AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 2000
REGISTRATION NO.
============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SILK BOTANICALS.COM, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 5190 65-0886132
------- ---- ----------
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification No.)
of Incorporation Classification
or Organization) Code Number)
975 S. Congress Avenue, Suite 102
Delray Beach, FL 33450
561-265-3600
-------------------------------------------------------------
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
------------------------
Joseph R. Bergmann
975 S. Congress Avenue, Suite 102
Delray Beach, FL 33445
561-265-3600
---------------------------------------------------------
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
Robert C. Hackney
HACKNEY & MILLER, P.A.
CITY CENTRE
2000 PGA BLVD., SUITE 4410
N. PALM BEACH, FLORIDA 33408
(561) 627-0677
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
====================================================================================================
TITLE OF EACH CLASS AMOUNT TO BE PROPOSED MAXIMUM PROPOSED REGISTRATION
OF SECURITIES TO REGISTERED OFFERING PRICE AGGREGATE FEE
BE REGISTERED- -- PER SHARE OFFERING
<S> <C> <C> <C> <C>
Common stock ............. 624,000 $2.50 $ 1,560,000
Common stock ............. 720,000 $3.00 $ 2,160,000
Common stock ............. 1,674,666 $3.75 $ 6,280,000
Total .................... 3,018,666 $2.50-3.75 $10,000,000 $2640
====================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of Regulation C promulgated under the Securities Act of
1933.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OF
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 SEC, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
<PAGE>
SILK BOTANICALS.COM, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION PROSPECTUS HEADING
----------------------------------------- -----------------------------------------
<S> <C> <C>
1. Front of Registration Statement and Forepart of Registration Statement and
Outside Front Cover of Prospectus.......... Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus.............................. of Prospectus
3. Summary Information and Risk Factors....... Prospectus Summary and Risk Factors
4. Use of Proceeds............................ Use of Proceeds
5. Determination of Offering Price............ Risk Factors and Plan of Distribution
6. Dilution................................... Dilution
7. Selling Security Holders................... Not Applicable
8. Plan of Distribution....................... Plan of Distribution
9. Legal Proceedings.......................... Not Applicable
10. Directors, Executive Officers, Promoters
and Control Persons........................ Management and Principal Stockholders
11. Security Ownership of Certain Beneficial
Owners and Management...................... Management and Principal Stockholders
12. Description of Securities
to be Registered........................... Description of Securities
13. Interest of Named Experts and Counsel...... Legal Matters
14. Disclosure of SEC Position on
Indemnification for Securities Act
Liabilities................................ Not Applicable
15. Organization Within Last Five Years........ Not Applicable
16. Description of Business.................... Business
17. Management's Discussion and Analysis or
Plan of Operation.......................... Plan of Operation
18. Description of Property.................... Business of the Company
19. Certain Relationships and Related
Transactions............................... Not Applicable
20. Market for Common Equity and Related
Stockholder Matters........................ Not Applicable
21. Executive Compensation..................... Management
22. Financial Statements....................... Financial Statements
23. Changes In and Disagreements With
Accountants on Accounting and Financial
Disclosure................................. Not Applicable
</TABLE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE SEC. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO
BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DATED April 28, 2000
<PAGE>
The information in this prospectus is not complete and may changed. We may not
sell these securities until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
Subject to Completion Dated May 16, 2000.
UP TO 3,018,666 SHARES OF COMMON STOCK
SILK BOTANICALS.COM, INC.
------------------------
The Company is offering up to 3,018,666 shares of common stock of SILK
BOTANICALS.COM, INC. (the "Common stock"). See "Description of Securities."
The Common stock is currently traded on the NASD Bulletin Board under the
symbol SIBO. The last reported sale of the security on May 9, 2000, was
$2.125 per share.
The Company reserves the right to use selling agents. No underwriting discounts,
or expenses are payable or applicable in connection with the sale of the Shares.
Persons who wish to purchase Shares in this offering must submit a Share
Purchase Agreement, attached hereto as Appendix A, together with the required
payment, to the Company.
There has been a public market for any securities of the Company prior to this
offering, and See "Risk Factors."
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION FROM THE OFFERING PRICE. SEE "RISK FACTORS" AND "DILUTION."
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=====================================================================================
UNDERWRITING
NUMBER OF PRICE TO DISCOUNTS AND PROCEEDS TO THE
CLASS OF STOCK SHARES PUBLIC COMMISSIONS COMPANY
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock
per share......... 624,000 $2.50 0 $2.50
Common stock
per share......... 720,000 $3.00 0 $3.00
Common stock
per share......... 1,674,666 $3.75 0 $3.75
Total............. 3,018,666 $10,000,000 0 $10,000,000
- -------------------------------------------------------------------------------------
</TABLE>
Footnotes on Next Page
The offering of the Common stock hereunder will terminate not later than ,
2000 (the "Termination Date"), provided that, in the sole discretion of the
Company, the offering period may be extended for an additional period not to
exceed 90 days.
THE DATE OF THIS PROSPECTUS IS ____________________, 2000
Footnotes to Cover Page
(1) Proceeds to the Company are calculated before the deduction of expenses in
connection with this offering and payable by the Company, which are estimated to
be $50,000 if the maximum number of shares of Common stock offered hereby are
sold, and include filing, legal, accounting, printing and other miscellaneous
fees.
<PAGE>
(INSIDE FRONT COVER)
(Appearing on the inside front cover of the Prospectus will be color pictures of
the products manufactured and distributed by the Company, each as it appeared on
April 1, 2000.)
<PAGE>
PROSPECTUS SUMMARY
COMMON STOCK PURCHASE INFORMATION
Subscribers purchasing shares of Common stock should make checks payable to SILK
BOTANICALS.COM, INC . Subscribers must complete a Subscription Agreement in the
form attached as Appendix A to this Prospectus. For convenience, an actual
Subscription Agreement has been included with this Prospectus. Additional copies
of the Subscription Agreement may be obtained by writing or calling or faxing
the Company at its executive office: 975 S. Congress Avenue, Suite 102, Delray
Beach, FL 33445, Attn: Shareholder Relations Coordinator, telephone (561)
265-3600. All checks and Subscription Agreements should be forwarded to the
Company.
SILK BOTANICALS.COM, INC., a Florida corporation, was incorporated on
November 20, 1998. The Company is authorized to issue two classes of capital
stock, which are Common stock and preferred stock. The total authorized Common
stock of the Company is 25,000,000 shares, $.001 par value. The total authorized
Preferred stock of the Company is 5,000,000 shares, $.001 par value. the Company
principal executive offices are located at 975 S. Congress Avenue, Suite 102,
Delray Beach, FL 33445; and its telephone number is (561) 265-3600.
RISK FACTORS
An investment in the shares of Common stock offered hereby involves a high
degree of risk. There can be no assurance that the Company will have substantial
product sales or revenues or that it will be able to sell its products at a
profit. Other risk factors include the Company reliance on third-party producers
and the Company reliance on Retail distributors and wholesalers for product
sales. See "Risk Factors."
THE OFFERING
Securities Offered by the
Company........................... 3,018,666 shares of Common stock
Price per share: .................. $2.50-3.75
Common stock Outstanding
before Offering................... 6,250,000 Shares
Common stock Outstanding
After Offering. ................... 9,268,666 Shares
Use of Proceeds..................... Marketing, new product introductions,
and for working capital and general
corporate purposes.
<PAGE>
RISK FACTORS
An investment in the common stock offered hereby involves a high degree of risk
and is not an appropriate investment for persons who cannot afford the loss of
their entire investment. Prospective investors should carefully consider the
following risk factors, in addition to the other information contained in this
Prospectus, before purchasing any of the common stock.
DEPENDENCE UPON KEY PERSONNEL. The Company success is dependent heavily upon the
continued active participation of its current executive officers, key employees
and consultants, particularly Joseph R. Bergmann. Loss of the services of one of
these executives, employees or consultants could have a material adverse effect
upon the development of our business. We have no employment agreement with and
do not maintain "key man" life insurance on Mr. Bergman's life. We do not have
employment contracts with or life insurance on any other officers or employees.
There can be no assurance that we will be able to recruit or retain other
qualified personnel should it be necessary to do so. See "Management."
