<PAGE>
As filed with the Securities and Exchange Commission on June ________, 2000
Registration No.
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
--------------------------
EXPORT EREZ USA, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Delaware 52-2237043 2390
(State or other jurisdiction of (I.R.S. Employer (Primary Standard Industrial
incorporation or organization) Identification Number) Classification Code Number)
</TABLE>
------------------------
Industrial Zone Erez
P.O. Box 779
Ashkelon, Israel 78101
telephone 011 972 7 689 1611
fax 011 972 7 689 9287
(Address, including zip code, and telephone
number, including area code, of registrant's principal
executive offices)
Joseph Postbinder, President
Industrial Zone Erez
P.O. Box 779
Ashkelon, Israel 78101
telephone 011 972 7 689 1611
fax 011 972 7 689 9287
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / X /
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------
Title of Each Class of Amount Proposed Proposed Amount of
Securities to be Registered to be Maximum Maximum Registration
Registered Offering Aggregate Fee (2)
Price Per Share(1) Offering Price
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of common stock held by 1,000,000 $0.3078 $ 307,800 $86.18
Selling Securityholders
------------------------------------------------------------------------------------------------------------------------
Shares of common stock 250,000 0.3078 76,950 21.54
underlying warrants
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TOTAL 1,250,000 0.3078 $ 384,750 $ 107.73(3)
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) There is no current market for the securities and the dollar amount of
the shares to be registered is de minimis based upon the estimated per
share of Common stock book value ($0.3078).
(2) Estimated solely for the purpose of calculating the registration fee
based on Rule 457(f)(2).
(3) Paid simultaneously with the filing hereof.
<PAGE>
PROSPECTUS Subject to Completion, Dated June _____, 2000
[Legend for Red Herring Prospectus ]
The information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
EXPORT EREZ USA, INC.
1,000,000 shares of common stock to be sold by the
holders thereof, and 250,000 shares of common stock
underlying warrants to be sold by the holders thereof
This registration statement relates to the offer and sale of 1,000,000
shares of common stock, $.0001 par value per share, and 250,000 shares of common
stock underlying warrants, of Export Erez USA, Inc. a Delaware corporation
("Export Erez USA" or the "Company") to be sold by the holders thereof. All
costs incurred in the registration of the shares are being borne by Export Erez
USA.
There has been no market for Export Erez USA's common stock and there
is no assurance that a public market will develop, or that, if any such market
does develop, it will be sustained.
The shares will become tradeable on the effective date of this
prospectus. The selling securityholders will receive the proceeds from the sale
of their shares and Export Erez USA will not receive any of the proceeds from
such sales. The selling securityholders, directly or through agents, dealers or
representatives to be designated from time to time, may sell their shares on
terms to be determined at the time of sale. See "PLAN OF DISTRIBUTION." The
selling securityholders reserve the sole right to accept or reject, in whole or
in part, any proposed purchase of the shares being offered for sale.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" CONTAINED IN
THIS PROSPECTUS BEGINNING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION 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 Discounts and Proceeds to Company or
Price to Public (1) Commissions(2) Other Persons
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share Unknown $ 0 (3)
------------------------------------------------------------------------------------------------------------------------
Total Unknown $ 0 (3)
========================================================================================================================
</TABLE>
(1) All the shares are being sold by the selling securityholders in separate
transactions at prices to be negotiated at that time.
(2) The shares are being sold by the selling securityholders and Export Erez USA
has no agreements or understandings with any broker or dealer for the sales of
such shares. A selling securityholder may determine to use a broker-dealer in
the sale of its securities and the commission paid to such broker-dealer if any,
will be determined at that time. Prior to the involvement of any such broker-
dealer, such broker-dealer must seek and obtain clearance of the compensation
arrangements from the National Association of Securities Dealers, Inc. In such
event, Export Erez USA will file a post-effective amendment identifying such
broker-dealer(s).
(3) Export Erez USA will not receive any proceeds from the sale of the shares.
-----------------
The date of this Prospectus is June ____, 2000
<PAGE>
Following the completion of this offering, certain broker-dealers may
be the principal market makers for the shares offered herein. Under these
circumstances, the market bid and asked prices for the securities may be
significantly influenced by decisions of the market makers to buy or sell the
securities for their own account. No assurance can be given that any market
making activities of the market makers, if commenced, will be continued.
For a period of at least one year following closing of this offering,
Export Erez USA will be required by the Securities Exchange Act of 1934 to file
periodic reports and other information with the Securities and Exchange
Commission. Such material may be inspected at the Commission's principal offices
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20459 or at its web
site at http://www.sec.gov and copies may be obtained on payment of certain fees
prescribed by the Commission. Export Erez USA will furnish to holders of its
common stock annual reports containing audited financial statements examined and
reported upon, and with an opinion expressed by an independent certified public
accountant. Export Erez USA may issue other unaudited interim reports to its
shareholders as it deems appropriate.
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<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere
in this Prospectus. Reference is made to, and this summary is qualified by, the
more detailed information set forth in this Prospectus, which should be read in
its entirety.
All references to "dollars," "U.S. dollars," "$," or "US$" are to
United States dollars. All references to "Shekels" or "NIS" are to New Israeli
Shekels. As of May 4, 2000, the exchange rate was 3.3602 Shekels to $1.00, or
$0.2367 to 1 Shekel.
Risk Factors
There are substantial risk factors involved in investment in Export
Erez USA. Investment in Export Erez USA is speculative and no assurances can be
made of any return to investors. See "RISK FACTORS".
The Company
Export Erez USA, Inc. is a recently-created holding company whose
subsidiaries, Export Erez, Ltd. and Mayotex. Ltd., have been operating in excess
of ten years. References herein to the "Company" include Export Erez, Ltd. and
to Mayotex, Ltd., as applicable. The Company is engaged in the production and
marketing of textile products designed to provide personal protection such as
bulletproof vests, and associated heavy fabric products such as tents and other
camping equipment. The Company, its predecessors and subsidiaries, have long
been suppliers to the Israeli military, and plan to increase their market to
include international and United States police forces, government agencies,
private security firms, and security-minded civilians.
Export Erez USA was incorporated on March 24, 1999 as a Delaware
corporation named Acanthus Acquisition Corporation, which changed its name to
Export Erez USA, Inc. on May 19, 1999.
Export Erez USA maintains its executive offices at the Industrial Zone
Erez, Israel. Its telephone number is 011 972 7 689 1611 and its fax number is
011 972 7 689 9287.
Trading Market
There is currently no trading market for the securities of Export Erez
USA. The Company intends to apply initially for admission to quotation of its
securities on the NASD OTC Bulletin Board or Nasdaq SmallCap Market. There can
be no assurance that the Company will qualify for quotation of its securities on
the NASD OTC Bulletin Board or Nasdaq SmallCap Market. See "RISK
FACTORS--Absence of Trading Markets" and "DESCRIPTION OF SECURITIES--Admission
to Quotation on Nasdaq SmallCap Market or the NASD OTC Bulletin Board".
Selected Financial Data
The following table sets forth the selected consolidated financial data
for the Company for the years ended December 31, 1999 and 1998, respectively.
