since we lack contact with any entity we would consider as an
acquisition, any statement about an acquisition is premature and has
been deleted.
Dilution, page 13
Capitalization, page 14
32. We have removed footnote 1 in the capitalization table as redundant.
With aspect to other footnotes, see our response to comment 21.
MD&A, page 15
33. Complied with
34. Complied with.
35. Complied with.
36. We believe the second paragraph provides in detail the requested
information.
Business, page 16
37. A new paragraph is inserted into the general business discussion giving the
background of the patent's development.
38. A new paragraph under background has been added that describes how the
application works and how it is distinguished from other
39. Complied with.
40. See response to comment 31.
Management, page 21
41. Complied with.
Underwriting, page 26
43. See response to comment 16.
44. As there will be no Selling Security Holders, that language has been
deleted.
45. See response to comment 16.
46. Complied with.
Part II
Undertakings
47. Complied with.
Outside Back Cover Page
48. Complied with.
FINANCIAL STATEMENT COMMENTS
49. Complied with.
Please feel free to contact me at the above telephone number if you have any
questions regarding this amendment.
Very truly yours,
/s/ Robert A. Forrester
Robert A. Forrester
RAF/gs
<PAGE>
As filed with the Securities and Exchange Commission on January 15, 1999
Registration No.333-67919
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
Amendment No. 1
REGISTRATION STATEMENT
Under the
SECURITIES ACT OF 1933
MASSIMO ENTERPRISES, INC.
(Name of small business issuer in its charter)
Texas 2844 72-1269331
(State or jurisdiction of (Primary Standard Industrial
(I.R.S. Employer
incorporation or organization) Classification Code Number)
Identification Number)
Massimo Enterprises, Inc.
8643 Grenadier Drive
Dallas, TX 75238
(214) 340-3506
(Address and telephone number of principal
executive offices and principal place of business)
----------------------------------------
Jason J. Romano
Massimo Enterprises, Inc.
8643 Grenadier Drive
Dallas, TX 75238
(214) 340-3506
(Name, address and telephone number of agent for service)
Copies of all communications to:
Robert A. Forrester, Esq.
1215 Executive Drive West
Suite 102
Richardson, TX 75081
Phone (972) 437-9898
Fax (972) 480-8406
Approximate date of proposed sale to public: As soon as practicable
after the effective date of the Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, 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 of 1933, 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 make 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>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to Offering Price Aggregate Amount of
Securities to be Registered be Registered Per Unit Offering Price (1) Registration Fee
<S> <C> <C> <C> <C>
Units, each consisting of
2 shares of Common Stock and
2 Redeemable Common Stock
Purchase Warrants (2) 690,000 $8.50 $5,865,000 $1,730.18
Common Stock, $0.01 par value (2) 1,380,000 (2) (2) (2)
Redeemable Series A Common
Stock Purchase Warrants (2) 1,380,000 (2) (2) (2)
Common Stock, $0.01 par value (3) 1,380,000 $5.10 $7,038,000 $2,076.21
Underwriter's Warrants (4) 60,000 $.00167 $100.00 $0.03
Units Underlying the
Underwriter's 60,000 $10.20 $612,000 $180.54
Warrants
Common Stock, $0.01 par value (5) 120,000 (5) (5) (5)
Redeemable Series A Common
Stock purchase Warrants 120,000 (5) (5) (5)
Common Stock, $0.01 par value (6) 120,000 $5.10 $612,000 $180.54
Total $4,167.49
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457 (a)
under
the Securities Act of 1933 (the "Act").
(2) Included in the Units. No additional registration fee is required.
(3) Issuable upon exercise of Redeemable Series A Common Stock Purchase
Warrants. Pursuant to Rule 416 there
are also registered an indeterminate number of shares of common stock,
which may be issued pursuant to the anti-dilution provisions applicable to
the Redeemable Series A Common Stock Purchase Warrants, the Underwriter's
Warrants and the Redeemable Series A Common Stock Purchase Warrants
issuable under the Underwriters' Warrants.
(4) Underwriters' Warrants to purchase up to 60,000 Units, consisting of an
aggregate of 120,000 shares of common stock and 120,000 Redeemable Series A
Common Stock Purchase Warrants.
(5) Included in the Units Underlying the Underwriter's Warrants. No additional
registration fee is required. (6) Issuable upon exercise of Redeemable Series A
Common Stock Purchase Warrants underlying the
Underwriters' Units.
Massimo Enterprises, Inc.
600,000 Units
Each Unit consisting of Two Shares of Common Stock and
Two Redeemable Series A Common Stock Purchase Warrants
<PAGE>
Massimo Enterprises, Inc. has developed a line of hair care products and
patented an applicator for applying relaxer to hair. We plan to market these
products primarily to African Americans. We have not yet begun to market these
products.
Each warrant sold with the unit entitles the holder to purchase one share of
common stock for __ (60% of the price of the unit). The holder may not exercise
this right until ______________(thirteen months from the dated of this
offering). This right ceases on _________ (five years after the date of this
prospectus). We may purchase the warrants at a price of $0.05 per warrant at any
time beginning _________(18 months form the date of this prospectus) provided
that the closing sale price per share of common stock equals or exceeds __ (the
offering price per unit for twenty consecutive days). The common stock and
warrants must trade as a unit for six months following the date of this
prospectus unless the ______________ permits them to trade separately at an
earlier date.
Prior to this offering, there has been no public market for any of these
securities, but we have applied to the Nasdaq Small-Cap Market and the Boston
Stock Exchange to list them for trading. We expect the units to be offered at a
price of ______to
<PAGE>
- -------.
<PAGE>
See "Risk Factors" beginning on page six for a discussion of certain factors
that you should consider before you invest in the units being sold with this
prospectus.
----------------------------
<PAGE>
The Offering: Per Unit Total
Public Price ........... $ $
Underwriting
Discounts ............. $ $
Proceeds to Us ...... $ $
For a period of 45 days form the date of this prospectus, the underwriters may
purchase up to 90,000 units at the public offering price less the
underwriting discount.
Proposed Trading Symbols:
Boston
Units
Common Stock
Warrants
Nasdaq Small-Cap
Units
Common Stock
Warrants
<PAGE>
Neither the Securities and Exchange Commission nor any State securities
commission have approved nor disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is
_________________, 1999.
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of offer to buy nor shall there be any sale of these securities in
any state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
Massimo's headquarters are located at 8643 Grenadier Drive, Dallas Texas
75238. Our telephone number is (214) 340-3506 and our fax number is (214)
340-1134.
Some of the statements contained in this prospectus under "Prospectus Summary,"
"Risk Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and "Business" are forward looking. They include
statements concerning (a) strategy, (b) liquidity and capital expenditures, (c)
competitive pressures, (d) problems of commencing operations and (e) general
conditions. Actual results may differ materially from those suggested by the
forward-looking statements for various reasons, including those discussed under
"Risk Factors."
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. The
summary may not contain all of the information that is important to you. To
understand this offering fully, you should read the entire prospectus carefully,
including the risk factors and financial statements.
The Company
Massimo is a development stage company which was formed in May 1994 as
a Louisiana corporation and reorganized as a Texas corporation in 1998. We have
developed and patented an applicator for applying hair relaxer and a line of
hair care products to be marketed primarily to African Americans. Our principal
product is the patented applicator which applies hair relaxer with accuracy and
significantly faster than existing application methods. In addition to the
applicator and hair relaxer product, Massimo has also developed:
Hair spray to hold styled hair
Conditioners that repair hair damaged by chemical treatment
and over processing Conditioning shampoo that cleans
without affecting color-treated or relaxed hair
All of these products are marketed under the trademark Smooth & Easy (R).
We have designed our patented applicator to apply hair straighteners in
five to ten minutes. Users of hair straighteners typically apply hair relaxer
ever five to six weeks and we believe it takes 30 to 40 minutes to apply.
Between major applications, one will apply hair relaxer to roots, and we believe
the process is cumbersome, imprecise, time consuming and often modifies the
effect of an earlier application. Our applicator not only shortens the time it
takes to apply hair relaxer, it is convenient and applies hair relaxer
accurately.
Massimo has not commenced significant operations. Nonetheless, we have
completed the design of our applicator and assembled 50,000 units, each
consisting of five products, which we hold in inventory. We have two patents on
the applicator and a registered trademark on Smooth & Easy(R). Massimo has
contracted with RAANI Corporation to assemble, package and ship our products.
Massimo plans to market our products primarily through television and
print advertising where consumers are asked to call a toll free number to obtain
more information and place orders for our products. The products will be shipped
directly to the consumer. We plan to engage a direct response multi-media
marketing firm to develop information and handle order processing.
The Offering
<TABLE>
<S> <C>
Securities offered hereby 600,000 units, each unit consisting of two shares
--------------------------------
of common stock and two Series A Warrants, each Series A
Warrant entitles the holder to purchase one share of common
stock at a price of __ (60% of the price per unit) until
____ (five years after the date of this prospectus). (See
"Description of Securities.")
Series A Warrants The warrants are not immediately exercisable and
------------------------------------------
are not transferable separately from shares until _____,
1999 (six months from the date of this prospectus.) The
Series A Warrants are redeemable by Massimo upon 30 days
written notice at $0.05 per warrant at any time beginning
____ (18 months from the date of this prospectus) provided
that the sale price per share of common stock equals or
exceeds $ ___ (the offering price per unit). (See
"Description of Securities.")
Offering Price $8.50 per unit
Common Stock to be outstanding
after the offering 1,903,533 shares (1)(2)
------------------------
Warrants to be Outstanding
after the Offering 1,200,000 warrants (2)(3)
------------------------
Use of Proceeds To provide additional funds for marketing and
product development and for working capital and other
general corporate purposes. (See "Use of Proceeds.")
Risk Factors The securities offered hereby are
speculative and involve a high degree of risk and should not
be purchased by investors who cannot afford the loss of
their entire investment. (See "Risk Factors.")
Boston Stock Exchange Symbols
Units
Common Stock
Series A Warrants
NASDAQ Small-Cap Market Symbols
Units
Common Stock
Series A Warrants
---------------------
</TABLE>
(1) Includes 3,500 shares issued subsequent to September 30, 1998. Excludes
170,000 shares of common stock reserved for issuance under Massimo's 1998
Stock Option Plan. To date, 170,000 options have been granted under the
1998 Stock Option Plan, none of which are immediately exercisable. See
"Executive Compensation Stock Option Plan."
(2) Excludes an aggregate of up to 1,800,000 shares issuable upon exercise of
(i) the warrants, (ii) the over-allotment option and (iii) the
underwriters' warrants.
(3) Excludes up to 180,000 Series A Warrants issuable upon exercise of the
over-allotment option or the 120,000 Series A Warrants underlying the
underwriters' warrants.
Summary Financial Information
<TABLE>
<CAPTION>
Year Ended May 24, 1994 Nine Months Ended
December 31 (Inception) Through September 30,
Operating Data: 1996 1997 December 31, 1997 1997 1998
---- ---- ----------------- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 6,127 - $ 6,127 - -
Gross profit 1,951 - 1,951 - -
Operating income (loss) (124,226) (93,788) (483,680) (36,027) (173,631)
Net income (loss) (125,585) (93,296) (484,547) (36,295) (170,724)
Net income (loss) per share $(0.25) $(0.18) $(0.96) $(0.07) $(0.27)
</TABLE>
<TABLE>
<CAPTION>
December 31 September 30
--------------------------
Balance Sheet Data: 1997 1998 As Adjusted (1)
------------- ----------- ---------------
<S> <C> <C> <C>
Working capital $149,149 124,740 $4,444,740
Total assets 171,668 187,067 4,507,067
Long-term liabilities - - -
Shareholders' equity 171,668 186,744 4,506,744
</TABLE>
(1) As adjusted to give effect to the sale of 600,000 units at an assumed
offering price of $8.50 per unit and the application of the net proceeds
therefrom of approximately $4,320,000. (See "Use of Proceeds" and
"Capitalization.")
<PAGE>
RISK FACTORS
Investing in Massimo's securities is very risky. You should be able to bear a
complete loss of your investment. You should carefully consider the following
factors, among others.