COMPETITION. The market for the sale of artificial florals is highly
competitive. There are numerous companies in the industry selling products to
retailers, including mass merchandisers, drug store chains, retail drug stores,
supermarkets and health food stores. Most of these companies are privately held
and we are unable to precisely assess the size of our competitors or where we
rank in comparison to such privately held competitors with respect to sales to
retailers. No company is believed to control more than 10% of this market.
Although we compete with other decorating companies, we believe our primary
competition stems from other companies.
Some of our competitors are substantially larger than we are and have greater
financial resources than us. The principal competitive factors affecting the
market for our products include product quality, packaging, brand recognition,
price and distribution capabilities. There can be no assurance that we will be
able to compete successfully against current and future competitors based on
these and other factors. We compete with a variety of domestic and international
suppliers of artificial florals, many of whom have substantially greater
financial, distribution and marketing resources and have achieved a higher level
of brand recognition than us. Increased competition could result in price
reductions, reduced profit margins and loss of market share, all of which would
have a material adverse effect on our business, financial condition and results
of operations. See "Business of the Company -- Competition."
FOREIGN SUPPLY. Currently, many of the raw materials used by the Company are
produced and manufactured outside of the United States. The foreign supply of
materials used in artificial botanicals is subject to a number of risks,
including transportation delays and interruptions, political and economic
disruptions, the imposition of tariffs and import and export controls and
changes in governmental policies. Any such impediment could have a material
adverse impact on us. To date we have not experienced any material adverse
effects due to such risks, there can be no assurance that such events will not
occur in the future with the result of possible increases in costs and delays
of, or interferences with, product deliveries resulting in losses of revenues
and goodwill. See "Business of the Company- Purchasing of Raw Materials."
FOREIGN CURRENCY AND FOREIGN EXCHANGE REGULATION. As part of ordinary business
operations, we are required to purchase raw materials from the suppliers. We may
be required to accomplish such purchases through the use of foreign currencies.
As a result, fluctuations in exchange rates of the United States dollar against
foreign currencies could adversely affect our results of operations. We may
attempt to limit its exposure to the risk of currency fluctuations by
<PAGE>
purchasing forward exchange contracts which could expose us to substantial risk
of loss. In such a transaction, we would purchase a predetermined amount of
foreign currency to ensure that in the future will own a known amount of such
currency to pay for goods at a predetermined cost. We believe the use of such
transactions will successfully allow the us to better determine costs involved
in its operations, and thus better manage currency fluctuations. There can be no
assurance that we will in the future successfully manage its exposure to
currency fluctuations or that such fluctuations will not have a material adverse
effect us.
DEVELOPMENT OF NEW PRODUCTS; NEED TO MANAGE PRODUCT INTRODUCTIONS. The
artificial florals industry is highly competitive and characterized by changing
consumer preferences and continuous introduction of new products. Our goal is to
expand our portfolio of artificial florals products through the development of
new products serving niche segments of the industry, and introduce such new
products on a timely and regular basis to maintain distributor and consumer
interest and appeal to varying consumer preferences. We believe that its future
growth will depend, in part, on its ability to anticipate changes in consumer
preferences and acquire, manage, develop and introduce, in a timely manner, new
products that adequately address such changes. There can be no assurance we will
be successful in acquiring, developing, introducing and marketing new products
on a timely and regular basis. If we are unable to develop and introduce new
products or if our new products are not successful, sales may be adversely
affected as customers seek competitive products. In addition, the introduction
or announcement of new products could result in reduction of sales of existing
products, requiring us to manage carefully product introductions in order to
minimize disruption in sales of existing products. There can be no assurance
that the introduction of new product offerings will not cause distributors and
consumers to reduce purchases or consumption of existing products. Such
reduction of purchases or consumption could have a material adverse effect our
business, operating results and financial condition.
NO DIVIDENDS ON COMMON STOCK ANTICIPATED. We have not paid any dividends upon
our common stock since its inception and, by reason of its present financial
status and our contemplated financial requirements, does not contemplate or
anticipate paying any dividends upon its common stock in the foreseeable future.
Therefore, any potential purchaser of the common stock whose decision to invest
in the common stock is based upon an expectation of dividend payments should
refrain from purchasing the shares of common stock. See "Dividend Policy."
RISKS ASSOCIATED WITH COMMON STOCK TRADING BELOW $5.00 PER SHARE. Upon
consummation of the trading in the common stock would be conducted in the
over-the-counter market in what are commonly referred to as the "pink sheets" or
on the NASD Electronic Bulletin Board. As a result, you may find it more
difficult to dispose of or obtain accurate quotations as to the price of the
common stock. In addition, if the common stock were to have a market price of
less than U.S. $5.00 per share, then the sale of such securities would become
subject to certain regulations adopted by the SEC which imposes sales practice
requirements on broker-dealers. For example, broker-dealers selling such
securities must, prior to effecting the transaction, provide their customers
with a document which discloses the risks of investing in the common stock.
Furthermore, if the person purchasing the securities is someone other than an
accredited investor or an established customer of the broker-dealer, the
broker-dealer must also approve the potential customer's account by obtaining
information concerning the customer's financial situation, investment experience
and investment objectives. The broker-dealer must also make a determination
whether the transaction is suitable for the customer and whether the customer
has sufficient knowledge and experience in financial matters to be reasonably
expected to be capable of evaluating the risk of transactions in the security.
Accordingly, if the common stock is trading
<PAGE>
for less than U.S. $5.00 per share, the SEC's rules may limit the number of
potential purchasers of the securities.
DIRECTORS' AND OFFICERS' INDEMNIFICATION. Our Articles of Incorporation and
Bylaws require us to indemnify and hold harmless its directors and officers from
and against and in respect of certain losses, damages, deficiencies, expenses or
costs which may be incurred or suffered by such directors and officers as a
result of their serving in such capacities with us. See "Certain Provisions of
Florida Law and our Articles of Incorporation and Bylaws."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF PRICE OF COMMON STOCK. The
trading price of the shares of Common stock could be subject to wide
fluctuations in response to such factors as, among others, variations in
anticipated or actual results of operations and market conditions in the
industries in which we operates trading in the common stock would be conducted
in the over-the-counter market in what are commonly referred to as the "pink
sheets" or on the NASD Electronic Bulletin Board. As a result, an investor may
find it more difficult to dispose of or obtain accurate quotations as to the
price of the common stock and we believe that this would limit its ability to
create and sustain a viable market for its common stock.
DISCRETION OF MANAGEMENT AND THE BOARD OF DIRECTORS IN USE OF PROCEEDS. Although
we intend to apply the net proceeds of this offering in the manner described
under "Use of Proceeds," we have broad discretion within such proposed uses as
to the precise allocation of the net proceeds, the timing of expenditures and
all other aspects of the use thereof. we reserves the right to reallocate the
net proceeds of this offering among the various categories set forth under "Use
of Proceeds" as it, in its sole discretion, deems necessary or advisable based
upon prevailing business conditions and circumstances. See "Use of Proceeds."
LACK OF AN INDEPENDENT DIRECTORS. Upon completion of the offering of the shares,
our board of directors will not have any independent directors. As such, upon
completion of the offering of the shares the sole director will be Joseph R.
Bergmann, the company's president. See "Management."
MANAGING GROWTH. We are currently experiencing a period of rapid growth and
expansion, which has placed, and could continue to place, a significant strain
on the management, customer service and support operations, sales and
administrative personnel and other resources. In order to serve the needs of its
existing and future customers, we have substantially increased and will continue
to increase its workforce, which requires us to attract, train, motivate and
manage qualified employees. Our ability to manage its planned growth requires us
to continue to expand our operating, management, information and financial
systems, all of which may significantly increase our operating expenses. If we
fail to achieve its growth as planned or is unsuccessful in managing its
anticipated growth, there could be a material adverse effect on us. In addition,
the loss of a significant customer or a number of customers, or a significant
reduction in purchase volume by or financial difficulty of such customers, for
any reason, could have a material adverse effect on us.
RISKS ASSOCIATED WITH INTERNATIONAL MARKETS. An element of our future growth
strategy is to increase the distribution and sale of our products into
international markets. Our existing and planned international operations are
subject to political and economic uncertainties, including, among other things,
inflation, risk of modification of existing arrangements with governmental
authorities, transportation, tariffs, export controls, government regulation,
currency exchange rate fluctuations, foreign exchange restrictions which limit
the repatriation of investments and
<PAGE>
earnings therefrom, changes in taxation, hostilities or confiscation of
property. Changes related to these matters could have a material adverse effect
on us.