The financial information set forth below is derived from, and should be read in
conjunction with, the more detailed financial statements (including the notes
thereto) appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998
---- ----
<S> <C> <C>
Income Statement Items:
Revenues $4,490,898 $4,568,498
Cost of sales 3,121,674 3,589,167
Selling, general and administrative expenses 701,993 649,694
Income from operations 667,231 329,637
Interest income, interest expense and other income 89,859 30,017
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Income before income taxes 757,090 359,654
Income taxes 163,015 130,068
Net income 594,075 229,586
Net income per ordinary share (basic and diluted) 50.52 19.52
Balance Sheet Items
Cash 681,291 670,759
Marketable securities 1,393,123 -
Trade accounts receivable 875,557 685,343
Other inventory 690,195 590,239
Total current assets 3,776,899 2,054,747
Total assets 5,030,243 3,099,383
Current liabilities 3,450,857 2,153,793
Long term obligations 144,456 166,828
Total shareholders' equity 1,434,930 778,762
</TABLE>
RISK FACTORS
The securities offered hereby are speculative in nature and involve a high
degree of risk. The securities offered hereby should be purchased only by
persons who can afford to lose their entire investment. Therefore, each
prospective investor should, prior to purchase, consider very carefully the
following risk factors, as well as all of the other information set forth
elsewhere in this prospectus and the information contained in the financial
statements, including all notes thereto.
Special note regarding forward-looking statements
This prospectus may contain certain forward-looking statements and
information relating to the Company that are based on its beliefs and its
principals as well as assumptions made by and information currently available to
them. These statements include, among other things, the discussions of its
business strategy and expectations concerning its market position, future
operations, expansion opportunities, and profitability. When used in these
documents, the words "anticipate," "feel," "believe," "estimate," "expect,"
"plan," and "intend" and similar expressions, as they relate to the Company or
its principals, are intended to identify forward-looking statements. Such
statements reflect the current view of Export Erez USA respecting future events
and are subject to certain risks, uncertainties, and assumptions, including the
meaningful and important risks and uncertainties noted, particularly those
related to its operations, results of operations, and growth strategy,
liquidity, competitive factors and pricing pressures, changes in legal and
regulatory requirements, general economic conditions, and other factors
described herein. Although the Company has attempted to identify important facts
that could cause actual results to differ materially, there may be other factors
that cause the forward-looking statement not to come true as anticipated,
believed, estimated, expected, planned, or intended. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected, or intended. Neither the Company nor
any other person undertakes any obligation to revise these forward-looking
statements, to identify important facts, or to reflect the occurrence of
unanticipated events after the date hereof that could cause actual results to
differ materially.
Risks of doing business adjacent to the Gaza Strip
Export Erez USA's operations are in an industrial area adjacent to the
occupied Gaza Strip and a large part of the work force is made up of
Palestinians. Gaza is an impoverished area under the administration of the
Palestinian Authority. The Industrial Zone Erez is administered by the Israeli
military. The status of the area and its future administration is dependent on
the ongoing peace process and negotiations among Israel, the Palestinian
Authority and other nations and parties involved in the Middle East peace
process. The area is populated largely by Palestinians. In the 1970's and
1980's, Gaza was a center for Palestinian nationalist and Islamic fundamentalist
activities, including hostile terrorist activities, civil uprisings, and the
so-called "intifada," although the Erez Crossing has remained peaceful since
1967. Gaza and the vicinity continues to suffer from adverse economic conditions
and political unrest, and any business, particularly an Israeli business, is
subject to numerous risks. These
4
<PAGE>
risks are dynamic and difficult to quantify and include, among others, the risks
of internal political or civil unrest, war, a general strike or government
restrictions.
Possible change in economic policies
Although the Israeli government and the Palestinian Authority have
adopted policies encouraging economic development, conditions might change
unexpectedly. Such conditions may change quickly and dramatically which may have
an adverse impact on ownership and may result in a loss without recourse of
property or assets of the Company. The civil justice system in Israel is
considered stable, but the stability of any legal system that may be set up by
the Palestinian Authority, should the Palestinian Authority gain jurisdiction
over any dispute, is uncertain. The likelihood of any foreign or Israeli-owned
company successfully prevailing in any dispute with the Palestinian Authority or
any private litigant under any proposed Palestinian legal system is difficult to
quantify or predict.
The Israeli economy is volatile and subject to hyperinflation
The Israeli economy has been volatile for decades, with high taxation,
high military spending, high social welfare costs and a generally high inflation
rate, which has in the past included periods of hyperinflation. Financial
statements, contracts and business transactions are generally drawn and
contemplated to adjust for inflation, but there can be no assurance that a
period of hyperinflation will not adversely impact the Company's business.
Export Erez USA commenced operations in 1999
Export Erez USA commenced operations in 1999 and has only a limited
history of operations, although its subsidiaries, Export Erez, Ltd. and Mayotex,
Ltd., have been in operation in Israel for over ten years. Export Erez USA is
expanding its business and moving into new markets with which it is not familiar
and in which it has no substantial reputation. There can be no assurance that
future operations will be profitable. Revenues and profits, if any, will depend
upon various factors, including market acceptance of its products, market
awareness, dependability of its distribution network, and general economic
conditions. There is no assurance that Export Erez USA will achieve its
expansion goals and the failure to achieve such goals would have an adverse
impact on it.
Export Erez USA may need additional financing
Future events, including the problems, delays, expenses and
difficulties frequently encountered by startup companies may lead to cost
increases that could make its available sources of capital insufficient to fund
Export Erez USA's proposed operations. Export Erez USA may seek additional
sources of capital, including an additional offering of its equity securities,
an offering of debt securities or obtaining financing through a bank or other
entity. Export Erez USA has not established a limit as to the amount of debt it
may incur nor has it adopted a ratio of its equity to a debt allowance. If
Export Erez USA needs to obtain additional financing, there is no assurance that
financing will be available, from any source, or that it will be available on
terms acceptable to it, or that any future offering of securities will be
successful. Export Erez USA could suffer adverse consequences if it is unable to
obtain additional capital when needed.
Speculative nature of investment
The defense industry is small but extremely competitive and the
commercial success of any product is often dependent on factors beyond the
control of Export Erez USA, including but not limited to market acceptance by a
small group of experts. Its civilian products may not find a mass market. Export
Erez USA may experience substantial cost overruns in manufacturing and marketing
its products, and may not have sufficient capital to successfully complete any
of its projects. Export Erez USA may not be able to manufacture or market its
products because of industry conditions, general economic conditions,
competition from other manufacturers and distributors, or lack of acceptance for
its products by consumers or retail outlets. Export Erez USA may also incur
uninsured losses for liabilities which arise in the ordinary course of business
in the manufacturing industry, or which are unforeseen, including but not
limited to trademark infringement, product liability, and employment liability.
See "BUSINESS."
5
<PAGE>
Possible adverse impact of domestic and foreign government regulation
Export Erez USA's operations are located in Israel and Gaza. Export
Erez USA will be subject to and affected by significant United States and
Israeli government regulation, as well as regulation by the Palestinian
Authority. Government laws and regulations, whether existing today or adopted in
the future, or during or following civil or political unrest, could adversely
affect Export Erez USA's ability to market and sell its products, and could
impair Export Erez USA's profitability. See "BUSINESS - Regulation."
Middle East peace could cause a decline in the market for military-industrial
products in Israel
One of the Company's major customers is the Israeli Defense Forces. A
normalization of relations with the Palestinians, Arab and Islamic countries
could lead to a decline in orders and production by military-industrial
contractors in Israel. There is no assurance that the Company's civilian product
lines would generate enough revenue to sustain the Company.
Enforceability of certain civil liabilities
The Company's officers and directors reside outside the United States.
The Company anticipates that a substantial portion of the assets that may be
developed or acquired by it will be located outside the United States and, as a
result, it may not be possible for investors to effect service of process within
the United States upon the officers or directors, or to enforce against the
Company's assets or against such person judgments obtained in United States
courts predicated upon the liability provisions, and most particularly the civil
liability provisions, of the United States securities laws or state corporation
or other law.