Risk of enterprise with limited prior operations
Limited operating history
We have had no revenues in 1997 and 1998. Consequently, we have little
actual experience with the manufacturing, marketing or financing of the product
and the integration of those functions. Although we have closely planned these
activities and believe that they will be successfully implemented within two
months following the close of this offering, it is possible that these
activities will neither function as anticipated nor be operational within the
time for which we have planned.
Profitability
We have allocated $1,750,000 from the proceeds of this offering for
marketing and advertising expense. In addition we will incur increased overhead
when operations commence. It is unlikely that our gross profit margins will be
sufficiently large to absorb these expenses in the first several months
following the completion of this offering.
Marketing risks
We do not know if our products will be accepted in the market place in the
manner in which we expect. Neither Massimo nor any independent third party has
formally studied the feasibility or marketing of our products. In addition we
anticipate that the reception of our products will be subject to changing
consumer preferences and demands that will require adjustment or changes in the
marketing of our products. There can be no assurance that we will have
sufficient funds or other resources to achieve market acceptance of our products
or make sufficent sales to achieve profitability. See "Use of Proceeds."
Possible need for additional financing
Massimo expects that cash flow from operations, together with the net
proceeds of this offering, will fund our cash requirements for at least twelve
months following the completion of this offering. However, additional financing
may be required if:
we incur operating losses in the future; or
operations do not generate sufficient funds.
Because there can be no assurance that adequate additional financing will be
available on terms acceptable to Massimo, we may be forced to limit our
operations. Any future financing that involves the sale of Massimo's equity
securities may result in dilution to the then current stockholders. See "Use of
Proceeds."
Dependence on suppliers and others
Massimo does not produce our own products but plans to purchase our raw
materials and packaging components from a variety of sources. We also plan to
rely upon third parties to market and distribute our products. Presently, we
have agreements with only one entity, RAANI Corporation, for the production of
our products and no formal agreements for pre-assembly, sales or distribution of
our products. Massimo believes that there are several such suppliers, marketers
and distributors, but there can be no assurance that those entities would be
available to us on an immediate basis if needed, or at prices on which we have
based our planning. The failure of Massimo to successfully obtain suppliers,
assemblers, marketers or distributors could have a material adverse effect on
the operations of Massimo. See "Business-Contractual Status."
Personnel and management risks
Our success depends upon our ability in a competitive environment to
attract and retain qualified personnel. Also, we may need to fill important
executive positions in the future. While we hope that qualified personnel can be
hired, the market for such individuals is highly competitive, and there is no
assurance that these critical positions can be filled on a timely or
economically basis, it at all.
Competition
Seven domestic manufacturers presently control the ethnic hair care
market. They manufacture and sell similar products in similar packaging. There
can be no assurance that competitors will not succeed in developing technologies
and products that are more effective than any which have been or are being
developed by Massimo. There can be no assurance that our product will be
successful and the profitability of certain products and services may be
reduced, possibly substantially, so that we can effectively compete in the
market. These reductions could have a material adverse effect on the business
and our financial condition. See "Business-Competition."
Key employees
Massimo's business is substantially dependent on the efforts of Jason
Romano, Joseph Romano and Charles Haag. Massimo lacks employment agreements with
any of these individuals, and the loss of services to Massimo of these
individuals, could have a material adverse effect on Massimo. Massimo has agreed
to obtain key man insurance in the amount of $1,000,000 on the lives of Jason
Romano and Joseph Romano, and there can be no assurance that the amount will be
sufficient to compensate Massimo for the loss of their services. See "
Management."
Regulations
Massimo is subject to a variety of Federal and State Regulations
relating to the content, production and sale of our products. The Food and Drug
Administration regulates the manufacture of products through its "Good
Manufacturing Practices" and regulates the contents of cosmetics their labeling
and claims about the products. The Federal Trade Commission also regulates
product claims. These regulations subject us to the possibility of repurchasing
or recalling products found to be defective as well as fines and penalties. See
"Business Regulations."
Arbitrary determination of offering price
The public offering price for the common stock offered hereby was
determined by negotiation between Massimo and the representative. The factors
considered in determining the public offering price include:
Massimo's potential for revenue growth, the industry in which we operate,
our business potential and earning prospects, and the general condition of the
securities markets at the time of the offering.
Prices for the shares of common stock after this offering will be determined in
the market and may be influenced by many factors, including:
the depth and liquidity of the market for the common stock, investor
perception of Massimo and the mortgage banking industry as a whole. See
"Underwriting."
Dilution
The principal shareholders of Massimo have acquired common stock at a
cost per share substantially less than that at which Massimo intends to sell the
common stock included in the units to investors in this offering. Therefore, an
investment in the units offered hereby will result in the investors experiencing
substantial immediate dilution in net tangible book value of 43.8% in their
ownership of common stock. (See "Dilution", "Certain Relationships and Related
Transactions" and "Description of Securities.")
Control by principal shareholders
Upon completion of the offering, the principal shareholders will own
approximately 37% of the common stock, assuming no exercise of the underwriters'
over-allotment option. As a result, the principal shareholders will have the
ability to exert significant influence over the business affairs of Massimo,
including the election of directors and other matters requiring shareholder
approval. (See "Principal Shareholders" and "Management.")
Boston Stock Exchange and NASDAQ Small-Cap Market
Massimo has applied for listing of the units, the common stock and the
warrants on the Boston Stock Exchange and for quotation on the NASDAQ Small-Cap
Market and anticipates that it will meet the initial inclusion requirements at
the time of the closing of this offering. There can be no assurance however that
the listing application will be approved. If the units, the common stock and the
warrants are listed, we may substantially fail to meet the maintenance
requirements of the Boston Stock Exchange and/or the NASDAQ Small-Cap Market
could result in Massimo's common stock and warrants being delisted from the
Boston Stock Exchange and/or the NASDAQ Small-Cap Market, could then delist our
common stock and warrants and they would trade on the OTC Electronic Bulletin
Board or in the "pink sheets" maintained by the National Quotation Bureau, Inc.
These trading markets are generally considered to be less efficient markets.
Penny stock regulation
Among other consequences, delisting from the Boston Stock Exchange
and/or the NASDAQ Small-Cap Market may cause a decline in the trading price of
the securities, difficulty in conducting trades and difficulty in obtaining
future financing. If at any time, the units, the common stock or the warrants
are not quoted on the Boston Stock Exchange or the NASDAQ Small-Cap Market, the
units, the common stock or the warrants could become subject to the "penny stock
rules" adopted pursuant to Section 15(g) of the Securities Exchange Act of 1934.
The penny stock rules apply to companies, the common stock of which trades at
less than $5.00 per share or which have tangible net worth of less than
$5,000,000 ($2,000,000 if Massimo has been operating for three or more years).
Such rules require, among other things, that brokers who trade "penny stock" to
persons other than "established customers":
complete certain documentation,
make suitability inquiries of investors,
provide investors with certain information concerning trading in the
security, including a risk disclosure document
and quote information under certain circumstances.
Many brokers have decided not to trade "penny stock" because of the requirements
of the penny stock rules and, as a result, the number of broker-dealers willing
to act as market makers in such securities is limited. (See "Underwriting.")
Absence of public market for common stock and warrants and volatility
Before the offering, there has been no public market for the
securities, and there can be no assurance that an active trading market will
develop or be sustained. The market prices for the common stock may be volatile
depending on a number of factors, including the operating results of Massimo,
the United States and global economic or political conditions and various other
factors generally affecting the stock market. Additionally, the stock market has
from time to time experienced extreme price and volume fluctuations which have
particularly affected the market price for emerging growth companies. These
extreme fluctuations, which often have been unrelated to the operating
performance of any particular company or to any group of companies, may
adversely affect the market price of the securities.
Lack of dividends on the common stock
Massimo does not anticipate paying dividends on the common stock at any
time in the foreseeable future. Massimo's Board of Directors currently plans to
retain earnings for the development and expansion of our business. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of Massimo and will depend on a number of factors including
future earnings, capital requirements, financial conditions and such other
factors as the Board of Directors may deem relevant.
Shares eligible for future sale
Upon the completion of this offering, Massimo will have outstanding
1,903,533 shares of common stock.
Of these shares, the shares included in the units will be tradable
after separation of the units without restriction, unless they are purchased by
affiliates of Massimo. Shares outstanding before the completion of this offering
are "restricted securities" under the Securities Act of 1933 which may be sold
in certain circumstances (See "Shares Eligible for Future Sale." Massimo's
majority shareholder and director has agreed not to dispose of shares of common
stock for a period of 365 days after the date of this prospectus. However, after
such period, this shareholder will still be subject to certain restrictions
contained in Rule 144 under the Securities Act of 1933 on the sale of his
shares. (See "Underwriting.")
We cannot predict the effect, if any, that market sales of such shares
or availability of such shares for future sales will have on the market price of
the common stock from time to time. Future sales of substantial amounts of
common stock by existing shareholders could adversely affect the prevailing
market price of the common stock and Massimo's ability to raise additional
capital.
Ability to exercise warrants
For the term of the warrants, we will use our best efforts to maintain
a current effective registration statement with the securities and Exchange
Commission relating to the shares of common stock issuable upon exercise of the
warrants. If Massimo is unable to maintain a current registration statement the
warrant holders would be unable to exercise the warrants and the warrants would
become valueless. Although the underwriters have agreed to not knowingly sell
the warrants in any jurisdiction in which the common stock issuable upon
exercise of the warrants is not registered or otherwise qualified, a purchaser
of the warrants may relocate to a jurisdiction in which the shares of common
stock underlying the warrants are not so registered or qualified. In addition, a
purchaser of the warrants in the open market may reside in a jurisdiction in
which the shares of the common stock underlying the warrants are not registered
or qualified. If Massimo is unable or chooses not to register or qualify or
maintain the registration or qualification of the shares of common stock
underlying the warrants for sale in all of the states in which the warrant
holders reside, Massimo would not permit such warrants to be exercised, and
warrant holders in those states would have no choice but to sell their warrants
or let them expire. Prospective investors and other interested persons who wish
to know whether or not shares of common stock may be issued upon the exercise of
warrants by warrant holders in a particular state should consult with the
securities department of the state in question or send a written inquiry to
Massimo. (See "Description of Securities-Warrants.")
Year 2000 compliance
Massimo's computer systems may not comply with year 2000 issues. Over
the next few years, Massimo may incur additional expenditures to modify our
software to operate correctly for the year 2000. While considered to be
immaterial by management, we have not yet quantified such costs, which will be
expensed as incurred. If we do not address this issue successfully, our business
could be materially and adversely affected.
Risk of redemption of warrants
Commencing 180 days from the date of this prospectus, Massimo may
redeem the warrants for $0.05 per warrant at any time commencing eighteen months
after the date of this prospectus, on 30 days prior written notice, provided
that the closing sale price per share for the common stock has equaled or
exceeded the offering price per unit 20 consecutive trading days. Notice of
redemption could force the holders to:
exercise their warrants and pay the exercise price at a time when it might
be disadvantageous or difficult for the holder to do so, sell the warrants at
current market price when they might otherwise wish to hold the warrants, or
accept the redemption price, which is likely to be less than the market price of
the warrants at the time of redemption.
Underwriters' warrants; Risk of further dilution
Massimo has agreed to sell to the underwriters, for nominal
consideration, warrants to purchase up to 60,000 units at an exercise price of
60% of the price at which the units are initially offered to the public. Massimo
has agreed to register under the Securities Act of 1933, and applicable state
securities laws, the securities issuable upon exercise of the underwriters'
warrants at the expense of Massimo. The underwriters' warrants and any profits
realized by the underwriter on the sale of the securities underlying the
underwriters' warrants could be considered additional underwriting compensation.
For the term of the underwriters' warrants, the holders are given, at nominal
cost, the opportunity to profit from the difference, if any, between the
exercise price of the underwriters' warrants and the value of or market price
for the securities, with a resulting dilution in the interest of existing
shareholders. The underwriters' warrants may be exercised at a time when in all
likelihood, Massimo would be able to obtain any needed capital by a new
placement of securities on terms more favorable than those provided for by the
underwriters' warrants. (See "Underwriting.")