<PAGE>
USE OF PROCEEDS
The set proceeds to be received by us from our sale of 3,018,666 common shares
and the proceeds from the exercise of options and warrants by the selling
shareholders, after deducting underwriting discounts and commissions and
offering expenses of approximately $50,000 will be approximately$9,950,000
assuming an average public offering price of $_____. We intend to use the net
proceeds of the offering as follows:
To expand inventory............................................... $2,000,000
To increase accounts receivable................................... $2,000,000
To provide for general corporate purposes,
including working capital, potential
Acquisitions and strategic partnerships (1)....................... $5,950,000
TOTAL ............................................................ $9,950,000
(1) Although we have allocated a portion of the net proceeds for potential
acquisitions, we are not in negotiations regarding, nor do we have any
agreements or understandings with respect to, any acquisitions.
Although we have allocated the net proceeds of this offering among these various
uses, the amounts actually expended for any of the above purposes may vary if
our needs or strategies change after the offering. Pending such use, we intend
to invest the net proceeds in short-term investment grade, interest-bearing
securities.
<PAGE>
DIVIDEND POLICY
We have never paid or declared any cash dividends on our common stock and do not
intend to pay dividends on our common stock in the foreseeable future. We
presently expect to retain our earnings to finance the development and
expansion of our business. The payment of dividends, if any, on our common stock
in the future is subject to the discretion of the Board of Directors and will
depend on our earnings, financial condition, capital requirements and other
relevant factors. See "Description of Securities."
<PAGE>
DILUTION
As of April 15, 2000, there were 6250000 shares of Common Stock outstanding
having a net tangible book value of $(61960) or approximately $(.01) per share.
Net tangible book value per share is the net tangible assets of the Company
(total assets less total liabilities and intangible assets) divided by the
number of shares of Common Stock outstanding. Upon completion of this offering,
there will be 9268666 shares of the Company's Common Stock outstanding having a
net tangible book value of approximately $9938040 or $1.07 per share assuming
all shares are sold. The net tangible book value of each share will have
increased by approximately $1.08 per share to present stockholders, and
decreased by approximately $3 per share to public investors if the total number
of shares are sold.
<PAGE>
DESCRIPTION OF BUSINESS
Silk Botanicals.Com, Inc. was formed on November 20, 1998, under the name of
Diversified Restaurant Holdings, Inc., a Florida corporation. On April 9, 1999,
DRHI, an inactive corporation at this time acquired JRB Marketing of South
Florida, Inc., a Florida corporation incorporated on October 2, 1996, through a
reverse acquisition. On August 2, 1999, Diversified filed a name change to Silk
Botanicals.Com, Inc.
We develop, market and distribute three lines of high-quality artificial flowers
- - artificial florals arrangements in clear glass vases set in epoxy providing
the illusion of fresh flowers in water. We marketed these products under the
Silk Botanicals, "Living Silk/registered trademark/" and "Forever
Fresh/registered trademark/" names. We market and sell these products to gift
retailers, decorative accessory retailers, and the hospitality industry. The
artificial foliage and flowers are imported primarily from Taiwan, Hong King and
the Peoples Republic of China. We purchase artificial flowers from US based
importers and US subsidiaries of foreign companies located in the US. Glassware
is purchased from domestic manufacturers. Our silk botanical products are
produced by JRB Enterprises, Inc. under a Manufacturing Agreement. JRB
Enterprises, Inc. had attempted previously to address the local wholesale
markets in Florida. Over the past four years, JRB Enterprises began cultivating
a business relationship with several nationally known retail corporations. The
test marketing efforts were primarily with locations in South Florida, which
generated aggregate sales at wholesale for these accounts in excess of two
million dollars. We plan to target these wholesale markets on a national scale.
Joseph R Bergmann controls JRB Enterprises, Inc. and us; the company will
operate as a stand alone business. We have instituted numerous firewalls to
prevent commingling of the businesses through such practices as separating
office and warehouse space, maintaining separate inventories, and separating
accounting functions.
We are primarily a design, marketing sales and distribution company which has
other companies manufacture products to our specifications. JRB Enterprises,
Inc. is a manufacturer and assembler that primarily sell its assembled products
through its approximately 25 retail stores and to Silk Botanicals.Com, Inc.
We became a corporate entity to disassociate itself from the retail stores
operated by JRB Enterprises, Inc. and to establish ourself as a wholesale
supplier to retail operations nationally. In this way, if the future of ours
business warrants, the companies can be sold individually without the overlap of
operations.
Independent research by Jacobs, Jenner & Kent of Baltimore, Maryland in their
study on Permanent Florals Products Industry, has revealed three important
opportunities which we have and will continue to address: (1) there is little
awareness of artificial florals brands among consumers, (2) merchandise with
retail prices less than $30 is the preferred choice for retailers and their
customers, and (3) gift boxes enhance merchandising. We plan to embark on a
program to build brand awareness, develop three product lines targeting three
distinct markets - gift retailers, decorative accessories retailers, and the
hospitality industry - and are developing gift boxes for select products.
PRODUCTS. We have developed over 200 florals and greenery arrangements and a
special gift box for its line of bud vase arrangements. We believe the gift box
will be well accepted by national gift and retail store chains and plans to
develop gift boxes for other vases in its product lines.
<PAGE>
Arrangements are sold as get well gifts by hospital gift shops and as gifts for
birthdays, anniversaries, Christmas, Chanukah, Valentines Day, Easter and
Mother's Day. Styles retailing for $20.00 to $50.00 have been strong sellers for
these markets. We further believe that the quality of the product will enable
customers to overcome any reluctance to buying artificial flowers. In addition,
styles priced from $58.00 to $198.00 are sold as decorative accessories and
house warming gifts for the consumer and decorative accessories and house
warming gifts for the consumer and decorative accents for the hospitality
industry. We plan to develop new products that would less seasonal.
CUSTOMER SERVICE. We strive to serve our customers with accurate and on-time
delivery of its products. Retail and chain stores demand a high level of service
to assure full product availability for their customers. We offer a variety of
distribution services depending on our customers' needs. Also we provide our
customers with high quality customer and ordering services. Our sales force
assists customers in identifying products from our lines and works closely with
them to furnish the best products for their store requirements.
QUALITY ASSURANCE. As part of its quality assurance program. We intend to select
carefully our suppliers and perform periodic product inspections, both prior to
shipment and after receipt. We expect to experience negligible returns of
defective or damaged products.
COMPETITION. The artificial florals industry is competitive but highly
fragmented with many small players in the manufacturing end. Therefore, we
believe that an excellent opportunity exists for our product lines that there
are a variety of ways for us to compete in this industry.
Our primary competitors are other assemblers, importers and distributors. Some
of these competitors focus on price and others specialize in a particular
product segment. We compete primarily on the basis of merchandising, high
quality product lines, supply dependability, price and brand name recognition.
Our competitors are not focused on the gift industry, have not developed
products targeting the gift industry, nor have they developed packaging to gift
industry standards.
The barriers to entry to our industry are relatively low. We believe, however,
that attaining success in the industry is difficult but that we have competitive
advantages, including our ability to fill orders quickly and completely and
provide a high level of customer service, high quality products, competitive
prices and brand names. We believe the industry does not have a single dominant
retailer or wholesaler of high quality artificial greenery and flower
arrangements. To date, the only other importer, manufacturer or distributor of
artificial flowers whose shares are publicly traded is Celebrity, Inc. (FLWR).
SALES AND MARKETING. We intend to market our products using the "Forever
Fresh/registered trademark/" and "Living Silk/registered trademark/trademarks,
which are licensed for thirty-six (36) years. We believe we have found a niche
in the gift industry. According to Retail Industry Indicators in 1997, gift and
general merchandise is a $49 billion market annually in the United States. The
overall target market for products is composed of almost 200,000 stores,
including general merchandise stores, catalog and mail orders, florists, gift
stores and furniture and home furnishing stores. We intend to build a national
base of gift stores and develop relationships that have been recently forged
with several regional and national chains. Our marketing efforts will be through
trade shows, direct mail, telemarketing, targeted e-mail, and the use of sales
representatives. We believe, however, that a high percentage of sales will be
obtained through its web site, WWW.SILKBOTANICALS.COM, which is presently in
operation
<PAGE>
For this reason, we included the .Com" in our corporate name to indicate our
entrance into e-commerce marketing and sales.