Current trading market for the Company's securities
There is no current trading market for Export Erez USA's common stock
and there is no assurance that one will develop. The Company intends to apply
for listing of its common stock on the NASD OTC Bulletin Board or, if and when
qualified, for listing on the Nasdaq SmallCap Market. No market makers have
committed to becoming market makers for the Company's common stock, and there is
no assurance that any market makers will do so. If a trading market does in fact
develop for the common stock offered hereby, there can be no assurance that it
will be maintained. Furthermore, if for any reason the common stock is not
listed on the NASD OTC Bulletin Board or Nasdaq SmallCap Market or a public
trading market does not otherwise develop, investors in the offering may have
difficulty selling their common stock should they desire to do so.
Penny Stock Regulation
Upon commencement of trading in the Company's stock, if such occurs (of
which there can be no assurance) the Company's common stock may be deemed a
penny stock. Penny stocks generally are equity securities with a price of less
than $5.00 per share other than securities registered on certain national
securities exchanges or quoted on the Nasdaq Stock Market, provided that current
price and volume information with respect to transactions in such securities is
provided by the exchange or system. The Company's securities may be subject to
"penny stock rules" that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the "penny stock rules" require the delivery, prior to the transaction,
of a disclosure schedule prescribed by the Commission relating to the penny
stock market. The broker-dealer also must disclose the commissions payable to
both the broker-dealer and the registered representative and current quotations
for the securities. Finally, monthly statements must be sent disclosing recent
price information on the limited market in penny stocks. Consequently, the
"penny stock rules" may restrict the ability of broker- dealers to sell the
Company's securities. The foregoing required penny stock restrictions will not
apply to the Company's securities if such securities maintain a market price of
$5.00 or greater. There can be no assurance that the price of the Company's
securities will reach or maintain such a level.
6
<PAGE>
Management and affiliates own enough shares to influence shareholder vote
Export Erez USA's executive officers and directors, together with
entities affiliated with them, own approximately 92% of the outstanding common
stock. As a result, these executive officers and directors will be able to
exercise substantial control over matters requiring stockholder approval,
including the election of directors and the approval of material corporate
matters.
Export Erez USA's operations are dependent on expertise of its key officers
Joseph Postbinder is President and a director of Export Erez USA and
Managing Director of Export Erez Ltd. and Mayotex Ltd. See "MANAGEMENT." All
decisions concerning the conduct of the business of Export Erez USA, including
the products, manufacturing and marketing by Export Erez USA and the
arrangements to be made for such distribution, are made by or significantly
influenced by Mr. Postbinder. The loss of Mr. Postbinder's services for any
reason would have a material adverse effect on Export Erez USA's business and
operations and its prospects for the future. Export Erez USA does not have "key
man" life insurance on the lives of Mr. Postbinder or any of its executive
officers.
Export Erez USA has never paid dividends
Export Erez USA has never paid cash dividends on its common stock and
no cash dividends are expected to be paid on the common stock in the foreseeable
future. Export Erez USA anticipates that for the foreseeable future all of its
cash resources and earnings, if any, will be retained for the operation and
expansion of its business.
Acquisition financing; additional dilution
The Company may attempt to finance future purchases and acquisitions
using shares of the Company's common stock, preferred stock, options, cash,
borrowed funds or a combination thereof. The Company has no arrangements,
agreements or understandings to that effect at this time. If the Company's
common stock does not maintain a sufficient market value, or if the price of the
Company's common stock is highly volatile, or if potential acquisition
candidates are otherwise unwilling to accept the Company's common stock as part
of the consideration for the sale of their businesses, the Company may be
required to use more of its cash resources or more borrowed funds in order to
initiate and maintain an acquisition program. If the Company does not have
sufficient cash resources, its growth could be limited unless it is able to
obtain additional capital though debt or equity offerings. The Company may also
enter into credit facilities with one or more lenders to obtain financing to be
used in connection with future purchases or acquisitions. There can be no
assurance that the Company will be able to obtain such financing if and when it
is needed or that any such financing will be available on terms it deems
acceptable.
Issuance of future shares may dilute investors' share value
The Certificate of Incorporation of Export Erez USA authorizes the
issuance of 100,000,000 shares of common stock and 20,000,000 shares of
preferred stock. The future issuance of all or part of the remaining authorized
common stock may result in substantial dilution in the percentage of the
Company's common stock held by its existing shareholders. Moreover, any common
stock issued in the future may be valued on an arbitrary basis by Export Erez
USA. The issuance of the Company's shares for future services or acquisitions or
other corporate actions may have the effect of diluting the value of the shares
held by investors, and might have an adverse effect on any trading market,
should a trading market develop for the Company's common stock.
The possibility of Export Erez USA issuing preferred stock with certain
preferences may depress market price of the common stock
Export Erez USA has 20,000,000 shares of non-designated preferred stock
authorized which it may issue from time to time by action of the Board of
Directors. As of the date hereof, Export Erez USA has not designated or issued
any shares of preferred stock. However, the Board of Directors may designate
voting and other preferences without shareholder consent which designations may
give the holders of the preferred stock voting control and other preferred
rights such as to liquidation and dividends. The authority of the Board of
Directors to issue such stock without shareholder consent may have a depressive
7
<PAGE>
effect on the market price of Export Erez USA's common stock even prior to any
such designation or issuance of the preferred stock.
The possibility of issuing preferred stock for anti-takeover effect could
prevent takeovers favored by shareholders
The Board of Directors has the authority, without further approval of
Export Erez USA's stockholders, to issue preferred stock, having such rights,
preferences and privileges as the Board of Directors may determine. Any such
issuance of shares of preferred stock, under certain circumstances, could have
the effect of delaying or preventing a change in control of Export Erez USA or
other takeover attempt and could adversely materially affect the rights of
holders of shares of the common stock.
Additional shares entering market pursuant to Rule 144 without additional
capital contribution
Pursuant to Rule 144 of the General Rules and Regulations of the
Securities and Exchange Commission, after the expiration of the holding period
certain shares of Export Erez common stock now restricted for trading will
become eligible for trading in the public market without any additional payment
therefore or increase to the Company's capitalization. Possible or actual sales
of its outstanding common stock by all or some of the present stockholders may
have an adverse effect on the market price of Export Erez USA's common stock
should a public trading market develop. The additional availability of such
shares to be traded in the public market would increase the "public float"
without any corresponding increase in the its capital.
Selling securityholders may sell securities at any price or time
After effectiveness of this prospectus, the selling securityholders may
offer and sell their shares at a price and time determined by the selling
securityholder in accordance with applicable federal and state securities laws.
Affiliates of Export Erez USA will be subject to limitations of Rule 144,
including its volume limitations in the sale of their shares. The timing of such
sales and the price at which the shares are sold by the selling securityholders
could have an adverse effect upon the public market for the common stock, should
one develop.
Possibility of no state restriction on sales by selling securityholders
The National Securities Market Improvement Act of 1996 limits the
authority of states to impose restrictions upon sales of securities made
pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file
reports under Sections 13 or 15(d) of the Exchange Act. Sales by the selling
securityholders in the secondary market may be made pursuant to Section 4(1)
(sales other than by an issuer, underwriter or broker). It is anticipated that
following the effective date of this prospectus the selling securityholder's
shares will be eligible for resale in the secondary market in each state.