<PAGE>
DIVIDEND POLICY
<PAGE>
Massimo does not anticipate paying dividends on the common stock at any time in
the foreseeable future. Massimo's Board of Directors currently plans to retain
earnings for the development and expansion of Massimo's business. Any future
determination as to the payment of dividends will be at the discretion of the
Board of Directors of Massimo and will depend on a number of factors including
future earnings, capital requirements, financial conditions and such other
factors as the Board of Directors may deem relevant
USE OF PROCEEDS
The net proceeds of this offering to Massimo are anticipated to be
$4,320,000 after deducting the underwriters discount and estimated offering
expenses. We will not receive any proceeds upon exercise of the underwriters'
over-allotment option, since the shares of common stock included in the units
will be sold by selling Shareholders, and no value has been assigned to the
warrants included in the units. Massimo intends to use the net proceeds as
follows:
<TABLE>
<CAPTION>
Approximate Approximate
Application of Net Proceeds Amount Percent
<S> <C> <C>
Product Development $1,000,000 23.1%
----------------------------------
Inventory............................................... 200,000 4.7
Advertising 1,750,000 40.5
------------------------------------------
General Corporate Purposes,
Including Working Capital 1,370,000 31.7
-------------------------- ----------- ------
Total $4,320,000 100.0%
--------------------------------------- ========== ======
</TABLE>
Pending application of the net proceeds of this offering, Massimo may
invest the net proceeds from this offering in interest-bearing savings accounts,
United States Government obligations, certificates of deposit or short-term
interest-bearing securities.
<PAGE>
DILUTION
As of September 30, 1998, the pro forma net tangible book value of
Massimo was $219,316 or $0.31 per share of common stock. The net tangible book
value of Massimo is the aggregate amount of our tangible assets less our total
liabilities. The net tangible book value per share represents the total tangible
assets of Massimo, less total liabilities of Massimo, divided by the number of
shares of common stock outstanding. After giving effect to the sale of 600,000
units at an assumed offering price per unit of $8.50 and the application of the
estimated net proceeds therefrom, the pro forma net tangible book value per
share would increase from $0.31 to $2.39. This represents an immediate increase
in net tangible book value of $2.08 per share to current shareholders and an
immediate dilution of $1.86 per share to new investors or 43.8%, as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Public offering price per share $ 4.25
----------------------------------------
Net tangible book value per share before this offering $ 0.31
--------
Increase per share attributable to new investors $ 2.08
-------------- ------
Adjusted net tangible book value per share after this offering $ 2.39
------------------ ------
Dilution per share to new investors $ 1.86
------------------------------------ ======
Percentage dilution 43.8%
</TABLE>
The following table sets forth as of September 30, 1998 (i) the number
of shares of common stock purchased from Massimo, the total consideration paid
to Massimo and the average price per share paid by the current shareholders, and
(ii) the number of shares of common stock to be purchased from Massimo and total
consideration to be paid by new investors at an assumed offering price of $8.50
per unit. The following table excludes
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Current shareholders (1) 700,033 37% $ 842,015 14% $1.20
New investors 1,200,000 63% $5,100,000 86% $4.25
------------------- --------------------
Total 1,900,033 100% $5,942,015 100%
================== ====================
</TABLE>
Adjusted to give effect to the sale of 600,000 units at an assumed offering
price of $8.50 per unit and the application of the net proceeds therefrom of
approximately $4,308,750.
(1) Excludes a total of 1,803,500 shares of common stock issuable upon the
exercise of: (i) the warrants or the underwriters' warrants, (ii) the
underwriters' over-allotment option, (iii) Shareholders' Stock Option or (iv)
3,500 shares issued subsequent to September 30, 1998.
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and capitalization of
Massimo as of September 30, 1998 and as adjusted to give effect to the sale of
600,000 units offered hereby and the application of the estimated net proceeds
therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
September 30, 1998
Actual As Adjusted
<S> <C> <C>
Long-term debt:
Notes payable $ 0 $ 0
---------------------------------------- ========== ==========
Shareholders' equity (deficit):
Common Stock, $.01 par value, 10,000,000
shares authorized, 500,000, 576,166
and 700,033 shares issued and outstanding,
1,900,033 as adjusted (1) 7,000 19,000
----------
Additional paid in capital (1) 835,015 5,143,015
-----------------------
Accumulated deficit (655,271) (655,270)
--------------------------------- ------------ -----------
Total capitalization $ 186,744 $4,506,744
------------------------ =========== ==========
</TABLE>
(1) Excludes 1,200,000 shares issuable upon the exercise of the Series A
Warrants, 240,000 shares underlying the 60,000 units issuable upon
exercise of the underwriters' warrants, 360,000 shares underlying the
90,000 units issuable upon the exercise of the underwriters'
over-allotment option 170,000 shares issuable upon exercise of
shareholders' Stock Option and 3,500 shares issued subsequent to
September 30, 1998. (See "Underwriting.")
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
Since Massimo's inception in May, 1994, we have focused on the
development of our products and planning for our marketing. From Massimo's
inception through December 31, 1997, Massimo had lost $484,547, incurring
$125,585 of those losses in 1996 and $93,296 in 1997. The balance, $265,666, was
incurred before January, 1996. The majority of the loss reflects expenses
incurred before January, 1996, for the development of marketing and advertising
material. Massimo also expensed $81,224 in general and administrative costs
during the same period reflecting management's expense in developing contacts
and organizing our activities.
In 1996, we completed our development of marketing plans and materials,
incurring $64,813 of advertising and marketing expense while not incurring any
marketing expense in 1997. In 1996, Massimo sold some product through a broker
but realized that sustained selling and distribution of our products would
require additional capital. We also concluded that distributing our products
through traditional marketing channels of cosmetic products was not efficient.
Accordingly, we stopped our selling activities and concentrated on developing
the strategy it is now pursuing.
For the nine months ended September 30, 1998, Massimo incurred a loss
of $173,631 compared to a loss of $36,293 for the same period in 1997. The
increased loss reflects management's activities, begun in the latter half of
1997, to complete our plans for the manufacture, sale and distribution of our
products through mass media and organize our effort for this offering, as well
as an expense of $88,226 reflecting management's decision to write off all
existing inventory
Liquidity and Capital Resources
At September 30, 1998, Massimo had $125,063 in cash, sufficient cash,
in the opinion of management, to complete this offering. The purpose of this
offering is to obtain sufficient funds to begin marketing and distribution of
our products through mass media. See "Use of Proceeds." Management of Massimo
believes that the proceeds from this offering are sufficient to commence selling
activity and enable us to become self sustaining.
Massimo does have $88,226 of product in inventory, an amount it has
held since 1997. Although management wrote off this inventory in 1998 and the
inventory includes some marketing materials, management plans to use virtually
all of this inventory and its use will partially mitigate the cash required for
product for sale after the completion of this offering. In addition, Massimo has
completed production of equipment necessary to manufacture the applicator for
hair relaxer. This equipment is almost fully depreciated but will be adequate
for our initial production needs following the completion of this offering.
Year 2000 compliance
Massimo's computer systems may not currently comply with year 2000
issues. Massimo's computer systems are limited to personal computers and generic
software which will be upgraded following completion of this offering. These new
products all represent they comply with year 2000 issues. Our supplier, RAANI
Corporation, represents that its computer systems comply with year 2000 issues.
We do not anticipate any direct computer interface with vendors and, after
inquiry, believe that information from them will be manually entered into our
computer systems. Potential vendors have represented to us that their operations
will not be affected by this issue. Nonetheless, if we are, in fact, not
successful in addressing this issue, our business could be materially and
adversely affected.
Plan of Operation
Prior to this offering, we have developed relationships which we
believe will permit us to outsource our manufacturing, packaging, marketing and
distribution, and we have entered into one such agreement with RAANI
Corporation. Immediately following this offering we plan to formally contract
with other entities that will complete our ability to market, manufacture and
distribute our products. Within 30 days following the completion of this
offering we plan to:
select an appropriate mix of multi- media components such as television and
newspaper advertising to promote the product line, create an infomerical for
direct response advertising, develop a program for customers to buy product each
month, identify markets in which test marketing will occur, and begin to build
inventory in anticipation of response to advertising.
Following the initial phase, we plan to:
perfect sales and distribution techniques, focus on creating demand through
television, complete development of new packaging and products, and begin
marketing outside of test markets and identify selected international markets.
<PAGE>
BUSINESS
<PAGE>
General
Massimo plans to market several hair care products for African
Americans, the most important of which is a patented applicator for applying
relaxer to the hair. Massimo intends to market the products under the trademark
Smooth & Easy(R).
Massimo was founded in 1994 as a Louisiana corporation and in 1998 was
reorganized as a Texas corporation which acquired all of the issued and
outstanding shares of the Louisiana corporation's capital stock. Since Massimo's
founding in 1994, we have:
developed our products,
obtained trademarks for those products,
obtained patents for our applicator,
produced and tested prototypes of our products, and
developed operating and marketing plans.
Massimo's patented applicator is designed to apply hair straighteners
in five to ten minutes. A hair relaxer is frequently applied every five to six
weeks and competitor's products, management believes, take approximately 30 to
40 minutes to apply. Management believes that this process is particularly
cumbersome unless performed by a hair stylist. Between major applications of
hair relaxers, one will apply hair relaxers to roots, a process that we believe
is cumbersome, imprecise, time consuming, and often modifies the effect of
earlier application. We believe that our applicator applies hair relaxers
quicker, with more convenience and accuracy.
Our patented applicator was invented by our Chief Executive Officer,
Jason Romano. Jason Romano formed Massimo to develop and exploit the applicator
and received no separate compensation for inventing the applicator. We filed the
patent on May 17, 1995, and the patent office issued the patent on September 8,
1998. Jason Romano has assigned the patent to us and received no separate
compensation for the assignment.
Background
Massimo's primary market is in the United States to those of African
descent and our primary product is a hair relaxer applied with our patented
applicator. Relaxed hair enables one to fashion hair as one pleases. Once hair
is relaxed, it must be redone every four to six weeks with occasional interim
applications of relaxer at the roots of hair as the hair grows.
The applicator is shaped like a large comb with six hollow, tapered
teeth about 2 inches long. Relaxer is squeezed into the handle of the comb, a
hard plastic tube about 5/8 inches in diameter, and forced into the six teeth
that are open at the tips. As relaxer is squeezed into the base of the
applicator, it evenly enters the teeth and is dispensed onto the user's hair.
Present products require the user to dip a flat stick in a jar and spread the
chemical onto the user's hair.
In the 1940's, a sodium hydroxide or lye based chemical relaxer became
widely used to relax hair. Lye based relaxers had a risk of hair damage and skin
irritation. In the 1970's, relaxers that were not lye based were introduced and
required mixing immediately before use. Although the newer products have
distinctive advantages over lye based products, particularly since they are less
irritating to the skin, the mixing process can result in mixing errors and
generally take 30 to 40 minutes to apply relaxer. In addition, the standard
applications cause the mixed chemicals to be applied with difficulty and
unevenly.
Massimo's patented applicator has been developed to speed the
application of the relaxer, to assure successful mixing of the active ingredient
in the hair relaxer compound and to permit the even, precise application of hair
relaxer onto the hair. The applicator can be used to apply hair relaxer to newly
grown hair because the applicator can dispense relaxer on the newly grown hair
without applying the relaxer to previously treated hair.
Massimo's applicator for the relaxer is unique, and the process for
mixing the hair relaxer for use in Massimo's patented applicator assures even
mixture before use. We will sell in our package, the applicator and relaxer
together with materials with which the relaxer is mixed. A customer cannot
readily clean the applicator so that each subsequent application of relaxer will
necessitate the purchase of a new kit, which includes the applicator. Formulas
for hair care products can be readily obtained from third parties. We have
formulated our products with some modification to those generally available, and
our relaxer has been formulated to flow evenly through the applicator.
Massimo plans to out-source all of the manufacturing, marketing and
distribution functions. The utilization of existing resources will save Massimo
from investing in manufacturing and assembly facilities and developing efficient
processes with which our management lacks experience.