EMPLOYEES. We currently employ six part-time and six full-time employees. We
anticipate increasing our staff with six new employees at the end of June 2000
and with an additional ten new employees by March 2001.
KEY EMPLOYEES. Our key employees are Joseph R. Bergmann, President, Chief
Executive Officer and Director; Regina M. Bergmann, Director of Personnel; Jerry
Frenz, Controller; Gail Scheel, Director of Advertising and Marketing; and Joyce
Bernard, Merchandising Manager.
LIMITED OPERATING HISTORY. We have a very limited operating history upon which
an evaluation of our prospects can be made. Our prospects must be considered
speculative, considering the risks, expenses and difficulties frequently
encountered in the establishment of a new business. There can be no assurance
that we will be able to achieve profitable operations.
<PAGE>
PLAN OF OPERATION
Based on financial projects prepared by management, we estimate that
approximately $500,000 will be required to fund its development plans. We plan
to obtain funding through a variety of sources, including but not limited to
both institutional and private loans and the option by the Manufacturer to
advance some initial funding costs. A private lender has been identified and as
agreed to lend up to $500,000 in working capital on terms acceptable to us. As
an alternative source to the private lender we are also negotiating a $500,000
loan with various institutional lenders. We believe that SunTrust will extend a
line of credit of approximately $100,000. The collateral conditions expected on
these loans will include primarily inventory and accounts receivable. At
present, the loans are not expected to require the guarantee by either JRB
Enterprises, Inc. or by Joseph R. Bergmann. If positive cash flow is not
sufficient to repay any of the loans, we will consider plans to issue additional
stock through a public offering of the yet unissued but authorized common stock
to raise the required capital. In addition, we have obtained special 180-day
financing terms with suppliers for immediate product and supply purchases.
For the fiscal year ended May 31, 1999, we had no revenues. Expenses of $694,688
consisted of $671,460 for the issuance costs of securities and $23,228 for
general administrative expenses.
There are no future capital transactions planned or agreements in place between
JRB Enterprises, Inc. and us.
The funds will be used to expand marketing efforts to include gift retailers in
the western United States and in the hospitality industry, develop and expand
our web site, develop additional product and marketing materials to enable the
company to separately target the gift and decorative accessories market,
increase inventories and accounts receivables, develop new products, and
increase its marketing staff to expand into new markets. We have our marketing
plan in place and operational as of the first quarter fiscal year end May 31,
2000.
PRODUCT DEVELOPMENT. Much of the efforts since inception have been on product
design and development. The design staff studies competitive fresh cut and
artificial arrangements, researches new sources of stems and vases, surveys
retailers and end users for preferences, and tests prototypes in focus groups
and by sampling. We focus on developing new product. Our design staff have
developed and refined over 200 arrangements by communicating with customers and
by attending silk and fresh flower trade shows.
As the product line has been refined, the focus has shifted to packaging and
merchandising. Although competitors offer similar products we are not aware of
any that have focused our energies on developing a brand, marketing to the gift
market and responding to the packaging requirements of this market.
We will continue to diversify to meet retailers' demands for quality and value.
The products will create revenue streams as follows:
BASIC LINE. The basic line is drawn from the existing unboxed designs, sold and
shipped in bulk. These are inexpensive and serve as the opening price point for
gift stores. We believe that this product sells especially well for tabletop
displays, for parties, and to the hospitality market.
<PAGE>
FOREVER FRESH/registered trademark/GIFT BOXED LINE: This line is the Forever
Fresh arrangements packaged in a branded window gift box. Benefits to the
retailer include Uniform Product Code ("UPC") labels for inventory and Point of
Sale ("P.O.S."), reduction of breakage, and enhanced on shelf merchandising.
Wholesale prices range from $8.00 to $14.00 and retail from $16.00 to $30.00 per
unit. This product line includes some of the following.
/bullet/ Special Occasion merchandise (Easter, Valentine's Day,
Birthday, Get Well, and for special people, Wives, Mothers,
Teachers.
/bullet/ Twin-pack boxed gifts will also be tested, i.e., small florals
vase with candle.
/bullet/ Special seasonal arrangements, country arrangements, exotic
florals and greenery.
CATALOG PROGRAM SALES. Catalog program sales are basic line and custom products
that are suitable for "drop shipping". Our products have appeared in upcoming
Smithsonian Institute and Touch of Class catalogs. We continually seek new and
diversified catalogs to carry our products.
GENERIC/PRIVATE LABEL GIFT BOXED PRODUCT. We will develop our own package line
of 10-12 permanent florals gifts in private label windowed gift boxes with
seasonal designs.
SIGNATURE SERIES. Our design staff is developing our signature line of large
florals arrangements. These arrangements will wholesale for $100.00 to $300.00.
Upon completion of this line it will be released and marketed to home
accessories retailers and hospitality providers through manufacturers
representatives. Other designer containers will be introduced that will enhance
the silk flowers and fit into custom interiors.
MARKET DEVELOPMENT. We will continue to cater to the needs of gift retailers and
expand our marketing efforts to include the western half of the United States.
By May 31, 2000, our products will be sold and shipped to three major national
as well as three major regional accounts. These customers recorded total annual
retail sales in excess of a billion dollars each. By May 31, 2001, national
accounts are expected to reach a total of six. Our plan is to target five
segments of the market.
/bullet/ INDEPENDENT GIFT SHOPS. Businesses that own/operate one or two
retail locations;
/bullet/ STRAND GIFT BUSINESSES. Companies that own/operate from three
to twenty-five retail locations;
/bullet/ CHAIN STORES. Companies that own a nationally or regionally
recognized retail gift business;
/bullet/ CATALOGS. Companies that sell products directly to consumers
via direct mail catalogs; and
/bullet/ DEPARTMENT STORES. We have to work closely with department
stores, rather than discounters, to develop products to meet
their specifications.
By identifying and categorizing the prospect list, current sales presentations
will be modified and new presentations developed to met specific needs of
current and future customers. Secondary target markets will continue to include
home furnishings retailers, hotels and restaurants, corporate gifts and
furnishings, the military (exchanges, commissaries and officer clubs).
SALES AND MARKETING. We will use the following marketing tactics to achieve its
financial objectives.
<PAGE>
TRADE SHOWS. We believe most sales are generated through trade shows where the
products can be properly displayed to their fullest effect. We currently
participate in wholesale trade shows and anticipate increasing the number of
shows we attend.
GIFT INDUSTRY TRADE SHOWS. The gift and general merchandise industries purchase
approximately $1 billion of products at gift trade shows each year. Buyers
prefer to view the merchandise in person
HIGH POINT. NC FURNITURE SHOW. This trade show is the only resource dedicated by
us to general sales without the furniture industry. Furniture stores represent a
projected 14% of our sales, making attendance at this show cost effective. We
anticipate participation in other furniture shows as well.
ALA MILITARY TRADE SHOW. The ALA Military Trade Show is the annual, exclusive
buying show for military bases and exchanges. It represents the only opportunity
to show and sell products to this lucrative business category. Forever
Fresh/registered trademark/and the Department of the Air Force finalized a
non-appropriated funds contract in the Fall of 1999 enabling us to provide
artificial florals arrangements to all military installations.
RESTAURANT SUPPLY TRADE SHOWS. We have initiated a search to retain a sales
organization that targets restaurants and hotels. Trade shows will be an
important component of the sales efforts.
SALES REPRESENATIVES. Independent sales organizations sell products though road
sales and trade shows. We have signed contracts with representative companies
that maintain permanent showrooms in Atlanta, Columbus, and Chicago for the east
coast of the United States. We plan to increase representation on the west coast
with representatives who can provide quality temporary or permanent show space.
COLOR CATALOGS. Full color catalogs have been produced for both Forever
Fresh/registered trademark/and Living Silk/registered trademark/. These are
being used to sell the most important and popular designs in both lines.