Officers and directors have limited liability and have indemnity rights
The Certificate of Incorporation and By-Laws of Export Erez USA provide
that Export Erez USA indemnify its officers and directors against losses
sustained or liabilities incurred which arise from any transaction in such
officer's or director's respective managerial capacity unless such officer or
director violates a duty of loyalty, did not act in good faith, engaged in
intentional misconduct or knowingly violated the law, approved an improper
dividend, or derived an improper benefit from the transaction. Export Erez USA's
Certificate of Incorporation and By-Laws also provide for the indemnification by
it of its officers and directors against any losses or liabilities incurred as a
result of the manner in which such officers and directors operate Export Erez
USA's business or conduct its internal affairs, provided that in connection with
these activities they act in good faith and in a manner which they reasonably
believe to be in, or not opposed to, the best interests of Export Erez USA, and
their conduct does not constitute gross negligence, misconduct or breach of
fiduciary obligations.
AVAILABLE INFORMATION
Export Erez USA has filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form SB-2 under the Securities
Act with respect to the securities offered hereby. This prospectus does not
contain all the
8
<PAGE>
information contained in that registration statement. For further information
regarding Export Erez USA and the securities offered hereby, reference is made
to the registration statement, including all exhibits and schedules thereto,
which may be inspected without charge at the public reference facilities of the
Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C.
20549 or on the Commission's home page on the World Wide Web at
http://www.sec.gov. Each statement contained in this prospectus with respect to
a document filed as an exhibit to the registration statement is qualified by
reference to the exhibit for its complete terms and conditions.
Export Erez USA will be subject to the informational requirements of
the Exchange Act and in accordance therewith will file reports and other
information with the Commission. Reports, proxy statements and other information
filed by Export Erez USA can be inspected and copied on the Commission's home
page on the World Wide Web at http://www.sec.gov or at the public reference
facilities of the Commission, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following Regional Offices: 7 World Trade
Center, Suite 1300, New York, N.Y. 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies can be obtained from
the Commission by mail at prescribed rates. Request should be directed to the
Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
Export Erez USA intends to furnish its stockholders with annual reports
containing audited financial statements and such other reports as may be
required by law.
EXPORT EREZ USA, INC.
Export Erez USA is a newly formed company that, through its
subsidiaries, manufactures textile products with special qualities, such as high
degrees of strength, durability and waterproofing. Export Erez USA was
incorporated on March 24, 1999 as a Delaware corporation named Acanthus
Acquisition Corporation, which changed its name to Export Erez USA, Inc. on May
19, 1999. As of April 21, 2000, Export Erez USA became the owner of all of the
shares of Export Erez Ltd. and Mayotex Ltd., operating companies organized under
the laws of the State of Israel, through which it conducts its operations in the
State of Israel and in the Gaza Strip.
BUSINESS
Operations
Export Erez Ltd. was formed and registered on January 23, 1983 under
the name R.T.V. Ltd. as a limited shares company under the Companies Ordinance
of the State of Israel and changed its name to Export Erez Ltd. on April 25,
1987. Export Erez Ltd. primarily produces and markets textile products designed
to provide personal protection, such as bulletproof vests, and associated heavy
fabric products, such as tents and other camping equipment. It has been a
supplier to the Israeli military for over 10 years.
Mayotex Ltd. was formed and registered on March 7, 1990 as a limited
liability company under the Companies Ordinance of the State of Israel. Mayotex
is engaged in weaving, improving, processing, dyeing, cutting and sewing of
fabric to make the heavy-duty and sometimes bulletproof fabrics used by Export
Erez Ltd. to manufacture its finished products and goods.
The Company's facilities are staffed by a Palestinian workforce, hired
with the cooperation of the Palestinian Authority. Should the Middle East peace
process continue to lead to a decrease in hostilities and normalization of
relations with the Arab and Islamic world, the Company believes that its history
of cooperation and employment with the Gazan Palestinians and the Palestinian
Authority will lead to opportunities to penetrate markets in the Arab and
Islamic world.
Products
The Company's products are designed for four major markets. The major
product group is aimed at the Israeli and international defense market. The
Company's military products include bulletproof clothing and combat vests, flak
jackets, dust
9
<PAGE>
protectors, padded coats, plus sleeping bags, bags and totes, weapons straps and
belts. Products under development include ballistic helmets, stab-resistant
fabric, ceramic ballistic plates and one-way protective windows.
The second product group is aimed at the civilian market, including
police, prison and security forces, and includes camping and sporting equipment
such as tents and sleeping bags and heavy-duty clothing including overalls and
coveralls. The Company's civilian defense and security products include a
bulletproof executive vest, and adaptations of the Company's military products.
The third product group is aimed at the industrial market and includes
special industrial fabrics and cloth tapes.
The fourth product group is aimed at animal owners, and includes dog
collars and leashes, items for horses and riders and protective equipment.
The following table details the Company's current product line, its
current and future target markets and geographic areas.
<TABLE>
<CAPTION>
Product description Present Future
Target market Geographical area Target market Geographical area
------------- ----------------- ------------- -----------------
<S> <C> <C> <C> <C>
Dust protectors
and various covers Military Israel Military, civilian Israel, international
Padded coats Military Israel Military, civilian Israel, international
Range of protective
vests and flak jacketsMilitary Israel, international Military, civilian Israel, international
Cooling jackets Military Israel Military Israel, international
Range of overalls Military Israel, international Military, civilian, Israel, international
industrial
Vests Military Israel, international Military, civilian Israel, international
Sleeping bags Military Israel Military, civilian Israel, international
Carriers for
grenade launchers Military Israel, international Military Israel, international
Individual bags
and totes Military Israel Military, civilian Israel, international
Tents Military Israel Military, civilian Israel, international
Camp beds Military Israel Military, civilian Israel, international
Personal belts
and weapon straps Military Israel Military, industrial Israel, international
Woven fabrics:
canvas, corduroy, Military, civilian,
nylon industrial Israel Military, civilian, Israel, international
industrial
Range of tapes Military, industrial Israel, international Military, civilian, Israel, international
industrial
Bags for riders Civilian - animals Israel, international Civilian Israel, international
Horse blankets
and saddles Civilian - animals Israel, international Civilian Israel, international
Collars, harnesses
and leads Civilian - animals Israel, international Civilian Israel, international
Protective
vests for riders Civilian - animals Israel, international Civilian Israel, international
Leg protectors Civilian - animals Israel, international Civilian Israel, international
</TABLE>
10
<PAGE>
The Company is currently developing new products for military and
civilian markets, including ballistic helmets, stab- resistant fabric, ceramic
ballistic plates and one-way protective windows. The Company is also developing
a new generation of complex products for protective vests used by security
forces and armies all over the world, using purchased materials. The vests will
offer a very high level of protection with minimum weight and maximum
flexibility.
Customers
Export Erez Ltd. has customers in the military and security categories
in over a dozen countries in the Mediterranean, Europe, Africa, and Asia for its
various heavy bags and carriers, protective vests, flak jackets and sleeping
bags. Export Erez Ltd. has customers in the United States and several Latin
American countries for its various vests, bags, pouches and binoculars.
The Company's customers can be divided into four main groups:
o Defense customers, members of the security services who need personal
equipment: clothing, sleeping bags, tents, etc., as well as personal
protection equipment, such as bullet proof vests, helmets, flak jackets
etc. This type of equipment must meet developed "human engineering"
requirements, providing comfort as well as maximum protection,
preventing penetration by bullets and knives, protection against fire,
collisions and other hazards.
o Civilian customers, which includes young or older hikers who need
equipment such as sleeping bags, tents, rucksacks, and clothing adapted
for specific needs such as mountain climbing, or hiking in cold
climates.
o Civilian defense customers, including members of civilian security
forces such as police officers, private security firms, airport
security, personal bodyguards, and event security guards. The
requirements of these customers for protective equipment are similar to
those of military security forces. However, since their work is mainly
in a civilian environment, it is also important to pay attention to
esthetic appearance, with protective features made as unobtrusive as
possible.
o Animal sports fans and animal owners. The Company divides this category
into two groups: Individual pet owners, for whom animal accessories are
supplied at three price levels and qualities. Animal sport groups who
buy equipment for specific animal sports. In the case of horse riding
equipment, "human engineering" is very important to ensure maximum
comfort for the animal and the rider.