Massimo has developed several products that are oriented toward the
African American hair care market. In addition to Massimo's hair relaxer
product, which is sold with the applicator, we have developed a shampoo that
cleans hair without affecting relaxed hair. One of our conditioners protects
hair from bleach and relaxer compounds and another enhances, repairs and
eliminates damage to over processed and chemically treated hair.
Another product is a hair spray that holds styled hair.
Marketing plan
Of the approximately 32,000,000 African Americans in the United States,
over 20,000,000 African Americans relax or straighten their hair every four to
six weeks. Growth rates for the African American population are expected to be
larger than those for the Caucasian population of the United States. African
American adults typically spend 34% more for personal care services than the
average U.S. household and African American women spend 41% more for personal
care services than American women as a whole. Relaxers constitute more than 20%
of the money spent by African Americans on hair care products. Massimo
anticipates that our initial marketing will be directed to the eight
metropolitan areas of the United States where the African American population
exceeds 25% of the metropolitan area's population.
We plan to market our products through direct response marketing in
which a third party will assist in developing mass marketing and advertising
materials and provide support services in which one desiring to purchase
Massimo's products will call a toll free number to order products. Although
Massimo anticipates that we will market principally through television
advertising, we will, through the marketing agent, develop print advertising for
inclusion in newspapers and direct mail.
Massimo anticipates that immediately following the completion of this
offering, we will commence television marketing. Massimo anticipates that we
will take 30 to 60 days to develop an infomercial for direct response
advertising and develop a regional test market.
Regardless of the media through which Massimo's products are
advertised, the advertisements will provide a toll free telephone number whereby
a customer can obtain more information and place orders. This service will be
provided by the marketing entity engaged by Massimo and not by our personnel. A
purchaser will receive products within two or three days of contacting the
marketing company.
As part of Massimo's marketing program, we will encourage customers to
regularly receive our products. The purpose of this program is to reduce
advertising costs through the establishment of formal programs for repeat
purchasers.
Although Massimo's immediate market is to African Americans, we plan to
market our products outside of the United States. There are approximately
900,000,000 people of African descent outside of the United States, of which
750,000,000 reside in Africa. Approximately 100,000,000 people of African
descent reside in Brazil and the balance, or approximately 50,000,000 people of
African descent reside in Europe, Central America and the Caribbean.
Production and distribution
Although Massimo has developed the tooling to manufacture our products,
we have entered into a contract with RAANI Corporation to manufacture the
products. We believe that using a third party to manufacture the products will
minimize our requirement to invest in property and equipment, employ
manufacturing personnel and provide working capital to support manufacturing
operations.
RAANI Corporation is registered as a drug and cosmetic manufacturer as
well as a labeler with the United States Food and Drug Administration. RAANI is
fully capable of complying with applicable current Good Manufacturing Practices
specified by the Food and Drug Administration.
Massimo is obligated to provide to RAANI Corporation required packaging
materials which consist of plastic bottles, jars, closures, sprayers, shipping
cartons, instructions and gloves. All of these products will be manufactured by
third parties and shipped to RAANI Corporation. RAANI Corporation will supply
all hair care chemicals and package the chemicals and kits containing relaxer,
activation chemicals other hair care products and the applicator. We will supply
RANNI, through third parties, with kits and other packaging material.
Following assembly by RAANI Corporation, which is located in Bedford,
Illinois, the products will be shipped to a distribution center, or "Fulfillment
Center," which Massimo anticipates being located near Chicago. The "Fulfillment
Center," also operated by a third party, will physically ship products based
upon orders from the organization taking orders.
Contractual status
While Massimo has entered into a formal agreement with RAANI
Corporation for the production of our products, we have not formally entered
into contracts with a marketing company, a "Fulfillment Center," or entities
that produce components that must be assembled by RAANI Corporation. Massimo
has, however, identified and held discussions with several of each such entities
and believes that it can complete contractual arrangements with these entities
within 30 to 60 days following completion of this offering.
African American retail hair care background
The retail market segments of the ethnic hair care market in which
Massimo will compete are described below:
Relaxers and Texturizers. Chemical hair relaxing is the process of
straightening curly hair for several weeks. Texturizers generally work in a
similar manner as relaxers to loosen curly hair, but do not straighten the hair
completely. Relaxed hair serves as the foundation for and facilitator of daily
hair styling. Consequently, its popularity is not significantly related to
current fashion trends. For the person with relaxed hair, relaxers represent a
basic personal care product, similar to shampoos and conditioners for the
general market. Further, the continual need for "touch-ups" approximately every
six weeks requires the relaxer user to frequently purchase relaxers and related
products. Over 50% of African American women use chemical relaxers in their
hair.
For persons of African descent, chemical relaxation became popular in
the 1940's with the introduction of sodium hydroxide or "lye" relaxer which was
the sole product available until a competitor invented and patented "no-lye,"
relaxers in 1978. In the retail market, no-lye relaxers are generally sold in
kits which include a cream base component and a chemical activator component,
which are mixed together to create the requisite chemical reaction. One of the
most significant sources of consumer complaints in the industry is inconsistent
results caused by mixing errors. Our new packaging process eliminates such
mixing problems. Although lye relaxers do not require mixing and tend to work
faster than no-lye relaxers, they have a much higher risk of hair damage and
skin irritation than no-lye relaxers. Until a competitor invented no-lye
relaxers, relaxing hair was relegated primarily to salons where it was applied
by trained technicians for safety reasons. We believe that the introduction of
Smooth & Easy(R) no-lye relaxers and the patented applicator by Massimo will
offer the most an effective and fastest in-home method alternative which should
significantly changed the industry. In 1995, the U.S. retail ethnic relaxer and
texturizer segment was the largest category of U.S. retail ethnic hair care
products, representing approximately 31% of the U.S. retail ethnic hair care
market, according to the Towne-Oller Report.
Hair Care Maintenance Products. The physiological differences between
the hair of individuals of African descent and Caucasian hair create the need
for a variety of products to treat or "maintain" the hair and scalp. Hair is
lubricated by the sebaceous gland which excretes oil that flows down and
lubricates the hair shaft. While this generally happens in straight hair and in
wavy hair, it is very difficult for oils to follow the curves and undulations of
increasingly curly hair. The lack of oil causes curly hair and particular
tightly curled hair to become very dry and brittle, leaving the hair with a
matte, almost dull finish. This condition is the major reason that hair care
maintenance products such as oil sheens, hair dress conditioners,
comb-outs/detanglers and wave products are popular among individuals of African
descent.
Women, children and men of African descent use a variety of products to
permanently change the structure of their hair. In most instances, chemical
processes (e.g., relaxing and color treating hair) leave the hair more dry and
brittle than it would be otherwise and can significantly damage hair if used
improperly. Thus there is an even greater need to condition, replenish and
protect hair before, after and in between treatments. To protect the hair,
strengthen it and return it to a soft, shiny condition with a healthy looking
appearance, the consumer in this market has an even greater need for hair care
maintenance products than her or his general market counterpart.
Numerous ethnic hair care companies and several general market health
and beauty aids companies sell hair care maintenance products to consumers of
African descent.
Massimo is reviewing the development and marketing of hair coloring
products and shaving products and the possible further development of these
products is contingent upon the successful introduction of the applicator.
Patents and trademarks
Massimo owns the trademark rights of "Smooth & Easy(R)" which is used
in connection with our principal brands both in the United States and in the
other countries in which the products will be marketed. We secured this
trademark on February 25, 1997. Massimo obtained a United States Patent on an
earlier model of the "Applicator" which was issued on May 14, 1996 and a utility
patent issued on September 8, 1998. Massimo utilizes certain proprietary or
patented technologies in the formulation or manufacture of a number of its
products: however, the loss of such proprietary rights would not have a material
adverse effect on the business, results of operations or financial condition of
Massimo.
Research and development
Massimo's research and development
expenses in 1994 and 1995 totaled approximately $181,000. Research and
development activities are expensed as incurred, since the majority of Massimo's
research and development activities consist of developing technically feasible
products and processes. Massimo will continue development activities as required
by the niche market needs.
Another part of our business planning involved repeated testing of the
applicator and relaxer with individuals and those involved in the professional
hair care industry. We determined that the response was unanimous. Both groups
stated that the applicator made applying relaxer easier, more precise and
faster. They also stated that the products made relaxed hair more manageable and
softer. In addition, we have worked with multimedia professionals to gage our
anticipated response to television advertising. Based upon their expertise and
experience, we determined that direct response would be the most effective
method of marketing our products.
Competition
The U.S. retail hair care market is competitive and highly fragmented
with a number of market participants that focus specifically on marketing to
African Americans. Seven companies generated approximately 63% of industry sales
in 1996 with the remainder being generated by a number of smaller companies.
Some of the larger companies, such as Soft Sheen, Luster Products and Pro-Line
Corp., are privately owned and compete only in the ethnic market, as does the
Johnson Products subsidiary of IVAX, Inc., a New York Stock Exchange traded
company. However, a few general market companies, such as Revlon and
Alberto-Culver Company, also produce a limited line of specialized products for
the ethnic consumer. In certain product categories, such as shampoos and hair
color, competition also arises from general market manufacturers such as the
Procter & Gamble Company and Bristol-Myers Squibb Company's Clairol division.
Such general market companies are larger and have substantially greater
financial and other resources than Massimo. Internationally, Massimo's
competitors differ from market to market and include Revlon, Soft Sheen and
several regionally based foreign companies.
One Company, Carson, Inc. claims ethnic market leadership through
established brand names, including the most widely recognized ethnic brand name
in the United States, Dark & Lovely, has an experienced direct sales force which
broadly distributes its products, a vigorous research and development program
and an experienced management team. While Massimo's management team has
extensive experience in entrepreneurial endeavors, it lacks operational
experience in the production on ethnic hair care products, and generally,
Massimo lacks resources on which Carson, Inc. asserts its leadership.
Most of these competitors market products similar to each others, using
similar packaging and marketing directly to retailers and to providers of hair
care services or using distributors to do so. We will market differently. Our
vertical packaging is different from existing horizontal packaging of products.
We will market and distribute our products through mass media and fulfillment
centers.
Regulation
Massimo is subject to a variety of Federal and State product safety
laws including the Food, Drug and Cosmetics Act, the Consumer Product Safety Act
and the Federal Hazardous Substance Act. Massimo is also subject to the Consumer
Product Safety Commission. The Food and Drug Administration promulgated certain
regulations concerning product ingredients, product labeling and product claims,
and the Federal Trade Commission also regulates product claims. These
regulations subject Massimo to the possibility of repurchasing or recalling
products found to be defective as well as fines and penalties.
The Food and Drug Administration has promulgated certain regulations
concerning product ingredients and the manufacture of those products. To the
extent that Massimo's products are deemed cosmetics, the products do not require
pre-market approval by the Food and Drug Administration. The Food and Drug
Administration also enforces regulations regarding the quality of manufacturing
called "Good Manufacturing Practices." Massimo believes that RAANI Corporation
complies with these manufacturing regulations and that its products are
"cosmetics" as defined by FDA regulations.
Employees
Because we rely on third parties for manufacturing, assembly, marketing
and distribution, Massimo is not a labor intense business. It will utilize a
fulfillment center for receiving and shipping orders. As of December 31, 1998,
Massimo's staff consisted of three full time employees. Massimo believes that
some additional staff will be required for increased marketing, sales,
development and support functions.
Legal proceedings
As of December 31, 1998, Massimo was not a party to any legal
proceedings.
<PAGE>
MANAGEMENT
<PAGE>
Executive Officers and Directors
The following list sets forth certain information regarding Massimo's executive
officers and directors:
Jason J. Romano (Chairman of the Board, CEO, Co-Founder and Director)
Joseph L. Romano (Vice President, Secretary, Co-Founder and Director)
Charles R. Haag (CFO and Director)
Kenneth B. Caldcleugh (Director)
Mr. Jason J. Romano, age 29, has served as Chairman of the Board since
March 1997 and Chief Executive Officer since Massimo's inception in May of 1994
when he began to devote his full time effort to Massimo's activities. From June
1993 to May of 1994, Jason Romano was involved in Industrial Sales with Colt
Contractors, Inc., which provides technical personnel to industry. Mr. Romano
will be responsible for overseeing the overall operations of Massimo. Mr. Romano
will also work on strategic distribution and the development of innovative
products. For the past five years, Mr. Romano has worked extensively in the
ethnic hair care industry on product development, manufacturing, shipping and
marketing. Mr. Romano received a Bachelor of Arts in International Business from
Southern Methodist University. Jason J. Romano is the son of Joseph L. Romano.