DIRECT MAIL. Holiday and seasonal product designs will be presented to existing
customers and prospects through direct mail. Trade show schedules and special
events are also announced through direct mail.
TELEMARKETING. We plan to contact our customer base at least four times a year.
Two of the calls will be used for pre-show marketing and the other two calls
will sell specific holiday packages (the Valentine's Day and Mother's Day
collections). Additionally, all direct mail recipients will receive a follow-up
call.
WEB SITE. We plan to develop fully our Web site, WWW.SILKBOTANICALS.COM. The
site has been operational since February, 2000. We will display our product
lines and accept order through our site, as well as provide information on the
company for potential investors.
SELL SHEETS. Sell sheets will be used to show the individual products at trade
shows and in direct mail presentations. We will use sell sheets to expand the
use of packages, to introduce and sell new products, and increase Basic Line
sales. The package themes include: Valentine and Mother's Day, Summer,
Christmas, and the Table Top Collections.
<PAGE>
EARLIER MARKETING ACTIVITIES. Since its inception under the name of JRB
marketing of South Florida, Inc.
1. Conducted market research
2. Developed products
3. Identified suppliers
4. Purchased an existing customer base from Forever Fresh/registered
trademark
5. Purchased marketing rights and registered trademarks
6. Began the development of a major web site; and
7. Planned to position itself to market its products worldwide
Because we were a development company, these earlier marketing activities to
enter the wholesale market were conducted with JRB Enterprises, Inc. on a test
basis in the local Florida markets. Based on early results, JRB Enterprises,
Inc. increased its manufacturing capabilities in an effort to become a major
supplier of an expanded line of finished products. These products can be
designed, assembled and packaged to the specifications of major wholesale
accounts. All sales and costs to expand the product line were accounted for and
recorded by JRB Enterprises, Inc.
CUSTOMER BASE. The sales and marketing plans take into account our desire to
expand operations both financially and geographically. We will continue to build
on the solid base of 2,000+ customers who were the wholesale customer base of
Forever Fresh (TM). These customers were acquired through JRB Marketing of South
Florida, Inc.'s License Agreement with Forever Fresh, Inc. and by virtue of
cobranding Forever Fresh (TM) silk florals products. Any sales of products to
this customer base were "wholesale" and were not part of any retail store
customers of JRB Enterprises, Inc. The retail store customer list has no value
to us. We are targeting "wholesale customers" and the vast majority of the
customer base is in states or regions not served by the JRB enterprises retail
stores. We continue to receive repeat purchases on a daily basis from the
Forever Fresh (TM) and Living Silk (TM) customer base through phone and fax
orders. We have also sent our mailings to this customer base for seasonal
specials such as Valentine's Day and have received reorders as a result of these
efforts. Repeat business from the existing customer base is generated at trade
shows, as customers are familiar with the name Forever Fresh (TM) because of
past purchases. The sales revenue of $112,462 for the nine months ended
February, 2000 were wholesale customers only. These customers were solicited
through sales representative, regional showrooms and mailings of brochures and
catalogs. The product sales mix consisted of approximately 1/3 florals
arrangements, 1/3 greenery arrangements, and 1/3 natural trunk trees. These
sales do not represent any sales by JRB Enterprises retail stores, and are sales
that would not have otherwise been captured by these retail stores, and are
sales that would not have otherwise been captured by these retail stores. With
additions to the sales force, enhanced trade show schedules, print advertising,
direct mail programs, product development and the web site. We expect to be able
to achieve its revenue and market share objectives.
<PAGE>
DESCRIPTION OF PROPERTY
Our administrative, warehousing and distribution facilities are located at 955
and 975 South Congress Avenue in Delray Beach, Florida.
We subleased approximately 2,000 square feet of furnished office space and
warehouse facilities from JRB Enterprises, Inc. This space has been specifically
identified and designated for us.
We plan to continue to sublease this space until May 2001 at a fixed cost of
$1,667 per month. The Sublease allows for two five-year renewal options.
Our tangible property consists of computer equipment and software which is
located in its office space.
We believe that these facilities are adequate for the foreseeable future.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth certain information regarding the beneficial
ownership of the common stock as of August 2, 1999 by (i) each person or entity
known by us to be beneficial owner of more than 5% of the outstanding shares of
common stock, (ii) each director and named executive officer, and (iii) all
directors and executive offices as a group
BENEFICIAL OWNER
Common Joseph Bergmann 4,042,687 shares* 64.7%
Par Value $.001 975 S. Congress Ave. President & Director
Delray Beach, FL
Common Directors & Officers 4,042,687 shares* 64.7%
Par Value $.001 As a group
*Of this number, 1,042,688 shares are issued to Joseph R. Bergmann IRA
CHANGES IN CONTROL We are not aware of any arrangements which may result in
"changes in control" as that term is defined by the provisions of Item 403(c) of
Regulation S-B.
BOARD OF DIRECTORS
NAME POSITION AGE
Joseph R. Bergmann Chairman of the Board 52
Note: Joseph R. Bergmann is currently the sole Director and Chairman.
OFFICERS
BIOGRAPHICAL INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS:
JOSEPH R. BERGMANNN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR: Mr.
Bergmann currently oversees the entire operation of the company. He is
responsible for merchandising of products, as well as the formation and
implementation of the company's marketing plans. From 1990 to the present, Mr.
Bergmann has also been the President and CEO of JRB Enterprises, Inc. From 1986
to 1989, he was President of Jewelmasters, Inc., a public multimillion dollar
fine jewelry company. He also served as Senior Vice President of Federated
Department Stores. He is a graduate of Queens College in New York.
BIOGRAPHICAL INFORMATION ON SIGNIFICANT EMPLOYEES:
REGINA M. BERGMANNN, DIRECTOR OF PERSONNEL. Ms. Bergmann currently serves as the
Company's Director of Personnel and participates in the daily operations of the
business. She has also been Director of Personal for JRB Enterprises, Inc. since
September 1995. From October 1990 to the present, Ms. Bergmann has served as the
Corporate Secretary and a Director of JRB Enterprises, Inc.
JOYCE BERNARD, MERCHANDISING MANAGER. Ms. Bernard currently has direct
responsibility for the Company's purchasing, inventory control and shipping
functions. She also
<PAGE>
serves as Merchandise Manager for JRB Enterprises, Inc. since 1996 where she
oversees the manufacturing functions as well. Ms. Bernard was a District Manager
for JRB Enterprises, Inc. from 1994 and a store manager for Silk, Silk, Silk
from 1993 to 1994. With over 15 years' experience in the florals industry, Ms.
Bernard also held various positions with Ben Franklin Stores, Inc.
JERRY FRENZ, CONTROLLER. Mr. Frenz is responsible for the financial reporting as
well as budgeting cash management and special product analysis. He also serves
as the Controller for JRB Enterprises since April 1994. Mr. Frenz has over 25
years of experience in key financial management positions including Controller
and Director of Accounting. Mr. Frenz began his career in public accounting as a
CPA with Arthur Andersen & Co. He held various financial management positions at
two multi-billion dollar companies. Case and FPL Group, Inc. and received his
accounting degree at the University of Wisconsin, Whitewater.
GAIL SCHEEL, DIRECTOR OF ADVERTISING AND MARKETING. Ms. Scheel is responsible
for the Company's advertising programs including media analysis and selection,
advertising scheduling and advertising promotion. Ms. Scheel also serves as the
Director of Advertising and Marketing as well as for Store Operations for JRB
Enterprises, Inc. since October 1990. Ms Scheel majored in Marketing at DePaul
University.
FAMILY RELATIONSHIPS. Joseph R. Bergmann, President, Chief Executive officer and
Director and Regina M. Bergmann, Director of Personnel are husband and wife.
<PAGE>
EXECUTIVE COMPENSATION
The table below summarizes the annual compensation for services in all
capacities to the company for the (i) person(s) serving as our Chief Executive
Officer; and (ii) our four most highly compensated executive officers other than
the CEO for the last fiscal year:
NAME TITLE SALARY/FISCAL YEAR BONUS AWARDS
Joseph R. Bergmann President $35,000.00 NA NA
(ii)
Not applicable
Joseph R. Bergmann is also an officer and director of JRB Enterprises, Inc.