In addition to the Israeli Ministry of Defense, Israeli police forces
and Israeli prison service, the Company has supplied products such as vests, bed
sheets, tapes, cannon covers, tents, belts, battle vests, dog accessories,
various bags, and special carriers for weapons for approximately 20 Israeli
commercial enterprises. Similar products have also been sold to at least 20
military, institutional, and civilian industrial customers in Cyprus, Italy,
England, Greece, Holland, Germany, Latvia, Switzerland, Slovakia, Paraguay,
Peru, Uruguay and the United States.
The Company has several contract bids pending for sale of certain of
its products to the Israel Military and Israel Police. There can be no assurance
that the Company will be successful in obtaining these contracts.
Marketing
The Company has developed a marketing strategy designed to penetrate
various markets by complying with stringent quality standards institutes in
targeted countries.
11
<PAGE>
Below are some of the steps the Company is taking in order to penetrate
different markets with its next generation of products:
Locating domestic entities to market the products.
Initiating contacts with chambers of commerce in international
embassies.
Actively participating in tenders and bids for contracts in military,
police and civilian markets worldwide. The Company is negotiating for
contract bids with the governments of Germany, Turkey, Argentina, Chile
and Brazil and the United Nations.
Actively participating in international exhibitions of military and
police security equipment. The Company recently participated in Milipol
in Paris, and Fidae in Chile and exhibited at the IFSEC 2000 security
show in the United Kingdom.
Advertising on the Internet: The Company is investing resources in
developing this area of e-commerce, expanding to new countries and
finding new contacts in areas relating to its activities.
Advertising in professional publications appearing annually, such as
The Israel Defense Sales Directory ("SIBAT").
Appearing in international databases, such as BDI (Kompass) various
"yellow pages" directories, Dun & Bradstreet, and other directories.
Distributing brochures describing the Company's procedures and
products.
The Company has divided its marketing division into the following sections:
o One section specializing in locating and submitting government
bids.
o One section specializing in the civilian sector.
o The export marketing division operated by the Company consists
of a marketing manager who operates on a self-employed basis
and manages a team of employees. This marketing team carries
out market surveys, market segmentation, and seeks out new
markets for the products, and new engagements with
international chambers of commerce. The marketing team earns
commissions that are determined in advance, according to the
scope and nature of the deal. The Company's policy is to pay
commissions of 2% to 10%.
o The civilian market is handled by two offices, each dealing
with a different geographical region and a different basket of
products.
Major Competitors
Export Erez Ltd.'s share of the Israeli defense market for applicable
products in 1998 was approximately 25% of a total market of $10,000,000. The
Company has two major competitors: Archidatex with approximately 25% of the
applicable market and Rabintex with approximately 35%. Export Erez Ltd.'s share
of the Israeli civilian market for applicable products in 1998 was approximately
10% of a total market of $14,000,000 with 40% controlled by other Israeli
companies and 50% made up by imported goods.
Internationally, Export Erez Ltd.'s competitors in the defense market
include companies such as Point Blank, Safari Land of Ontario, California and
A.B.A. in the United States, R.B.R. International Ltd. and L.B.A. in England,
Indigo in Spain, Systema Compositi in Italy, Hellenic Arms Industries in Greece
and Barman in Sweden. In each case, the competing manufacturers specialize in a
more limited product line than does the Company.
12
<PAGE>
In the civilian market, the Company is aware of approximately 20
companies manufacturing similar products. For pet products, a number of major
manufacturers with resources and reputations far greater than those of the
Company compete for such market. The Company intends to market its products over
the Internet as well as through a network of distributors. There is no assurance
that the Company will find a market for its civilian products large enough to
recoup its costs.
Inventory
The Company keeps low inventories for most of its products and
components, except for straps, which are used in a wide range of the company's
products. Inventory usually is held after production for an average of 54 days.
Inventory normally accounts for approximately 15-17% of the Company's total
assets.
Raw Materials
The Company's products include raw materials such as fabric purchased
in Israel and abroad, specialized composite materials such as Kevlar produced by
Dupont Ltd., Twaron produced by Akzo Ltd., Dyneema produced by D.S.M. Ltd. and
Spectra and Gold Flex produced by Allied-Signal. Other specialized materials
include specialized glass mixed with polycarbonate and various resins. The
Company obtains its supplies by purchasing on the basis of an open letter of
credit, by specialized documentary credit, or in the case of suppliers that the
Company has dealt with for years, on open account.
Management believes that its suppliers are stable, and that no
difficulties are foreseen in assuring a steady supply of materials, although no
assurance can be made that such conditions will continue in the future.
Seasonality
Sales of the Company's military and security clothing products and
industrial products are not seasonal in nature. Sales of the Company's camping
equipment and clothing may experience slight increases during certain seasons.
Property
The Company's executive offices, manufacturing, production and
distribution facilities encompass two buildings in the Erez Industrial Area
adjacent to Gaza. One building, owned by Joseph Postbinder, is leased to the
Company for $7,119 per month for 2,500 square meters. The second building is
owned directly by the Company and is unencumbered by any mortgage or debt, and
contains 1,400 square meters of usable space. The Company also has a factory in
the Netivot Industrial Area, which is leased for $1,900 per month for 380 square
meters.
Patents and trademarks
The Company does not have any patents or trademarks registered in its
name.
Regulation
The operations of the Company are subject to extensive regulation by
United States and Israeli authorities and are subject to various laws and
judicial and administrative decisions imposing requirements and restrictions on
part or all of its operations.
The following are among the rules and procedures all companies must
follow in order to participate in Ministry of Defense and other government bids
in Israel:
The bidder must be registered as a recognized supplier.
The bidder must have government certification and is authorized to
participate in bids only up to the limit of its approved security
classification.
National Priority Area and local product: goods produced in
Israel are given priority over foreign bidders according to
13
<PAGE>
Israeli bid regulations.
The bidder must offer an attractive price.
The bidder must keep to contractual schedules and milestones.
The goods must pass final quality control tests before delivery.
Every bid is different, and different documents may be required. There
are no special taxes on bids apart from the Israeli Value Added Tax ("VAT").
Because the Company's business is highly regulated, the laws, rules and
regulations applicable to the Company are subject to regular modification and
change. There can be no assurance that laws, rules or regulations will not be
adopted in the future which could make compliance much more difficult or
expensive, restrict the Company's ability to originate, service or broker loans,
further limit or restrict the amount of commissions, interest and other charges
earned on loans originated or brokered by the Company, or otherwise adversely
affect the business or prospects of the Company.
Employees
Export Erez USA, including its subsidiaries Export Erez Ltd. and
Mayotex Ltd., has approximately 130 full-time employees, including its executive
officers. Export Erez USA does not have a collective bargaining agreement with
its employees and is not aware of any labor disputes. The majority of Export
Erez Ltd.'s employees are Palestinian Gazans, hired through and with the
cooperation of the Palestinian Authority. Subject to political and military
circumstances, the Company believes that it has good relations with its
employees.
DIVIDEND POLICY
Export Erez USA presently does not intend to pay cash dividends on its
common stock in the foreseeable future and intends to retain future earnings, if
any, to finance the expansion and development of its business. Any future
decision of Export Erez USA's Board of Directors to pay dividends will be made
in light of Export Erez USA's earnings, financial position, capital requirements
and other relevant factors then existing.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONDITION AND RESULTS OF OPERATIONS
This section should be read in conjunction with the Company's financial
statements and the relevant notes thereto, as well as the business information
presented in other parts of the registration statement of which this prospectus
is a part.