Mr. Joseph L. Romano, age 62, has served as Vice President, Treasurer and
Secretary since Massimo's inception in May of 1994. Mr. Romano has 35 years of
business experience focusing primarily on sales and public relations. In 1970,
Mr. Romano co-founded Spartan Supply Co., an oil field supply company, which he
sold in 1980. In 1980, Mr. Romano founded River Parish Maintenance and Louisiana
Maintenance Services, Inc., which supply personnel to heavy industry and with
which he is presently employed. Presently, Mr. Romano serves on the board of
directors of River Parish Maintenance and Louisiana Maintenance Services, Inc.
Mr. Romano received a Bachelor of Science in Electrical Engineering from the
University of Southwestern Louisiana. Joseph L. Romano is the father of Jason J.
Romano.
Mr. Charles R. Haag, age 56, has been a Director of Massimo since March of
1997. Mr. Haag is a business "generalist" with 26 years of experience, 13 in
major corporations and 13 in small businesses. Mr. Haag has "specialized," over
the past 13 years, in turnaround and rollout situations. Mr. Haag was Vice
President and Chief Financial Officer of A Pea in the Pod, a retail chain
specializing in maternity clothes. From May 1995 to October 1995, Mr. Haag was
Vice President and Chief Financial Officer of Sesame Street General Store, a
specialty retail chain. Since October of 1995, he has been a consultant to Bank
One, a national commercial bank, and Eurcare, Inc., which provides physicians
and other medical personnel to hospitals.
Mr. Kenneth B. Caldcluegh, age 48, has been a director of Massimo since
June of 1998. Mr. Caldcleugh has 23 years of business experience focusing
primarily on sales, distribution and acquisition growth. Mr. Caldcleugh has
served as Assistant Regional Manager of Glazer Companies, a distributor of
alcoholic beverages, for the State of Texas from 1979 to 1981 and as
Corporate Vice President / Louisiana Regional Manager through 1996. During
his tenure, the company grew from a $48 million dollar to a $120 million
dollar company. Since 1997, Mr. Caldcleugh has owned a full service,
premium food and alcohol concept retail store, The Cellars of River Ridge
and is also a member of the Board of Directors of the Christian Brothers
Foundation, Guaranty Savings and Loan, and the National Board of Directors
of the Wine & Spirit Wholesalers of America. Mr. Caldcleugh received a
Bachelor of Science from Texas Tech University.
Directors of Massimo are elected at each annual meeting of
shareholders. The officers of Massimo are elected annually by the Board of
Directors. Officers and directors hold office until their respective successors
are elected and qualified or until their earlier resignation or removal.
Compensation of Directors
All directors of Massimo will receive $500 per meeting attended and related
travel expenses following the initial public offering.
Indemnification and Limitation on Liability
If available at a reasonable cost, Massimo intends to maintain
insurance against any liability incurred by our officers and directors in
defense of any actions to which we are made parties by any reason of our
positions as officers and directors.
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Jason J. Romano, Joseph L. Romano and Charles Haag are the Company's
only promoters. None have received compensation or remuneration for their
activities other than Jason J. Romano's salary and each's reimbursement of
expenses relating to Company activities. Jason J. Romano received no separate
compensation for the invention of the applicator, its patent or its transfer to
the Company. Following the close of this offering, we expect to increase Jason
J. Romano's salary to $7,000 per month and commence paying Joseph L. Romano and
Charles Haag $5,000 per month each.
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid to Massimo's
President Jason J. Romano and Vice President Joseph L. Romano for services
rendered to Massimo in all capacities for the fiscal years ended December 31,
1997, 1996 and 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Jason J. Romano 1997 $36,000 -0- -
1996 36,000 -0- -
1995 36,000 -0- -
Joseph L. Romano 1997 -0- -0- -
1996 -0- -0- -
1995 -0- -0- -
</TABLE>
Before this offering, Massimo was a privately held corporation and
minimum compensation was paid to Jason Romano. In the future, Massimo intends to
compensate our officers in accordance with the recommendations of a compensation
committee.
<PAGE>
Employment Agreements
Massimo has no employment agreements.
Stock Option Plan
The 1998 Stock Option Plan, provides for the grant to employees,
officers, directors, and consultants to Massimo or any parent, subsidiary or
affiliate of Massimo of up to 170,000 shares of Massimo's common stock, subject
to adjustment in the event of any subdivision, combination, or reclassification
of shares. The 1998 Stock Option Plan will terminate in 2007. The 1998 Stock
Option Plan provides for the grant of incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, and non-qualified options
at the discretion of the Board of Directors or a committee of the Board of
Directors. The options granted are exercisable within the times or upon the
events determined by the Board or Committee set forth in the grant, but no
option is exercisable beyond ten years from the date of the grant. The Board of
Directors or Committee administering the 1998 Stock Option Plan will determine
whether each option is to be an incentive stock option or non-qualified stock
option, the number of shares, the exercise price, the period during which the
option maybe exercised and any other terms and conditions of the option. The
holder of an option may pay the option price in:
(1) cash,
(2) check,
(3) other shares of Massimo,
(4) authorization for Massimo to retain from the total number of shares to be
issued that number of shares having a fair market value on the date of
exercise equal to the exercise price for the total number of shares,
(5) irrevocable instructions to a broker to deliver to Massimo the amount
of sale or loan proceeds required to pay the exercise price,
(6) delivery of an irrevocable subscription agreement of the shares which
irrevocably obligates the option holder to take and pay for shares not more
than 12 months after the date of the delivery of the subscription
agreement,
(7) any combination of the foregoing methods of payment, or
(8) other consideration or method of payment for the issuance of shares as
may be permitted under applicable law.
The options are nontransferable except by will or by the laws of descent and
distribution. Upon dissolution, liquidation, merger, sale of stock or sale of
substantially all assets, outstanding options, notwithstanding the terms of the
grant, will become exercisable in full at least 10 days before the transaction.
The 1998 Stock Option Plan is subject to amendment or termination at any time
and from time to time, subject to certain limitations.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership as of September 30, 1998, of the common stock by (a) each person known
by Massimo to be a beneficial owner of more than 5% of the outstanding shares of
common stock and by each selling shareholder, (b) each director of Massimo, (c)
each Named Executive Officer, and (d) all directors and executive officers of
Massimo as a group. Unless otherwise noted, each beneficial owner named below
has sole investment and voting power with respect to the common stock shown
below as beneficially owned by him.
<TABLE>
<CAPTION>
Shares Owned Shares Owned
Before offering After offering
Name and Address of Number of Percent Number of Percent
Beneficial Owner Shares Owned Owned Shares Owned Owned
<S> <C> <C> <C> <C>
Jason J. Romano (1).................. 225,000 32.1% 225,000 11.8 %
8643 Grenadier Dr.
Dallas, Texas 75238
Joseph L. Romano (1)................ 225,000 32.1 225,000 11.8
328 Celeste Ave.
River Ridge, Louisiana 70121
Charles R. Haag...................... 50,000 7.1 50,000 2.6
17200 Westgrove Dr.
#2421 Dallas, Texas 75248
Total (all executive officers 516,700 73.8% 516,700 27.2%
and directors as a group)
- ---------
</TABLE>
(1) Excludes options to purchase 66,300 shares each.
DESCRIPTION OF SECURITIES
<PAGE>
Units
Each unit consists of two shares of common stock and two Series A
Warrants. The shares and the warrants included in the units may not be
separately traded for six months after the date of this prospectus, unless
earlier separated upon three days' written notice from the representative to
Massimo.
Common Stock
Massimo is authorized to issue 10,000,000 shares of common stock, $.01 par
value. As of September 30, 1998 there were 700,033 shares of common stock.
The holders of outstanding shares of all classes of common stock are
entitled to share ratably in any dividends paid on the common stock when, as and
if declared by the Board of Directors out of funds legally available. Each
holder of common stock is entitled to one vote for each share held of record.
The common stock is not entitled to cumulative voting or preemptive rights and
is not subject to redemption. Upon liquidation, dissolution or winding up of
Massimo, the holders of common stock are entitled to share ratably in the net
assets legally available for distribution. All outstanding shares of common
stock are fully paid and non assessable.
Warrants
The warrants will be issued in registered form under, governed by, and
subject to the terms of a warrant agreement between Massimo and ________Transfer
Agent______ as warrant agent. The following statements are brief summaries of
certain provisions of the warrant agreement. Copies of the warrant agreement may
be obtained from Massimo or the warrant agent and have been filed with the
Securities and Exchange Commission as an exhibit to the registration statement
of which this prospectus is a part.
Each warrant entitles the holder thereof to purchase at any time one
share of common stock at an exercise price of $_.__ per share at any time after
the common stock and warrants become separately tradable until ______ [five
years from the date of this prospectus]. The right to exercise warrants will
terminate at the close of business on ______ [five years from the date of this
prospectus]. The warrants contain provisions that protect the warrant holders
against dilution by adjustment of the exercise price in certain events,
including but not limited to stock dividends, stock splits, reclassification or
mergers. A warrant holder will not possess any rights as a shareholder of
Massimo. Shares of common stock, when issued upon the exercise of the warrants
in accordance with the terms thereof, will be fully paid and non-assessable.
Commencing six months after the date of this prospectus, Massimo may
redeem some or all of the warrants at a call price of $0.05 per warrant, upon 30
days' prior written notice if the closing bid quotation of the common stock on
the Boston Stock Exchange and/or the NASDAQ Small-Cap Market has equaled or
exceeded 200% of the offering price per unit for twenty consecutive trading days
within the thirty-day period immediately preceding such notice.
The warrants may be exercised only if a current prospectus relating to
the underlying common stock is then in effect and only if the shares are
qualified for sale under the securities laws of the state or states in which the
purchaser resides. So long as the warrants are outstanding, Massimo has
undertaken to file all post-effective amendments to the registration statement
required to be filed under the Securities Act of 1933, and to take appropriate
action under federal law and the securities laws of those states where the
warrants were initially offered to permit the issuance and resale of the common
stock issuable upon exercise of the warrants. However, there can be no assurance
that Massimo will be in a position to effect such action, and the failure to do
so may cause the exercise of the warrants and the resale or other disposition of
the common stock issued upon such exercise to become unlawful. Although Massimo
does seek to qualify the shares of common stock underlying warrants for the sale
in those states in which the units are to be offered, no assurance can be given
that such qualification will occur. The warrants may be deprived of any value if
a current prospectus covering the underlying shares are not, or cannot be,
registered in the applicable states. Massimo may amend the terms of the
warrants, but only by extending the termination date or lowering the exercise
price thereof. Massimo has no present intention of amending such terms. However,
there can be no assurances that Massimo will not alter our position in the
future with respect to this matter.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the shares of the common stock is
__________________________.
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
<PAGE>
Upon completion of this offering, Massimo will have 1,903,533 shares of
common stock outstanding. Of these shares, 1,200,000 shares sold in this
offering (1,380,000 if the underwriters' over-allotment option is exercised in
full) will be freely tradable in the public market without restriction under the
Securities Act of 1933, except shares purchased by an "affiliate" (as defined in
the Securities Act) of Massimo. The remaining 703,533 shares will be "restricted
shares" within the meaning of the Securities Act of 1933 and may be publicly
sold only if registered under the Securities Act of 1933or sold in accordance
with an applicable exemption from registration, such as those provided by Rules
144 and 701 promulgated under the Securities Act of 1933.