Together we and JRB Enterprises, Inc. have engaged in numerous transactions
including, but not limited to, the Manufacturing Agreement, the Sub-Lease
Agreement, and a Licensing Agreement. Mr. Bergmann's role in these transactions
was to negotiate and procure the Agreements and he received no compensation save
for his income received in the ordinary course of business.
For the Officers and Directors of JRB Enterprises, Inc. the following outlines
compensation received for the last three fiscal years:
NAME TITLE YEARS COMPENSATION PER YEAR
Joseph R. Bergmann Director 1996-98 0
Joseph R. Bergmann President 1996-98 $ 150,000
Regina M. Bergmann Director 1996-98 0
Regina M. Bergmann Secretary 1996-98 $ 25,000
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 9, 1999, Diversified Restaurant Holdings, Inc. acquired JRB Marketing
of South Florida, Inc. from Joseph R. Bergmann in a stock for stock exchange.
We will purchase our silk botanical products from JRB Enterprises Inc., which is
owned by our president and majority stockholder. On April 1, 1999, we entered
into a manufacturing and distribution agreement with JRB Enterprises, Inc., for
a term of six years with the right to extend the term for six additional terms.
JRB Enterprises, Inc. will invoice us for products and distribution of the
products at rates to be negotiated periodically between JRB Enterprises and us.
Additionally, we share office facilities, certain office equipment and certain
employees with JRB Enterprises, Inc. At May 31, 1999, we had issued 1,900 shares
of preferred stock to JRB Enterprises, Inc. for the license rights to the
trademarks Living Silk and certain manufacturing processes. We owed JRB
Enterprises, Inc., $138,338 at May 31, 1999, for the purchase of inventory, a
computer and software, and monies JRB Enterprises, Inc. had advanced in
acquiring the trademark and manufacturing process rights to the Forever
Fresh/registered trademark/line of florals arrangements.
Currently, JRB Enterprises, Inc., also controlled by Joseph R. Bergmann,
President and Majority Stockholder of the company, is one of the primary
suppliers to us. We purchased, under a Manufacturing Agreement with JRB
Enterprises, Inc., certain florals arrangements, greenery arrangements and
natural trunk trees product.
We also order our supplies from the following companies:
Private label florals cleaning products - S.S.G. Inc.
Company designed faux stone planters - Millennium Designs
Company designed table top vases, urns & containers, Pompadour Products
Additional manufacturers and potential supplier will be identified through the
company's participation in industry trade shows and exhibits.
On April 10, 1999 we entered into an exclusive license agreement to market and
distribute artificial greenery and florals arrangements with Living Silk and
Silk Botanicals trademarks owned by JRB Enterprises, Inc. Additionally, the
license agreement granted us the exclusive right to use the manufacturing
process of the Living Silk (TM) and Silk Botanicals (TM) products. As
consideration for the license agreement we issued preferred stock to JRB
Enterprises, Inc. We further agreed to pay JRB Enterprises, Inc. royalty
payments of 5% of the net amount invoiced by us or any affiliate, for Living
Silk (TM) or Silk Botanicals (TM) products invoiced to any third party during
the initial six year term. For additional periods of up to six, six year terms,
agreed to pay one quarter of one percent (.25%) of its net sales per annum for
all Living Silk (TM) and Silk Botanicals (TM) products old to any third party.
<PAGE>
DESCRIPTION OF SECURITIES
We are authorized to issue 25,000,000 shares of common stock $.001 par value,
each share of common stock having equal rights and preferences, including voting
privileges. As of August 2, 1999, 6,250,000 shares of common stock were issued
and outstanding.
We are authorized to issue 5,000,00 shares of preferred stock at $.001 par
value. As of August 2, 1999, 1,900 shares of preferred stock were issued and
outstanding. The preferred shares were designated and issued upon such terms and
conditions as the Board of Directors determined appropriate and as more
particularly defined in the Board of Directors Resolution dated April 10, 1999.
The terms and conditions stated the following: a) payment of a quarterly
dividends at the annual rate of 6.0%; b) said dividends to be cumulative and
have priority over the common stock; and the preferred stock will have a value
of $100.00 per share. No additional shares of preferred stock have been issued.
If additional shares are issued, the conditions that may be set by the Board of
Directors include but are not limited to the entitlement of the holders of the
preferred shares to (a) cumulative, non-cumulative or partially cumulative
dividends, (b) the preference over any other class or classes of shares as to
the payment of dividends, (c) the preference in the assets of the corporation
over any other class or classes of shares upon the voluntary or involuntary
liquidation of the corporation, (d) the convertibility, if any, into shares of
any class or into shares of any series of the same or other class, and (a)
voting rights, if any.
<PAGE>
LEGAL MATTERS
The validity of the securities being offered hereby will be passed upon for the
Company by Hackney Miller, PA, Palm Beach Gardens, Florida.
<PAGE>
EXPERTS
The Financial Statements of the Company for the period of June 30, 1996 to June
30, 1997 and June 30, 1997 to June 30, 1998 and for the period ended therein,
have been included in this Prospectus in reliance upon the report appearing
elsewhere herein, of Sweeney Gates, independent certified public accountants,
and upon the authority of said independent certified public accountants as
experts in accounting and auditing.
<PAGE>
AVAILABLE INFORMATION
Silk Botanicals, a Florida corporation has filed with the Commission a
Registration Statement on Form SB-2 under the Securities Act for the
registration of the shares of Common Stock offered hereby. This Prospectus omits
certain of the information contained in the Registration Statement, and
reference is hereby made to the Registration Statement and exhibits and
schedules thereto for further information with respect to the Company and the
securities to which this Prospectus relates. Statements made herein concerning
the provisions of any document are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit tot
eh Registration Statement. Each such statement is qualified in its entirety by
such reference. Items of information omitted from this Prospectus but contained
in the Registration Statement may be inspected without charge at the Public
Reference Room of the Commission, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, at prescribed rates.
Upon consummation of the offering of the Common Stock, the Company will become
subject to the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith will file reports and other
information can be inspected at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and
at the Commission's New York Regional Office, 26 Federal Plaza, New York, NY
10007, and it Chicago Regional Office, Everett McKinley Dirksen Building, 219
South Dearborn Street, Room 1204, Chicago, ILL 60604. Copies of such material
can be obtained from the Public Reference Section of the Commission, Washington,
D.C. 20549, at prescribed rates. The Commission also makes electronic filings
publicly available on the Internet within 24 hours of acceptance. The
Commissions Internet address is HTTP://WWW.SEC.GOV. The Commission website also
contains reports, proxy and information statements, and other information
regarding registrants that file electronically with the Commission.
The Company intends to deliver annual reports to the holders of its securities,
which will contain, among other information, audited financial statements
examined and reported upon by its independent certified public accountants.
<PAGE>
TABLE OF CONTENTS
Financial Statements
The following Unaudited financial statements are filed herewith:
Balance Sheet as of February 29, 2000 and
May 31, 1999 Page F-2
Consolidated Statements of Operations for the Three and Nine
Months Ended February 29, 2000 and 1999 Page F-3
Consolidated Statements of Cash Flows for the Nine months Ended
February 29, 2000 and 1999 Page F-4
Balance Sheet as of November 30, 1999 and
May 31, 1999 Page F-5
Consolidated Statements of Operations for the Three and Six
Months Ended November 30, 1999 and 1998 Page F-6
Consolidated Statements of Cash Flows for the Six months Ended
November 30, 1999 and 1998 Page F-7
Results of Operations and Management's Discussion and
Analysis of Financial Condition Page F-8
The statements, insofar as they relate to the period
subsequent to May 31, 1999, are Unaudited.
<PAGE>
SILKBOTANICALS.COM, INC.