Overview
The Company's strategic objectives are as follows:
o To develop high tech products, including: stab-proof fabric, ballistic
helmets, ballistic ceramic boards and one-way protective windows by the
year 2001.
o To increase its share of the local defense market to about 35% by the
year 2004.
o To increase its share of the local civilian market to about 25% by the
year 2004.
o To penetrate the international defense market with business worth about
$1 million in 1999, growing by about $1.5 million per annum to the year
2004.
o To extend activity in the international civilian market starting with
activity worth about $0.3 million in 1999, growing by about $0.5-0.75
million per annum to the year 2004.
14
<PAGE>
Results and Plan of Operations
During 1999, bulletproof vests developed by the Company were sent to
laboratories in the United States for testing, and following the tests, the
products were deemed to have met the American N.I.G. standard. Obtaining this
standard is intended to provide the Company's products with entry into the
American market, and to encourage development of other markets.
During 1999, the Company enlarged its Internet Web site in order to
participate in the worldwide trend towards more electronic trade. The web site
is located at www.exporterez.co.il.
Expanding its product range requires the Company to make considerable
investments in research and development, and penetrating markets outside Israel
also involves heavy expenses. The Company intends to develop the following
products between 2000 and 2003: anti-stab cloth, ballistic helmets, ballistic
ceramic plates, one-way protective windows.
The Company intends to spend funds, as and if available of which there
can be no assurance, on commencing production and marketing of new products,
construction of a new manufacturing and office complex, new equipment and
upgrading its existing equipment.
The Company intends to apply for listing on the NASD OTC Bulletin Board
or for quotation of its securities on the Nasdaq SmallCap Market. The Company
anticipates that it will offer additional shares of its common stock to the
public with a view toward raising additional capital with which to effect its
development plans. Management also believes that if the Company is able to
establish a public trading market on the NASD OTC Bulletin Board or Nasdaq
SmallCap Market will increase the Company's visibility to government authorities
and additional potential civilian customers.
In March 1999, the Company signed a limited partnership agreement with
Orlite Ltd., a public company whose stock is traded on the Tel-Aviv stock
exchange, for the production of ballistic helmets for export from Israel only.
The partnership operated throughout 1999 on a limited basis only, because the
approval required from the Business Restrictions Authority has not yet been
given. This approval is expected in the course of the year 2000.
The year ended December 31, 1999 compared to the year ended December 31, 1998
In 1999, revenues decreased from $4,568,498 in 1998 to $4,490,898
whereas exports grew by 102% from $357,600 in 1998 to $722,900 in 1999. The form
of the relationship with a number of large customers was altered this year. The
Company worked on orders while the raw materials were supplied by the customer.
As a result of this system, there was a decrease in sales and consumption of raw
materials dropped accordingly by 8.4%, from $2,331,000 to $2,134,000. The cost
of sales and processing decreased from $3,589,167 in 1998 to $3,121,674 in 1999.
The Company's gross profit rose from $979,331 in 1998 to $1,369,224 in 1999.
General and administrative costs decreased slightly from $458,451 to
$457,218 in 1999.
Three month period ended March 31, 2000 compared with three month period ended
March 31, 1999
Revenues from sales in the first quarter of 2000 totaled $1,257,091
compared to $1,327,356 for the same quarter in the previous year due to a slight
drop in sales. At the end of the first quarter of 1999, the form of engagement
established by the Company with certain of its customers changed, and those
customers supplied their own raw materials. As a result of this change, revenues
from sales decreased, but at the same time the cost of sales also dropped from
$824,568 to $727,968. The Company's net profit for the first quarter of 2000 was
$230,951 compared with $193,375 for the same quarter in 1999.
The Company's accumulated pending orders through March 2000 were worth
$1,600,000. The Company does not foresee any problems filling these orders.
Liquidity and capital resources
15
<PAGE>
The Company's current activities are financed by short term bank loans
balanced by short term deposits. The decision regarding the amount of the loans
was derived from considerations of the yield on the deposit which is generally
in foreign currency (receipts from overseas sales), compared to the cost of
short term loans. The Company has positive working capital (current assets less
current liabilities).
MANAGEMENT
Officers and Directors
The following table sets forth certain information with respect to Erez
USA's directors, executive officers and key consultants:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Joseph Postbinder Chairman, President and Director
Meira Postbinder Vice President of Financing, Secretary, Treasurer and Director
Dan Zarchin Vice President of Marketing and International Business Development and Director
Tsippy Moldovan Deputy Managing Director of Finance and Director
Shlomo M. Lev-Yehudi Director
</TABLE>
All directors hold office until the next annual meeting of stockholders
and until their successors are elected. Officers are elected to serve, subject
to the discretion of the Board of Directors, until their successors are
appointed. Directors do not receive cash compensation for their services to
Export Erez USA as directors, but are reimbursed for expenses actually incurred
in connection with attending meetings of the Board of Directors.
Joseph Postbinder, 53, Chairman, President and a director of the
Company and Chief Executive Officer of Export Erez Ltd. and Mayotex, has a
technical background in fine mechanics. He has been in charge of Export Erez
since he founded the company in 1983. He is the husband of Meira Postbinder.
Meira Postbinder, 54, manages the Financing Division and is a director
of the Company and Export Erez Ltd. which positions she has held for more than
the last five years. She is the wife of Joseph Postbinder.
Dan Zarchin, 52, Manager of Marketing and International Business
Development and a director of the Company, is a textile engineer. He is a
consultant to the Company and has been doing business as Zarchin Consultants,
Tel-Aviv, Israel, since 1981. Previously, he was Marketing Manager for Kibbutz
Noam-Urim, Israel. The kibbutz's products included textile goods. Mr. Zarchin
received a Bachelor of Arts degree in Textile Engineering from the College of
Textile Science in Philadelphia, Pennsylvania in 1973 and a Masters of Business
Administration from Tel-Aviv University, Tel-Aviv, Israel, in 1979.
Tsippy Moldovan, 45, is the Deputy Managing Director of Finance and a
director for the Company and has been the Deputy Managing Director of Finance of
Export Erez Ltd. for the past 12 years. Mrs. Moldovan attended Buchnich
Accounting School in Ashkelon, Israel, and completed course work in economics
and management accounting from the Mishlav School, Tel Aviv, Israel.
Shlomo M. Lev-Yehudi, 73, has been a director of the Company since
April 2000. Mr. Lev-Yehudi has been a certified public accountant in Tel-Aviv,
Israel since 1957, and was the Company's accountant from 1987 until 1997.
Certain Relationships and Possible Conflict of Interest
16
<PAGE>
The Company leases a building, owned by Joseph Postbinder, President
and a director of the Company, for $7,119 per month for 2,500 square meters. The
terms of the lease were not the result of an arms'length transaction.
Executive Compensation
No officer or director received compensation from the Company in excess
of US$100,000 in 1999 or 1998.
Employment Agreements
Export Erez USA has not entered into any employment agreements with its
executive officers or other employees to date. Erez USA may enter into
employment agreements with them in the future.
Indemnification of Officers, Directors, Employees and Agents
The Certificate of Incorporation and By-Laws of Export Erez USA provide
that Export Erez USA shall, to the fullest extent permitted by applicable law,
as amended from time to time, indemnify all directors of Export Erez USA, as
well as any officers or employees of Export Erez USA to whom Export Erez USA has
agreed to grant indemnification.