In general, under Rule 144, as currently in effect, a person (or
persons whose shares are aggregated) is entitled to sell restricted shares if at
least two years have passed since the later of the date such shares were
acquired from Massimo or any affiliate of Massimo. Rule 144 provides, however
that within any three-month period such person may only sell up to the greater
of 1% of the then outstanding shares of Massimo's common stock (approximately
19,000 shares following the completion of this offering) or the average weekly
trading volume in Massimo's common stock during the four calendar weeks
immediately preceding the date on which the notice of the sale is filed with the
Securities and Exchange Commission. Sales pursuant to Rule 144 also are subject
to certain other requirements relating to manner of sale, notice of sale and
availability of current public information. Any person who has not been an
affiliate of Massimo for a period of 90 days preceding a sale of restricted
shares is entitled to sell such shares under Rule 144 without regard to such
limitations if at least three years have passed since the later of the date such
shares were acquired from Massimo or any affiliate of Massimo. Shares held by
persons who are deemed to be affiliated with Massimo are subject to such volume
limitations regardless of how long they have been owned or how they were
acquired.
Any employee, officer or director of Massimo who purchases his or her
shares pursuant to a written compensatory plan or contract is entitled to rely
on the resale provision of Rule 701 under the Securities Act of 1933, which
permits non-affiliates to sell their Rule 701 shares without having to comply
with the public information, holding period, volume limitations or notice
provisions of Rule 144 and permits affiliates to sell their Rule 701 shares
without having to comply with the holding period restrictions of Rule 144, in
each case commencing 90 days from the date of this prospectus.
Without consideration of contractual restrictions described below, an
aggregate of 516,700 shares of common stock, representing 27% of the outstanding
shares of the common stock are subject to Rule 144 after the completion of this
offering. Massimo is unable to estimate the number of shares that may be sold
from time to time under Rule 144, since such number will depend upon the market
price and trading volume for the common stock, the personal circumstances of the
sellers and other factors.
After this offering, executive officers, directors and senior
management will own 516,700 shares of the common stock. Massimo's largest
shareholder and director has entered into an agreement with the underwriters
providing that he will not sell or otherwise dispose of any shares of common
stock held by him for a period of 180 days after the date of this prospectus
without the prior written consent of the underwriters. Massimo's executive
officers, other directors, and management have entered into separate agreements
with the underwriters providing that each will not sell or otherwise dispose of
any shares of common stock held by them for a period of 180 days after the date
of this prospectus without the prior written consent of the underwriters, except
for shares sold upon exercise of the underwriters' over-allotment option.
<PAGE>
UNDERWRITING
<PAGE>
Pursuant to the terms and subject to the conditions contained in the
Underwriting Agreement, Massimo has agreed to sell on a firm commitment basis to
the underwriters named below, and each of the underwriters, for whom
__________________ is acting as representative, have severally agreed to
purchase the number of units set forth opposite their respective names in the
following table:
Underwriters Number of Units
Total 600,000
The representative has advised Massimo that the underwriters propose to
offer the shares to the public at the initial public offering price per share
set forth on the cover page of this prospectus and to certain dealers at such
price less a concession of not more than $_.__ per Share, of which $ __.__ may
be reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representative. No such reduction shall change the amount of proceeds to be
received by Massimo as set forth on the cover page of this prospectus.
Certain persons participating in this offering may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock, including exercising the over-allotment option, effecting
syndicate covering transactions or imposing penalty bids.
Massimo has granted to the underwriters an option, exercisable during
the 45-day period after the date of this prospectus, to purchase up to 90,000
additional units to cover over-allotments, if any, at the same price per unit as
Massimo will receive for the 600,000 units that the underwriters have agreed to
purchase. To the extent that the underwriters exercise such option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of such additional units that the number of units to be purchased by
it shown in the above table represents as a percentage of the 600,000 units
offered hereby. If purchased, such additional units will be sold by the
underwriters on the same terms as those on which the 600,000 units are being
sold.
The Underwriting Agreement contains covenants of indemnity among the
underwriters and Massimo against certain civil liabilities, including
liabilities under the Securities Act of 1933.
The holders of approximately 703,533 shares of the common stock after the
offering have agreed with the representative that, until one year after the date
of this prospectus, subject to certain limited exceptions, they will not sell,
contract to sell, or otherwise dispose of any shares of common stock, any
options to purchase shares of common stock, or any securities convertible into,
exercisable for or exchangeable for shares of common stock, owned directly by
such holders or with respect to which they have the power of disposition,
without the prior written consent of the representative, except for shares sold
upon exercise of the underwriters' over-allotment option. Substantially all of
such shares will be eligible for immediate public sale following expiration of
the lock-up periods, subject to the provisions of Rule 144. In addition, Massimo
has agreed that until 365 days after the date of this prospectus, Massimo will
not, without the prior written consent of the representative, subject to certain
limited exceptions, issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options to purchase any shares of common stock or
any securities convertible into, exercisable for or exchangeable for shares of
common stock other than Massimo's sales of shares in this offering, the issuance
of common stock upon the exercise of outstanding options or warrants or the
issuance of options under our employee stock option plan. See "Shares Eligible
for Future Sale."
<PAGE>
The underwriters have the right to offer the securities offered hereby
only through licensed securities dealers in the United States who are members of
the National Association of Securities Dealers, Inc. and may allow such dealers
such portion of its 10% commission as the underwriter may determine.
The underwriters will not confirm sales to any discretionary accounts
without the prior written consent of their customers.
Massimo has agreed to pay the representative a non-accountable expense
allowance of 2.5% of the gross amount of the units sold ($127,500 upon the sale
of the units offered) at the closing of the offering. The underwriters' expenses
in excess thereof will be paid by the representative. To the extent that the
expenses of the underwriting are less than that amount, such excess shall be
deemed to be additional compensation to the underwriter. In the event this
offering is terminated before its successful completion, Massimo may be
obligated to pay the underwriter a maximum of $25,000 on an accountable basis
for expenses incurred by the underwriter in connection with this offering.
Massimo has agreed to enter into a consulting agreement with the
representative at rate of $1,000 per month, commencing 90 days after the closing
and extending for a period of 24 months.
The Underwriting Agreement provides for indemnification among Massimo
and the underwriters against certain civil liabilities, including liabilities
under the Securities Act of 1933. In addition, the underwriters' warrants
provide for indemnification among Massimo and the holders of the Underwriters'
warrants and underlying shares against certain civil liabilities, including
liabilities under the Securities Act of 1933 and the Securities Exchange Act of
1934.
Underwriters' Warrants
Upon the closing of this offering, Massimo has agreed to sell to the
underwriters for nominal consideration, the underwriters' warrants. The
underwriters' warrants are exercisable at 120% of the public offering price for
a four-year period commencing one year from the effective date of this offering.
The underwriters' warrants may not be sold, transferred, assigned or
hypothecated for a period of one year from the date of this offering except to
the officers of the underwriter and their successors and dealers participating
in the offering and/or their partners or officers. The underwriters' warrants
will contain anti-dilution provisions providing for appropriate adjustment of
the number of shares subject to the warrants under certain circumstances. The
holders of the underwriters' warrants have no voting, dividend or other rights
as shareholders of Massimo with respect to shares underlying the underwriters'
warrants until the underwriters' warrants have been exercised.
Massimo has agreed, during the four year period commencing one year
from the date of this offering, to give advance notice to the holders of the
underwriters' warrants or underlying securities of our intention to file a
registration statement, other than in connection with employee stock options,
mergers, or acquisitions, and in such case the holders of the underwriters'
warrants and underlying securities shall have the right to require Massimo to
include their securities in such registration statement at Massimo's expense
("Piggyback" Rights).
For the term of the underwriters' warrants, the holders thereof will be
given the opportunity to profit from a rise in the market value of Massimo's
shares, with a resulting dilution in the interest of other shareholders. The
holders of the underwriters' warrants can be expected to exercise the
underwriters' warrants at a time when Massimo would, in all likelihood, be able
to obtain needed capital by an offering of our unissued shares on terms more
favorable to Massimo than those provided by the underwriters' warrants. Such
facts may adversely affect the terms on which Massimo can obtain additional
financing. Any profit realized by the underwriter on the sale of the
underwriters' warrants or shares issuable upon exercise of the underwriters'
warrants may be deemed additional underwriting compensation.
Determination of Offering Price
The offering price will be determined by negotiations between Massimo
and the representative. The factors considered in determining the offering price
include Massimo's initial investment since our organization, the industry in
which it operates, Massimo's business potential and earning prospects and the
general condition of the securities markets at the time of the offering. The
offering price does not bear any relationship to Massimo's assets, book value,
net worth or other recognized objective criteria of value.
Before this offering, there has been no public market for the
securities of Massimo, and there can be no assurance than an active market will
develop. Although the representative has informed Massimo that it currently
intends to make a market in the securities subsequent to the effectiveness of
the offering, there can be no assurance that the representative will take any
action to make such a market thereafter.
NASDAQ Small-Cap Market System and Boston Stock Exchange
It is anticipated that after the offering, the securities will be
quoted on the NASDAQ Small-Cap Market System and listed on the Boston Stock
Exchange. However, there can be no assurance that the securities will be listed,
that a market for the securities will develop or if it does develop that it will
be maintained.
LEGAL MATTERS
The validity of the issuance of the securities offered hereby will be
passed upon for Massimo by Robert A. Forrester, Attorney at Law. Mr. Forrester
or his affiliates own 3,500 shares of common stock.
EXPERTS
The financial statements as of September 30, 1998 have been so included
in reliance on the report of Killman, Murrell & Company, P.C., independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
ADDITIONAL INFORMATION
Massimo has not previously been subject to the reporting requirements
of the Securities Exchange Act of 1934. We have filed with the Securities and
Exchange Commission a registration statement on Form SB-2, under the Securities
Act of 1933 with respect to the securities offered hereby. This prospectus does
not contain all of the information set forth in the registration statement and
the exhibits and schedules thereto. For further information with respect to
Massimo and the Securities, reference is made to the registration statement and
the exhibits and schedules thereto. Statements made in this prospectus regarding
the contents of any contract or document filed as an exhibit to the registration
statement are not necessarily complete and, in each instance, reference is
hereby made to the copy of such contract or document so filed. The registration
statement and the exhibits and the schedules thereto filed with the Securities
and Exchange Commission may be inspected, without charge, at the office of the
Securities and Exchange Commission at Judiciary Plaza, 450 fifth Street, NW,
Washington, D.C. 20549. Copies of such materials may also be obtained from the
Public Reference Section of the Securities and Exchange Commission at 450 Fifth
Street, NW, Washington, D.C. 20549, at prescribed rates. The Securities and
Exchange Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the Securities and Exchange Commission at http:/www.sec.gov.
As a result of this offering, Massimo will become subject to the
reporting requirements of the Securities Exchange Act of 1934, and in accordance
therewith will file periodic reports, proxy statements and other information
with the Securities and Exchange Commission. Massimo will furnish our
shareholders with annual reports containing audited consolidated financial
statements certified by independent public accountants following the end of each
fiscal year, proxy statements and quarterly reports containing unaudited
consolidated financial information for the first three quarters of each fiscal
year following the end of such fiscal quarter.
Massimo has applied to the NASDAQ Small-Cap and Boston Stock Exchange.
If the Company's application is accepted, then reports, proxy statements and
other information concerning Massimo will be available for inspection at the
Boston Stock Exchange, One Boston Place, Boston, MA 02108.
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors Massimo Enterprises, inc.
We have audited the accompanying balance sheets of Massimo Enterprises, inc. (a
development stage company) as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equiq, and cash flows for the years
ended December 31, 1996 and 1997, and for the period from May 24, 1994
(inception) to December 31, 1997. These financial statements are the
responsibility of tbe 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
tbe 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 financial statements referred to above present fairly, in
all material respects, the financial position of Massimo Enterprises, inc. (a
development stage company) as of December 31, 1996 and 1997, and the results of
its operations and its cash flows for the years ended December 31, 1996 and
1997, and from May 24, 1994 (inception), to December 31, 1997, in conformity
with generally accepted accounting principles.
Killman, Murrell & Company, P.C. Dallas, Texas luly 16, 1998
<PAGE>
MASSIMO ENTERPRISES, INC.