BALANCE SHEETS
(see notes to financial statements)
<TABLE>
<CAPTION>
February 29, May 31,
2000 1999
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash in Banks $ 19,252 $ --
Accounts receivable 114,719 --
Inventory 49,910 57,353
--------- ---------
Total current assets 183,881 57,353
Property and equipment 1,122 1,500
License rights, net of valuation allowance
accumulated amortization 37,190 42,500
--------- ---------
$ 222,193 $ 101,353
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Short-term Debt $ 19,505 $ --
Accounts payable 44,369 21,414
Accounts payable due to related party 183,089 101,353
--------- ---------
Total current liabilities 246,963 122,767
--------- ---------
Stockholders' deficit:
Series A preferred stock, $.001 par value, 1,900 shares
authorized, issued and outstanding 2 2
Preferred stock, $.001 par value, 4,998,100 authorized,
none issued and outstanding -- --
Common stock, $.001 par value, 25,000,000 shares
authorized 6,250,000 shares issued and outstanding 6,250 6,250
Additional paid-in capital 671,460 671,460
Deficit accumulated during the development stage (699,126) (699,126)
Retained deficit (3,356) --
--------- ---------
Total stockholders' deficit (24,770) (21,414)
--------- ---------
$ 222,193 $ 101,353
========= =========
</TABLE>
F-2
<PAGE>
SILKBOTANICALS.COM, INC.
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
February 29 February 29
-------------------------------------------------------
2000 1999 2000 1999
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 507,434 $ -- $ 226,190 $ --
Cost of goods sold 355,204 -- 158,333 --
----------- --------- ----------- -----------
Gross profit 152,230 -- 67,857 --
Operating expenses:
General and administrative 147,036 -- 56,117 --
----------- --------- ----------- -----------
Total 147,036 -- 56,117 --
----------- --------- ----------- -----------
Net Income (loss) 5,194 -- 11,740 --
Preferred dividend requirement 8,550 -- 2,850 --
----------- --------- ----------- -----------
Net loss available to common
shareholders (3,356) -- 8,890 --
----------- --------- ----------- -----------
Net loss per share of common stock:
Basic and diluted $ -- $ -- $ -- $ --
Weighted average number of common
shares outstanding 6,250,000 4,435,813 6,250,000 4,435,813
</TABLE>
F-3
<PAGE>
SILKBOTANICALS.COM, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
February 29,
2000 1999
----------------------
<S> <C> <C>
Cash flows from operating activities:
Net Loss $ (3,356) $ --
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 5,688 --
Changes in assets and liabilities:
Increase in accounts receivable (114,719) --
(Increase) decrease in inventory 7,443 --
Increase in accounts payable 22,955 --
Increase in due to related parties 81,736 --
----------------------
Net cash used in operation activities (253) --
Cash flow from financing activities
Bank lines 19,505 --
----------------------
Net increase in cash 19,252 --
Cash at beginning of period -- --
----------------------
Cash at end of period $ 19,252 $ --
======================
</TABLE>
F-4
<PAGE>
SILKBOTANICALS.COM, INC.
BALANCE SHEETS
(see notes to financial statements)
<TABLE>
<CAPTION>
November 30, May 31,
1999 1999
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash in Banks $ 23,215 $ --
Accounts receivable 67,144 --
Inventory 52,078 57,353
--------- ---------
Total current assets 142,437 57,353
Property and equipment 1,248 1,500
License rights, net of valuation allowance
accumulated amortization 38,960 42,500
--------- ---------
$ 182,645 $ 101,353
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Short-term Debt $ 25,525 $ --
Accounts payable 42,877 21,414
Accounts payable due to related party 142,202 101,353
--------- ---------
Total current liabilities 210,604 122,767
--------- ---------
Stockholders' deficit:
Series A preferred stock, $.001 par value, 1,900 shares
authorized, issued and outstanding 2 2
Preferred stock, $.001 par value, 4,998,100 authorized,
none issued and outstanding -- --
Common stock, $.001 par value, 25,000,000 shares
authorized 6,250,000 shares issued and outstanding 6,250 6,250
Additional paid-in capital 671,458 671,460
Deficit accumulated during the development stage -- (699,126)
Retained deficit (705,699) --
--------- ---------
Total stockholders' deficit (27,959) (21,414)
--------- ---------
$ 182,645 $ 101,353
========= =========
</TABLE>
F-5
<PAGE>
SILKBOTANICALS.COM, INC.
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
November 30 November 30
--------------------------------------------------------
1999 1998 1999 1998
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 281,244 $ -- $ 168,782 $ --
Cost of goods sold 196,871 -- 118,148 --
----------- --------- ----------- -----------
Gross profit 84,373 -- 50,634 --
Operating expenses:
General and administrative 90,918 -- 55,536 --
----------- --------- ----------- -----------
Total 90,918 -- 55,536 --
----------- --------- ----------- -----------
Net Income (loss) (6,545) -- (4902) --
Preferred dividend requirement 5,700 -- 2,850 --
----------- --------- ----------- -----------
Net loss available to common
shareholders (12,245) -- (7,752) --
----------- --------- ----------- -----------
Net loss per share of common stock:
Basic and diluted $ -- $ -- $ -- $ --
Weighted average number of common
shares outstanding 6,250,000 4,435,813 6,250,000 4,435,813
</TABLE>
F-6
<PAGE>
SILKBOTANICALS.COM, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
NOVEMBER 30,
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,545) $ --
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 3,792 --
Changes in assets and liabilities:
Increase in accounts receivable (67,144) --
(Increase) decrease in inventory 5,275 --
Increase in accounts payable 21,463 --
Increase in due to related parties 40,849 --
Net cash used in operation activities (2,310) --
Cash flow from financing activities
Bank lines 25,525 --
Net increase in cash 23,215 --
Cash at beginning of period -- --
Cash at end of period $ 23,215 $ --
======== ========
</TABLE>
F-7
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Silk Botanicals.Com, Inc.
(The Company) have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q SB. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the nine-month period
ended February 29, 2000 are not necessarily indicative of the results that may
be expected for the year ended May 31, 2000.
2. REVENUES
Sales revenue for the third quarter of operation increased to $226,190, which
was a 34% increase over sales revenue for the second quarter of $168,782. The
Company began shipments of product to select locations for a large national
discount department store chain. Cost of goods sold remained constant at 70.0%
producing a gross profit of $67,857 or 30.0%. General and administrative
operating expenses were $56,117 or 24.8% of sales, producing a net income of
$11,740 or 5.2%.
For the nine months ended February 29, 2000, revenues were $507,434. The cost of
goods sold was $355,204 with a gross profit of $152,230 or 30.0%. Operating
expenses were $147,036 or 29.0%, producing a net income of $5,194 or 1.1%. The
Company maintained $49,910 of inventory as of February 29th. The turnover of
such inventory would be annualized at 9.5 times per year.
3. YEAR 2000
The Company did not incur any costs associated with its computer system as it
relates to the conversion to the Year 2000. The financial institutions and
vendors used by The Company were also in compliance and no problems occurred.
4. OTHER EVENTS
During the third quarter, The Company completed the final production phase of
its website which includes all in-line Living Silk, Forever Fresh and Silk
Botanicals products. The Company's pro-rata expense for completing this phase
was included in General and administrative expenses during this quarter. The
website includes a shopping cart which will enable customers to order products
on line. The Company plans to continue making enhancements to the website on a
regular basis and is also evaluating several marketing techniques to promote the
website.
5. FORWARD LOOKING INFORMATION
Certain statements in this section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect The
Company's future financial position and operating results. The words "expect",
"anticipate", "intend", and "project" and similar words or expressions are
intended to identify forward-looking statements. These statements speak only as
of the date of this report. The statements are based on current expectations,
are inherently uncertain, are subject to risks, and should be viewed with
F-8
<PAGE>
caution. Actual results and experience may differ materially from the forward-
looking statements as a result of many factors, including: changes in economic
conditions in the various markets served by The Company's operations, increased
competition, and other unanticipated events and conditions. It is not possible
to foresee or identify all such factors. The Company makes no commitment to
update any forward-looking statement or to disclose any facts, events, or
circumstances after the date hereof which may affect the accuracy of any
forward-looking statement except as may be required by law.
6. SUBSEQUENT EVENTS
During the month of December, The Company executed sales rep agreements with a)
an organization in Atlanta to cover six (6) southeast states, with b) an
organization in Dallas to cover six (6) southwest states, and with c) a rep
organization in Illinois to cover five (5) Midwestern states. All rep
organizations maintain permanent showrooms in their respective cities and have
road sales people, as well as showroom people for all categories of Silk
Botanicals' merchandise.
In December, The Company was approved as a vendor for two major supermarket
chains and commenced deliveries to select locations. In early January 2000, The
Company received an initial purchase order agreement from a large national
discount department store chain, and has commenced delivery of product to select
locations. The Company also received commitments from a national retailer who
operates over 200 stores, for anticipated deliveries to begin in March 2000.