Section 145 of the Delaware General Corporation Law empowers a
corporation to indemnify its directors and officers and to purchase insurance
with respect to liability arising out of their capacity or status as directors
and officers provided that this provision shall not eliminate or limit the
liability of a director
For any breach of the director's duty of loyalty to the corporation or
its stockholders;
For acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
Under Section 174 (relating to liability for unauthorized acquisitions
or redemptions of, or dividends on, capital stock) of the General
Corporation Law of the State of Delaware; or
For any transaction from which the director derived an improper
personal benefit.
The Delaware General Corporation Law provides further that the
indemnification permitted thereunder shall not be deemed exclusive of any other
rights to which the directors and officers may be entitled under the
corporation's By-Laws, any agreement, vote of shareholders or otherwise.
The effect of the foregoing is to require Export Erez USA to indemnify
the officers and directors of Export Erez USA for any claim arising against such
persons in their official capacities if such person acted in good faith and in a
manner that he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING
EXPORT EREZ USA PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF THE
SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC
POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
17
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of the effective
date of this prospectus regarding the beneficial ownership of Export Erez USA's
common stock by each officer and director of Export Erez USA and by each person
who owns in excess of five percent of Export Erez USA's common stock.
<TABLE>
<CAPTION>
Shares of common stock Percentage of Shares of Class Owned (2)
Name, Position and Address Beneficially Owned (1) Prior to After
Offering Offering
<S> <C> <C> <C>
Joseph Postbinder 11,490,212 (3) 92% 92%
Meira Postbinder 9,788 (3) * *
Dan Zarchin 5,000 * *
Shlomo M. Lev-Yehudi 0 0 0
Tsippy Moldovan 10,000 * 0
All officers and directors
as a whole (4 persons) 11,515,000 92% 92%
</TABLE>
* Less than 1% percent
(1) Based upon 12,500,000 shares outstanding as of May 4, 2000.
(2) Does not include 250,000 shares which may be issued upon exercise of
warrants.
(3) Meira Postbinder is the spouse of Joseph Postbinder.
SELLING SECURITYHOLDERS
The Company is registering for offer and sale by the holders thereof
1,000,000 shares of common stock and 250,000 shares of common stock issuable
upon the exercise of outstanding warrants. The selling securityholders will
offer their securities for sale on a continuous or delayed basis pursuant to
Rule 415 under the Securities Act. See "RISK FACTORS-Additional shares, if
issued, may come into market as shares become available for resale pursuant to
Rule 144" and "Selling securityholders may sell shares at any price or time."
All of shares registered hereby will become tradeable and/or
exercisable on the effective date of the registration statement of which this
prospectus is a part.
The following table sets forth the beneficial ownership of the
securities of the Company held by each person who is a selling securityholder.
<TABLE>
<CAPTION>
Percent of Common Number of Percent of
Name and Address of Number of Stock Owned Shares Common Stock
Beneficial Owner Shares Owned Prior to Offering(1) Offered Owned After
Prior to Offering For Sale Offering(2)
<S> <C> <C> <C> <C>
Keylani Abed Alcarim Atia 5,000 * 5,000 0%
Beit Lehia 190
2, Israel
Hashem Sa'eed Abuamuna 5,000 * 5,000 0%
Nasirat 8
4, Israel
Maged Ali-Nasralla 5,000 * 5,000 0%
Sagahia 33
4 Gaza, Israel
Magdi Ali-Nasralla 5,000 * 5,000 0%
Sagahia
Gaza, Israel
</TABLE>
18
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Gbar Amin-Nasar 5,000 * 5,000 0%
Beit Hanoon 86
1, Israel
Saned Amin-Nasar 5,000 * 5,000 0%
Beit Hanoon, Israel
Shafir Amir 5,000 * 5,000 0%
Ha'ayala 9
46 Ashkelon, Israel
Salman Mahamed Asma'il 5,000 * 5,000 0%
Beit Hanoon 27
5, Israel
Joseph Berzak 25,000 * 25,000 0%
36 Seshet Hayamin Street
Suite 22
Kasar Shaba 44269 Israel
Sherri Carmel 5,000 * 5,000 0%
Nissanit 428 D.N.
Chof Aza, Israel
Beno Dvir 5,000 * 5,000 0%
Tsahal 91
Tsahala, Tel Aviv, Israel
Ofra Dvir 5,000 * 5,000 0%
Tsahal 91
Tsahala, Tel Aviv, Israel
Shimone Eden 5,000 * 5,000 0%
Ashdod 4
Ashkelon, Israel
Guillermo Eisik 5,000 * 5,000 0%
Efriam Tsor 306
8 Ashkelon, Israel
Stella Maris Eisik 5,000 * 5,000 0%
Efraim Tsor 306
8 Ashkelon, Israel
Jaber Elabed-Nasralla 15,000 * 15,000 0%
Elnatzar 1082
52 Gaza, Israel
Abed Elcarim-Marish 5,000 * 5,000 0%
Sagahi 92
4 Gaza, Israel
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Carol Fostbinder 10,000 * 10,000 0%
Herzel 2
9 Naharia, Israel
Rachel Fostbinder 10,000 * 10,000 0%
Herzel 2
9 Naharia, Israel
Sharon Fostbinder 15,000 * 15,000 0%
Yutvata 6
1 Ashkelon, Israel
Ra'ad Gabar-Nasralla 5,000 * 5,000 0%
Sagahia 424
4 Gaza, Israel
Avital Gerson 15,000 * 15,000 0%
Montifiori 14
9 Ashkelon, Israel
Doron Gerson 15,000 * 15,000 0%
Montifiori 14
9 Ashkelon, Israel
Avraham Gura 10,000 * 10,000 0%
Nordoy 12
16 Naharia, Israel
Hagit Gura 10,000 * 10,000 0%
Nordoy 12
16 Naharia, Israel
Yehudit Gura 10,000 * 10,000 0%
Nordoy 12
16 Naharia, Israel
Hiam Guzansky 10,000 * 10,000 0%
Remez 31
Rishon Letsion, Israel
Haya Guzansky 10,000 * 10,000 0%
Remez 31
Rishon Letsion, Israel
Walid Hassan-Elhelo 5,000 * 5,000 0%
Gabalia 2
10, Israel
Jovanda, Ltd. (3) 287,500 (3) 2.4% 287,500 0%
18034 Ventura Boulevard
Suite 119
Encino, California 91316
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Ruti Kricheli 5,000 * 5,000 0%
Eshtaol 32
3 Ashkelon, Israel
Ronit Lankesner 15,000 * 15,000 0%
Robert Sold 28
1 Kiriat Yam, Israel
Batia Levi 5,000 * 5,000 0%
Givat Tsion 1319
5 Ashkelon, Israel
Wa'al Machreesh-Nasralla 5,000 * 5,000 0%
Elremal 130
61 Gaza, Israel
James K. McKillop 175,000 (4) 1.4% 175,000 0%
1875 Century Park East
Suite 1165
Los Angeles, California 90067
Tsipi Muldovan 10,000 * 10,000 0%
Hatsionut 34
Ashkelon, Israel
Hanna Pearl 5,000 * 5,000 0%
Rambam 19
8 Ashkelon, Israel
Sharon Peleg 5,000 * 5,000 0%
Macabi 1
7 Nes Tsiona, Israel
Pierce Mill Associates, Inc. 175,000 (4)(5) 1.4% 175,000 0%
1504 R Street, NW
Washington, DC 20009
George Pompan 5,000 * 5,000 0%
Hana Senesh 10
6 Azor, Israel
Aliza Rubin 15,000 * 15,000 0%
Dov Bryer 11
22 Ashkelon, Israel
Moshe Rubin 15,000 * 15,000 0%
Dov Bryer 11
22 Ashkelon, Israel
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C> <C.