TABLE OF CONTENTS
Page
----
Report of Independent Certified Public Accountant F-2
Financial Statements
Balance Sheets as of December 31, 1996 and 1997
and September 30, 1998 (Unaudited) F-3
Statements of Operations for the Years Ended
December 31, 1996 and 1997 for the Period
May 24, 1994 (Inception) Through December 31,
1997 and the Nine Months Ended September 30,
1997 and 1998 (Unaudited) F-4
Statements of Stockholders' Equity for the
Period May 24, 1994 (Inception) to December
31, 1994 and for Each of the Years Ended
December 31, 1995, 1996 and 1997 and the Nine
Months Ended September 30, 1998 (Unaudited) F-5
Statements of Cash Flows for the Years Ended
December 31, 1996 and 1997, the period May
24, 1994 (Inception) through December 31, 1997
and the Nine Months Ended September 30, 1997 and
1998 (Unaudited) F-6
Notes to Financial Statements F-8
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Massimo Enterprises, Inc.
We have audited the accompanying balance sheets of Massimo Enterprises, Inc. (a
development stage company) as of December 31, 1996 and 1997, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1996 and 1997, and for the period from May 24, 1994
(inception) to December 31, 1997. 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 audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of Massimo Enterprises, Inc. (a
development stage company) as of December 31, 1996 and 1997, and the results of
its operations and its cash flows for the years ended December 31, 1996 and
1997, and from May 24, 1994 (inception), to December 31, 1997, in conformity
with generally accepted accounting principles.
Killman, Murrell & Company, P.C.
Dallas, Texas
July 16, 1998
F-2
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
------------------------------------ ------------------
1996 1997 1998
---------- ---------- ------------------
(Unaudited)
CURRENT ASSETS
<S> <C> <C> <C>
Cash $ 3,803 $ 60,923 $ 125,063
Inventory 88,226 88,226
---------- ---------- ---------
TOTAL CURRENT ASSETS 92,029 149,149 125,063
EQUIPMENT, net of accumulated
depreciation of $9,337, $14,045 and
$17,576, respectively 15,213 9,497 5,966
OTHER ASSETS
Intangible assets, net of accumulated
amortization of $2,148, $3,563 and
$4,802, respectively 12,021 12,922 11,683
Deferred Offering Costs - - 44,255
Other Assets 100 100 100
----------- ----------- -----------
$ 119,363 $ 171,668 $ 187,067
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ - $ - $ 323
Bank overdraft 6,414 - -
Note payable - Note 2 44,084 - -
---------- ------------ ------------
TOTAL CURRENT LIABILITIES 50,498 - 323
---------- ------------ --------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value;
10,000,000 shares authorized;
500,000, 576,166 and 700,033 issued
and outstanding, respectively 5,000 5,762 7,000
Additional paid-in capital 455,116 650,453 835,015
Deficit accumulated during the development
stage (391,251) (484,547) (655,271)
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 68,865 171,668 186,744
---------- --------- ---------
$ 119,363 $ 171,668 $ 187,067
========= ========= =========
</TABLE>
The accompanying notes are an
integral part of these financial
statements.
F-3
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, May 24, 1994 September 30,
---------------------------- (Inception) Through --------------------------
1996 1997 December 31, 1997 1997 1998
---------- ---------- ----------------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SALES $ 6,127 $ - $ 6,127 $ - $ -
COST OF SALES 4,176 - 4,176 - 88,226
---------- ------------ ---------- ---------- ----------
GROSS PROFIT(LOSS) 1,951 - 1,951 - (88,226)
OPERATING EXPENSES
General and administrative 55,351 87,665 224,240 31,985 80,635
Advertising and marketing 64,813 - 243,783 - -
Depreciation and amortization 6,013 6,123 17,608 4,042 4,770
---------- --------- ---------- -------- ----------
126,177 93,788 485,631 36,027 85,405
--------- -------- --------- -------- ----------
LOSS FROM OPERATIONS (124,226) (93,788) (483,680) (36,027) (173,631)
OTHER INCOME (EXPENSE)
Interest income 10 760 770 - 2,907
Interest expense (1,369) ( 268) (1,637) (268) -
---------- ---------- ---------- --------- ------------
(1,359) 492 (867) (268) 2,907
---------- --------- ----------- --------- ----------
NET LOSS $(125,585) $(93,296) $(484,547) $(36,295) $(170,724)
========= ======== ========= ======== =========
NET LOSS PER COMMON SHARE $ (.25) $ (.18) $ (.96) $ (.07) $ (.27)
========== ========= =========== ========= ===========
WEIGHTED AVERAGE OUTSTANDING
COMMON SHARES 500,000 520,013 505,003 500,000 625,713
========= ======== ========= ======== =========
</TABLE>
The accompanying notes are an
integral part of these financial
statements.
F-4
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
---------------------------- Additional
Number Par Paid-In Retained
of Shares Value Capital (Deficit) Total
---------- --------- ------------ ---------- ---------
Initial common stock sale,
<S> <C> <C> <C> <C> <C>
May 24, 1994 (inception) 500,000 $5,000 $ 72,000 $ - $ 77,000
Net loss (40,285) (40,285)
---------- --------- ------------ ---------- ---------
Balance, December 31, 1994 500,000 5,000 72,000 (40,285) 36,715
Cash contributions from stockholder - 269,000 - 269,000
Net loss - - (225,381) (225,381)
--------- --------- ----------- --------- --------
Balance, December 31, 1995 500,000 5,000 341,000 (265,666) 80,334
Cash contributions from stockholder - 114,116 - 114,116
Net loss - - (125,585) (125,585)
--------- --------- ----------- --------- --------
Balance, December 31, 1996 500,000 5,000 455,116 (391,251) 68,865
Cash contributions from stockholder - - 81,849 - 81,849
Sale of common stock, September and
October 1997 76,166 762 113,488 - 114,250
Net loss - - - (93,296) (93,296)
--------- -------- ----------- ---------- ---------
Balance, December 31, 1997 576,166 5,762 650,453 (484,547) 171,668
Sale of common stock, June 1998 123,867 1,238 184,562 - 185,800
Net loss - - - (170,724) (170,724)
--------- -------- ----------- ---------- --------
Balance, September 30,1998 (unaudited) 700,033 $7,000 $835,015 $(655,271) $186,744
======= ====== ======== ========= ========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
F-5
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended May 24, 1994 Nine Months Ended
December 31, (Inception) Through September 30,
1996 1997 December 31, 1997 1997 1998
------------ ---------- ---------------- ---------- ----------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net loss $(125,585) $(93,296) $(484,547) $(36,295) $(170,724)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 6,013 6,123 17,608 4,042 4,770
Changes in current assets and liabilities:
Accounts receivable - - - - -
Inventory (38,769) - (88,226) - 88,226
Other assets (100) 1,008 (100) - -
Accounts payable - - - - 323
------------ ----------- ------------ --------- -------
NET CASH USED BY
OPERATING ACTIVITIES (158,441) (86,165) (555,265) (32,253) (77,405)
--------- -------- --------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,450) - (23,542) - -
Purchase of intangible assets (2,680) (2,316) (16,485) (2,295) -
---------- --------- --------- --------- --------
NET CASH USED BY
INVESTING ACTIVITIES (6,130) (2,316) (40,027) (2,295) -
---------- --------- ---------- ---------- --------
</TABLE>
(Continued)
F-6
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
Years Ended May 24, 1994 Nine Months Ended
December 31, (Inception) Through September 30,
1996 1997 December 31,1997 1997 1998
------- -------- ----------------- ---------- --------
(UNAUDITED)
CASH FLOWS FROM FINANCING ACTIVITIES
<S> <C> <C> <C> <C> <C>
Net borrowings (payments) on note payable $ 44,084 $(44,084) $ - $(44,084) $ -
Proceeds from sale of common stock - 114,250 114,250 - 185,800
Proceeds from stockholder contributions 114,116 81,849 541,965 82,018 -
Net increase (decrease) in bank overdraft 6,414 (6,414) - (6,416) -
Deferred offering costs - - - - (44,255)
----------- ----------- ------------ ---------- --------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 164,614 145,601 656,215 31,518 141,545
-------- -------- --------- -------- --------
NET INCREASE (DECREASE) IN CASH 43 57,120 60,923 (3,030) 64,140
CASH BALANCE AT BEGINNING OF PERIOD 3,760 3,803 - 3,803 60,923
--------- --------- ------------ --------- ---------
CASH BALANCE AT END OF PERIOD $ 3,803 $ 60,923 $ 60,923 $ 773 $125,063
======== ======== ========= ======== ========
SUPPLEMENTAL INFORMATION
Interest paid $ 1,369 $ 268 $ 1,637 $ 268 $ -
======== ========= ========== ========= ===========
</TABLE>
The accompanying notes are an
integral part of these financial
statements.
F-7
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Massimo Enterprises, Inc. (a development stage company) (Company) was
incorporated in the state of Louisiana on May 24, 1994 to develop and distribute
ethnic hair-care products. On June 23, 1998, the Company was reincorporated
under the laws of the State of Texas. The Company has been in the development
stage since inception and is devoting substantially all of its efforts to
financial planning, raising capital, research, and development and marketing.
The Company plans to launch its product line in the United States and in many
areas of South America.
Cash equivalents
For purposes of determining cash flows, cash includes cash-on-hand and in bank
accounts.
Inventory
Inventory consists of finished goods (hair care products) and is carried at the
lower of cost (first-in, first-out) or market. There have been no sales of
inventory since June of 1996 due to management's decision not to initiate a
sales effort until such time as a national advertising program has commenced.
The value of the December 31, 1997 inventory has been charged against operations
in 1998.
Equipment
Equipment is recorded at cost. Depreciation of equipment is provided using the
straight-line method over the assets' estimated useful lives of five years.
Maintenance and repairs of a routine nature are charged to operations as
incurred. Renewals and betterments which substantially extend the useful life of
an existing asset are capitalized and depreciated over its estimated useful
life. Upon retirement or sale of the asset, the cost of the asset and the
related accumulated depreciation are removed from the respective accounts and
any resulting gain or loss is included in operations.
Intangible Assets
Included in intangible assets are a trademark and a patent, recorded at cost and
amortized on the straight-line method over ten years.
(Continued)
F-8
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Federal Income Taxes
The Company has elected S Corporation status under the Internal Revenue Code.
Accordingly, the Company is not a taxable entity for federal income tax purposes
and its net income (loss) is included in the federal income tax returns of its
stockholders. No pro forma tax provision is reflected in these financial
statements since the realization of any portion of the deferred tax assets
resulting from the Company's net operating loss carryforward is not considered
more likely than not.
Management Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets, liabilities, revenues and expenses
during the reporting period. Actual results could differ from management's
estimates.
Advertising
Advertising expenses are charged to operations as incurred. Advertising expenses
for the year ended December 31, 1996 was approximately $64,813. There was no
advertising cost for the year ended December 31, 1997 or the nine months ended
September 30, 1998.
Net Loss Per Common Share
Net (loss) per common share is based on the weighted average number of common
shares outstanding during the respective periods. At December 31, 1997 and
September 30, 1998 the Company had issued options to purchase 170,000 shares of
common stock at $1.50; however, the net loss per share computation did not
include the exercise of the options since the effect would have been
antidilutive.
New Accounting Standards
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
(Statement No. 128), which is required to be adopted for financial statements
issued for annual or interim periods after December 15, 1997. The adoption of
Statement No. 128 required a change in the presentation of earnings per share
(EPS) to replace primary and fully diluted EPS with a presentation of basic and
diluted EPS and to restate EPS for all periods presented. The adoption of
Statement No. 128 did not have a material impact on the Company's financial
statements.
(Continued)
F-9
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 1: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
New Accounting Standards
In February 1997, the FASB also issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure"
(Statement No. 129). Statement No. 129 establishes standards for disclosing
information about an entity's capital structure and applies to all entities.
Statement No. 129 continues the previous requirements to disclose certain
information about an entity's capital structure found in APB Opinions No. 10,
"Omnibus Opinion -- 1966", and 15, "Earnings per Share", and FASB Statements of
Financial Accounting Standards No. 47, "Disclosure of Long-Term Obligations",
for entities that were subject to the requirements of APB Opinions 10 and 15 and
Statement No. 47 and consolidates them for ease of retrieval and for greater
visibility to non-public entities. Statement No. 129 is effective for financial
statements for periods ending after December 15, 1997. The Company experienced
no material revision in its disclosures when Statement No. 129 was adopted.