The company's chief supplier/manufacturer has been running at 25% capacity.
Therefore, the company expects to be able to fill all orders that these newly
reached sales arrangements may reasonably be expected to produce.
F-9
<PAGE>
PART II
MARKET PRICE OF AND DIVIDENDS ON THE COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
MARKET INFORMATION.
Currently our equity is publicly traded on the NADAQ bulletin board under the
symbol "SIBO".
HOLDERS.
As of October 21, 1999, we have a total of 75 holders of its common stock.
DIVIDENDS
There have been no cash dividends declared on our common stock since our
inception. Dividends will be declared at the sole discretion of our Board of
Directors.
LEGAL PROCEEDINGS
There are no legal actions pending against us nor are any such legal actions
contemplated.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with our accountants since our
formation pursuant to Item 304 of Regulations S-B.
RECENT SALES OF UNREGISTERED SECURITIES USE OF PROCEEDS
From November 20, 1998 through April 6, 1999, we issued 1,814,187 shares of its
common stock to a total of 69 individuals in an offering exempt from
registration under Rule 504 of Regulation D promulgated pursuant to the
Securities Act of 1933.
Regarding the shares issued under Rule 504, the aggregated transactions
consisted of the following: On November 20, 1998 we issued 335,187 shares of
common stock to 46 individuals and recorded an expense of $335 for the issuance.
These shares were issued at par value since we had no operations. Between
November 30, 1998 and March 31, 1999 we issued 26,250 shares of common stock as
compensation for services rendered to three individuals and recorded an expense
of $26. From January 2, 1999 until March 31, 1999 we issued 99,000 shares of
common stock for cash of $49,500 to 14 individuals, which was utilized prior to
the recapitalization. We issued, from April 1, 1999 through April 6, 1999
1,353,750 shares of common stock to six individuals and recorded an expense in
accordance with generally accepted accounting principles of $671,460 which
approximates market value. All of the stock issued has been restated to reflect
the reverse stock split of 1 for 4.
On April 9, 1999 we issued an aggregate of 4,435,813 shares in an offering
exempt from registration under Section 4(2) of the Securities Act of 1933, in
exchange for all of the issued and outstanding common stock of JRB Marketing of
South Florida, Inc.
USE OF PROCEEDS: All funds generated will be used by us for working capital.
<PAGE>
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Articles of Incorporation and Bylaws require us to indemnify its
directors and officers to the fullest extent permitted by Florida law. Florida
law presently provides that in the case of a nonderivative action (that is, an
action other than by or in the right of a corporation to procure a judgment in
its own favor), a corporation has the power to indemnify any person who was or
is a party or is threatened to be made a party to any proceeding by reason of
the fact that the person is or was an agent of the corporation, against
expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with the proceeding if that person acted in
good faith and in a manner the person reasonably believed to be in the best
interests of the corporation and, in the case of a criminal proceeding, had no
reasonable cause to believe that the conduct of the person was unlawful. The
termination of any proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent does not, of itself, create a
presumption that the person did not act in good faith and in a manner that the
person reasonably believed to be in the best interests of the corporation or
that the person had reasonable cause to believe that the person's conduct was
unlawful.
With respect to derivative actions, Florida law provides that a corporation has
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
the person is or was an agent of the corporation, against expenses actually and
reasonably incurred by that person in connection with the defense or settlement
of the action if the person acted in good faith, in a manner the person believed
to be in the best interests of the corporation and its shareholders.
Indemnification is not permitted to be made in respect of any claim, issue, or
matter as to which the person shall have been adjudged to be liable to the
corporation in the performance of that person's duty to the corporation and its
shareholders, unless and only to the extent that the court in which the
proceeding is or was pending determines that, in view of all the circumstances
of the case, the person is fairly and reasonably entitled to indemnity for
expenses, and then only to the extent that the court shall determine.
<PAGE>
INCORPORATION BY REFERENCE
The SEC allows us to incorporate by reference in this prospectus other
information that we have filed with them, which means that we can disclose
important information to you by referring you to those documents. This
prospectus incorporates important business and financial information about us
that is not included in or delivered with this prospectus. The information that
we file later with the SEC will automatically update and supersede the
information included in and incorporated by reference in this prospectus. We
incorporate by reference the documents listed below and any future filings made
with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange
Act of 1934 until the effective date of this prospectus.
1. The Form 10-SB filed with the Exchange on 8-24-99, as amended,
including but not limited to the consents of experts included therein. -
2. The quarterly report on Form 10-Q for the fiscal quarter ended
2-29-00.
We have filed each of these documents with the SEC and they are
available from the SEC's Internet site at/or public reference rooms.
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you with
information that is different from or in addition to what is contained in this
prospectus. Therefore, if anyone does give you information of this sort, you
should not rely on it. If you are in a jurisdiction where it is unlawful to
offer to exchange or sell or to ask for offers to exchange or buy the securities
offered by this prospectus, or if you are a person to whom it is unlawful to
direct those activities, then the offer presented in this prospectus does not
extend to you. The information contained in this prospectus speaks only as of
its date unless the information specifically indicates that another date
applies.
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The Exhibits listed below are filed as part of this Registration Statement
EXHIBIT NUMBER DOCUMENT
3.1* Articles of Incorporation
3.2* Articles of Amendment to Articles of Incorporation of
Diversified Restaurant Holdings, Inc
3.3* Articles of Amendment to Articles of Incorporation of Silk
Botanicals.Com, Inc.
3.4* Bylaws
5.0 Consent and Legal Opinion of Hackney Miller, PA
10.1* License Agreement Between Forever Fresh, Inc. and JRB
Marketing of South Florida, Inc.
10.2* Manufacturing and Distribution Agreement
10.3* Agreement Between Diversified Restaurant Holdings, Inc.
and Joseph R. Bergmann
10.4* License Agreement Between JRB Enterprises Inc. and JRB
Marketing of South Florida, Inc., Diversified Restaurant
Holdings, Inc.
10.5* Sublease Agreement
24.1* Consent of Sweeney, Gates & Co., Auditors to the Company
*Incorporated by Reference and Included in Earlier Filings
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2000 SILK BOTANICALS.COM, INC.
By: /s/ Joseph R. Bergmann
------------------------------------
It's: President and Secretary
----------------------------------
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
5.0 Consent and Legal Opinion of Hackney Miller, PA
EXHIBIT 5.0
Registration Statement Form SB-2
EXHIBIT 5.0
April 28, 2000
Silk Botanicals.Com, Inc.
975 South Congress Avenue, Suite 102
Delray Beach, FL 33450
Re: Registration Statement on Form SB-2
Ladies and Gentlemen:
We are counsel for Silk Botanicals.Com, Inc., a Florida corporation
(the "Company") in connection with its proposed public offering under the
Securities Act of 1933, as amended, of up to 3,018,666 shares of its securities
through a Registration Statement on Form SB-2 ("Registration Statement") as to
which this opinion is a part, to be filed with the Securities and Exchange
Commission (the "Commission").
In connection with rendering our opinion as set forth below, we have
reviewed and examined originals or copies identified to our satisfaction of the
following:
(1) Articles of Incorporation, and amendment thereto, of the Company as
filed with the Secretary of State of the State of Florida.
(2) Corporate minutes containing the written deliberations and
resolutions of the Board of Directors and shareholders of the Company.
(3) The Registration Statement and the Preliminary Prospectus contained
within the Registration Statement.
(4) The other exhibits to the Registration Statement.
We have examined such other documents and records, instruments and
certificates of public officials, officers and representatives of the Company,
and have made such other investigations as we have deemed necessary or
appropriate under the circumstances.
Based upon the foregoing and in reliance thereon, it is our opinion
that the Units, Common Stock, Warrants and Common Stock issuable upon exercise
of the Warrants offered under the Registration Statement will, upon the
purchase, receipt of full payment, issuance and delivery in accordance with the
terms of the offering described in the Registration Statement, be fully and
validly authorized, legally issued fully paid and non-assessable.
<PAGE>
We hereby consent to the use of this opinion, as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Prospectus constituting a part thereof.
Very truly yours,
Hackney & Miller, P.A.