New Accounting Standards (Continued)
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" (Statement No. 130). Statement No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. Statement No. 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an entity display
an amount representing total comprehensive income for the period in that
financial statement. Statement No. 130 is effective for fiscal years beginning
after December 15, 1997. The Company does not expect Statement No. 130 to have
any effect on the Company's financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131 (Statement No. 131), "Disclosures About Segments of an Enterprise and
Related Information." Statement No. 131 establishes standards for disclosures
related to business operating segments. The Company anticipates that Statement
No. 131 will have no significant effect on the disclosures set forth in its
consolidated financial statements.
NOTE 2: NOTE PAYABLE
At December 31, 1996, the Company had a note payable to a bank of $44,084. The
note accrued interest at 10.5% and was due on demand. The note was paid in full
in January 1997.
F-10
<PAGE>
MASSIMO ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1997
(Unaudited with respect to September 30, 1997 and 1998
and the nine months ended September 30, 1997 and 1998)
NOTE 3: INTERIM FINANCIAL INFORMATION
The balance sheet as of September 30, 1998 and the statements of operations,
stockholders' equity and cash flows for the nine months ended September 30, 1998
and 1996 have been prepared by the Company without audit. In the opinion of
management, such statements include all adjustments (consisting solely of normal
recurring adjustments) necessary to a fair presentation of the financial
position, results of operations and cash flows of the Company for all periods
presented. The results of operations for interim periods are not necessarily
indicative of the results to be obtained for the full fiscal year.
F-11
<PAGE>
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus in connection with
the Offering and, if given or made, such information or representation must not
be relied upon as having been authorized by Massimo. This Prospectus does not
constitute an offer to sell, or solicitation of an offer to buy, to any person
in any jurisdiction in which such offer to sell or solicitation is not
authorized, or in which the person making such offer of solicitation is not
qualified to do so, or to any person to whom it is unlawful to make such offer
or solicitation. Neither the delivery of this Prospectus nor any offer,
solicitation or sale made hereunder shall, under any circumstances, create any
implication that the information herein is correct at any time subsequent to the
date of this Prospectus.
-----------------
TABLE OF CONTENTS
Page
Prospectus Summary.................. 3
The Offering........................... 4
Summary Financial Information..... 5
Risk Factors............................ 6
Dividend Policy........................ 10
Use of Proceeds........................ 11
Dilution................................. 12
Capitalization........................... 13
Management's Discussion and
Analysis of Results of Operations.. 14
Business ................................ 16
Management ............................ 22
Certain Relationships and Related
Transactions............................ 23
Principal Shareholders................. 25
Description of Securities............... 25
Shares Eligible for Future Sale........ 26
Underwriting............................ 27
Legal Matters........................... 30
Experts.................................. 30
Additional Information ............... 30
Index to Financial Statements F-1
600,000 Units
Each Unit Consisting of
Two Shares of Common Stock
And
Two Redeemable Series A
Common Stock
Purchase Warrant
OFFERING PRICE
$8.50
PER UNIT
Prospectus
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Officers and Directors
Article Eleven of the Registrant's Articles of Incorporation provide as follows:
A director of Massimo shall not be personally liable to Massimo or its
shareholders for monetary damages for any act or omission in his capacity as a
director, except to the extent otherwise expressly provided by a statute of the
State of Texas. Massimo shall be obligated to indemnify its officers and
directors against any and all judgments, penalties (including excise and similar
taxes), fines, settlements and reasonable expenses incurred by that person to
the full extent permitted under Texas law. Any repeal or modification of this
Article shall be prospective only, and shall not adversely affect any limitation
of the personal liability or rights to indemnification of a director of Massimo
existing at the time of the repeal or modification.
The Bylaws of the Registrant provide as follows:
Massimo may indemnify any person (and the heirs, executor and administrators of
such person) who is or was a director, officer or employee of Massimo, or of any
other corporation of which Massimo is directly or indirectly a shareholder or
creditor or in which it is in any way interested, and for which he served in the
capacity of director, officer or employee at the request of Massimo against any
and all liability and reasonable expense that may be incurred by him in
connection with or resulting from any civil or criminal claim, action, suit or
proceeding (whether brought by or in the right of Massimo or otherwise) or in
connection with an appeal relating thereto in which he may have become involved
as a party or otherwise by reason of being such director, officer or employee.
The rights of indemnification provided for in this Article shall be in addition
to any right to which any such director, officer or employee may be entitled
under any agreement, vote of shareholders, Articles of Incorporation or as a
matter of law or otherwise.
Reference is also made to the Form of Underwriting Agreement filed as Exhibit
1.1 to this Registration Statement for provisions relating to the
indemnification of directors, officers and controlling persons against certain
liabilities including liabilities under the Securities Act of 1933.
Item 25. Other Expenses of Issuance and Distribution
Estimated expenses in connection with the public offering by Massimo of the
securities offered hereunder are as follows:
Securities and Exchange Commission Filing Fee $ 4,167
NASD Filing Fee 2,000
Blue Sky Fees and expenses 10,000
Boston Stock Exchange Application and Listing Fee* 30,000
Accounting Fees and Expenses 25,000
Legal Fees and Expenses 40,000
Printing* 25,000
Fees of Transfer Agents and Registrar* 5,000
Underwriters' Non-Accountable Expense Allowance 106,250
Miscellaneous* 1,333
----------
Total $270,000
- ------------
*Estimated
Item 26. Recent Sales of Unregistered Securities
In September and October, 1997, Massimo issued an aggregate of 76,166 shares of
Common Stock to twelve individuals for $114,249 cash. In June, 1998 Massimo
issued an additional 123, 867 shares to 17 individuals for an aggregate of
$185,800.50 cash. The sale of those securities was exempt form registration
under the Securities Act of 1933, or amended pursuant to Rule 504 of Regulation
D promulgated thereunder and Section 4(2) thereof.
Item 27. Exhibits
Exhibit No. Item
Exhibit 1.1 Form of Underwriting Agreement(3)
Exhibit 1.2 Form of Underwriters Warrant Agreement(3)
Exhibit 3.1 Articles of Incorporation(3)
Exhibit 3.2 Bylaws(3)
Exhibit 5.1 Opinion of Robert A. Forrester(2)
Exhibit 10.1 Contract with RAANI Corporation(3)
Exhibit 10.2 1998 Stock Option Plan(3)
Exhibit 10.3 Assignment of Patent to Corporation(1)
Exhibit 23.1 Consent of Killman Murrell & Co. P.C.(1)
Exhibit 23.2 Consent of Robert A. Forrester is contained in his
opinion filed as Exhibit 5.1 to this
registration statement. (2)
Exhibit 27.1 Financial Data Schedule(2)
- ------------
(1) Filed herewith
(2) To be filed by amendment
(3) Previously filed
Item 28. Undertakings
The undersigned registrant hereby undertakes as follows;
(1) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in such denominations and
registered in such names as required by the Underwriters to permit
prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons
controlling the small business issuer pursuant to the foregoing
provisions, or otherwise, the small business issuer has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. If a claim for indemnification against
such liabilities (other than the payment by the small business issuer
of expenses incurred or paid by a director, officer or controlling
person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the shares of the securities
being registered, the small business issuer will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a city of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.
(3) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it
effective.
(4) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the
initial bona fide offering of those securities.
(5) (a) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to: (I)
include any prospectus required by section 10(a)(3) of the Securities
Act; (ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end
of the estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; (iii) Include any additional or changed
material information on the plan of distribution.
(b) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time
to be the initial bona fide offering.
(c) File a post-effective amendment to remove from registration any
of the Securities that remain unsold at the end of the offering.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, Texas on January 15, 1999.
Massimo Enterprises, Inc.
By: /s/ Jason J. Romano
Jason J. Romano, Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears
below constitutes and appoints Jason Romano and Joseph L. Romano, and each for
them, his true and lawful attorney's-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities (until revoked in writing), to sign any and all further
amendments to this Registration Statement (including post-effective amendments
or registration statements filed pursuant to Rule 462(b) relating to this
Registration Statement), and to file same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto such attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person thereby ratifying and confirming all
that said attorneys-in-fact and agents, and each of them, or their substitutes
may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Title Date
/s/ Jason J. Romano Director, Chief Executive Officer January 15, 1999
- ---------------------- ----------------
Jason J. Romano
/s/ Joseph L. Romano* Director, Vice President January 15, 1999
- ---------------------- ----------------
Joseph L. Romano
/s/ Charles R. Haag* Director, Chief Financial Officer January 15, 1999
- ---------------------- ----------------
Charles R. Haag
/s/ Kenneth B. Caldcleugh* Director January 15, 1999
- -------------------------- ----------------
Kenneth B. Caldcleugh
*By Jason J. Romano pursuant to power of attorney.
</TABLE>
Exhibit 10.3 Assignment of Patent
WHEREAS, I, Jason Romano (hereinafter referred to as ASSIGNOR), having a
post office address of 8643 Grenadier Drive, Dallas, Texas 75238, am the sole
inventor of an invention entitled `HAIR/SCALP TREATMENT DEVICE," as described
and claimed in the specification for which an application for United States
letters patent was filed on May 17, 1995, and assigned Application No.
08/442,981, now U. S. Patent No. 5,803,093, issued September 8, 1998; and
WHEREAS, Massimo Enterprises, Inc. (hereinafter referred to as
ASSIGNEE), a corporation of the State of Texas, having a place of business at
8643 Grenadier Drive, Dallas, Texas 75238, is desirous of acquiring the entire
right, title and interest in and to the invention and in and to the above and
any other letters patents that may be granted therefor in the United States and
in any and all foreign countries;
NOW, THEREFORE, in consideration of One Dollar ($1.00) and other good
and valuable consideration, the receipt of which is hereby acknowledged,
ASSIGNOR hereby sells, assigns and transfers unto said ASSIGNEE the entire
right, title and interest in and to said invention, said application, the above,
and any and all other letters patents which may be granted for said invention in
the United States of America and its territorial possessions and in any and all
foreign countries, and in any and all divisions, reissues and continuations
thereof, including the right to file foreign applications directly in the name
of ASSIGNEE and to claim priority rights deriving from said United States
application to which said foreign applications are entitled by virtue of
international convention, treaty or otherwise, said invention, application and
all letters patent on said invention to be held and enjoyed by ASSIGNEE and its
successors and assigns for their use and benefit and of their successors and
assigns as fully and entirely as the same would have been held and enjoyed by
ASSIGNOR had this assignment, transfer and sale not been made. ASSIGNOR hereby
authorizes and requests the Commissioner of Patents and Trademarks to issue all
letters patent on said invention to ASSIGNEE. ASSGNOR agrees to execute all
instruments and documents required for the making and prosecution of
applications for United States and foreign letters patent on said invention, for
litigation regarding said letters patent, or for the purpose of protecting title
to said invention or letters patent therefor.
1-11-99_______________________ /s/ Jason Romano__________________
Date Jason Romano
<PAGE>
STATE OF TEXAS }
}
COUNTY OF DALLAS }
I certify that I know or have satisfactory evidence that Jason Romano
is the person who appeared before me, and said person acknowledged that he
signed this instrument and acknowledged it to be his free and voluntary act for
the uses and purposes mentioned in the instrument.
Dated _January 11, 1999__________________________
Notary Public /s/ Jeanette D. Payton_________________
Printed Name Jeanette D. Payton___________________
My appointment expires _2-8-01__________________________
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTS
We consent to the inclusion in this Amendment No. 1 of the Registration
Statement on Form SB-2, of Massimo Enterprises, Inc. (the "Company") of our
report dated July 16, 1998 on the balance sheets of the Company as of December
31, 1997 and 1996 and the related statements of operations, stockholders' equity
and cash flows for the years ended December 31, 1996 and 1997, and for the
period from May 24, 1994 (inception) to December 31, 1997. We also consent to
the reference to our Firm under the caption "Experts" in the Prospectus which is
part of the Registration Statement.
KILLMAN, MURRELL & COMPANY, P.C.
Certified Public Accounts
Dallas, Texas
January 14, 1999
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(Replace this text with the legend)
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