Ravit Rubin 15,000 * 15,000 0%
Eli Cohen 6
10 Ashkelon, Israel
Gehad Sa'adi Nasralla 5,000 * 5,000 0%
Sagahia
Gaza, Israel
Salah Sa'adi-Nasralla 5,000 * 5,000 0%
Sagahia 269
17 Gaza, Israel
Aviva Sacagiu 10,000 * 10,000 0%
Nechemia 17
Hertzelia, Israel
Sara Sacagiu 10,000 * 10,000 0%
Rosenblum Hertzel 13
43 Beer Sheva, Israel
Tsipora Sacagiu 10,000 * 10,000 0%
Caf Tet Benovember 3
3 Petach Tikva, Israel
Yasha Sacagiu 10,000 * 10,000 0%
Nechemia 17
Hertzelia, Israel
Yosef Sacagiu 10,000 * 10,000 0%
Rosenblum Hertzel 13
43 Beer Sheva, Israel
Naomi Salev 10,000 * 10,000 0%
Bialik 128
1 Ashkelon, Israel
Radia Shafik-Nasralla 15,000 * 15,000 0%
Sagahia 424
4 Gaza, Israel
Mariam Shafir 15,000 * 15,000 0%
Hashikma 2
Ashkelon, Israel
Oded Shafir 15,000 * 15,000 0%
Hashikma 2
Ashkelon, Israel
Clara Solomon 10,000 * 10,000 0%
Elfasy 12
35 Beer Sheva, Israel
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C> <C> <C.
David Solomon 10,000 * 10,000 0%
Elfasy 12
35 Beer Sheva, Israel
Itzhak Torgaman 5,000 * 5,000 0%
Ramat Eshcol 2039
2 Ashkelon, Israel
Orly Torgaman 5,000 * 5,000 0%
Ramat Escol 2039
2 Ashkelon, Israel
Nissim Vaknin 10,000 * 10,000 0%
Escol 3
6 Ashkelon, Israel
Moosa Yousof- Matar 5,000 * 5,000 0%
Gabalia Tel Zatar 300
15, Israel
Nabil Yousof-Matar 5,000 * 5,000 0%
Gabalia Tel Zatar 415
15, Israel
Danny Zarchin 5,000 * 5,000 0%
Hanachal 16
Ranana, Israel
Yoseph Zarchin 5,000 * 5,000 0%
Zlotziski 12
42 Tel Aviv, Israel
Joseph Zeewi 25,000 * 25,000 0%
El-Al Building
32 Ben Yehuda Street
Tel Aviv 63805 Israel
Total 1,000,000 shares
250,000 shares underlying
warrants
</TABLE>
* Less than 1% percent
(1) Based upon 12,500,000 shares outstanding as of May 4, 2000
(2) Assumes sale of all shares offered by named selling securityholder.
(3) Includes 62,500 shares of common stock issuable upon exercise of
warrants and 225,000 shares of common stock. The named shareholder is a
private company controlled by Peter Zoltan and who may be deemed the
beneficial owner of its shares.
(4) Includes 62,500 shares issuable upon exercise of warrants and 112,500
shares of common stock
(5) James M. Cassidy is the sole shareholder and officer of Pierce Mill
Associates, Inc. and may be deemed the beneficial owner of its
securities.
(3)
23
<PAGE>
If Export Erez USA meets the requirements of the NASD OTC Bulletin
Board it will apply for listing thereon. When qualified, if ever of which there
can be no assurance, it intends to apply for quotation of its securities on the
Nasdaq SmallCap Market. There can be no assurance that it will qualify for
listing of its securities on the NASD OTC Bulletin Board or to be quoted on the
Nasdaq SmallCap Market. If it should be accepted for listing thereon, then
certain underwriters may engage in passive market making transactions in Export
Erez USA's common stock in accordance with Rule 103 of Regulation M.
Following the completion of this offering, certain broker-dealers may
be the principal market makers for the securities offered hereby. Under these
circumstances, the market bid and asked prices for the securities may be
significantly influenced by decisions of the market makers to buy or sell the
securities for their own account. No assurance can be given that any market
making activities, if commenced, will be continued.
Resales of the Securities under State Securities Laws
The National Securities Market Improvement Act of 1996 ("NSMIA") limits
the authority of states to impose restrictions upon sales of securities made
pursuant to Sections 4(1) and 4(3) of the Securities Act of companies which file
reports under Sections 13 or 15(d) of the Securities Exchange Act. Sales of the
securities in the secondary market will be made pursuant to Section 4(1) of the
Securities Act (sales other than by an issuer, underwriter or broker). It is
anticipated that following the effective date the selling securityholders'
securities will be eligible for resale in the secondary market in each state.
DESCRIPTION OF SECURITIES
Authorized Capital
The total number of authorized shares of stock of Export Erez USA is
one hundred million (100,000,000) shares of common stock with a par value of
$.0001 per share of which 12,500,000 shares are outstanding and twenty million
(20,000,000) shares of non-designated preferred shares with a par value of
$.0001 per share of which none are designated and outstanding. The Board of
Directors is authorized to issue additional shares, on such terms and conditions
and for such consideration as the Board may deem appropriate without further
stockholder action.
Common stock
Holders of shares of common stock are entitled to one vote for each
share on all matters to be voted on by the stockholders. Holders of common stock
do not have cumulative voting rights. Holders of common stock are entitled to
share ratably in dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor. In
the event of a liquidation, dissolution or winding up of Export Erez USA, the
holders of common stock are entitled to share pro rata all assets remaining
after payment in full of all liabilities. All of the outstanding shares of
common stock are fully paid and non-assessable.
Holders of common stock have no preemptive rights to purchase Export
Erez USA's common stock. There are no conversion or redemption rights or sinking
fund provisions with respect to the common stock.
Incorporation
Export Erez USA, Inc. (the "Company") was incorporated under the laws
of Delaware in 1999 under the name Acanthus Acquisition Corporation, which
changed its name to Export Erez USA, Inc. on May 19, 1999. Export Erez USA's
Certificate of Incorporation, By-Laws and corporate governance, including
matters involving the issuance, redemption and conversion of securities, are
subject to the provisions of the Delaware General Corporation Law, as amended
and interpreted from time to time.
Noncumulative Voting
Each holder of common stock is entitled to one vote per share on all
matters on which such stockholders are entitled to vote. Shares of common stock
do not have cumulative voting rights. The holders of more than 50 percent of the
shares voting
24
<PAGE>
for the election of directors can elect all the directors if they choose to do
so and, in such event, the holders of the remaining shares will not be able to
elect any person to the Board of Directors.
Preferred Stock
Export Erez USA's Certificate of Incorporation authorizes the issuance
of 20,000,000 shares of preferred stock, $.0001 par value per share. In the case
of voluntary or involuntary liquidation, dissolution or winding up of Export
Erez USA, holders of shares of preferred stock are entitled to receive the
liquidation preference before any payment or distribution is made to the holders
of common stock or any other series or class of Export Erez USA's stock
hereafter issued that ranks junior as to liquidation rights to the preferred
stock, but holders of the shares of the preferred stock will not be entitled to
receive the liquidation preference of such shares until the liquidation
preference of any other series or class of Export Erez USA's stock hereafter
issued that ranks senior as to liquidation rights to the preferred stock has
been paid in full. After payment in full of the liquidation preference of the
shares of the preferred stock, the holders of such shares will not be entitled
to any further participation in any distribution of assets by Export Erez USA.
Neither a consolidation or merger of Export Erez USA with another corporation,
nor a sale or transfer of all or part of Export Erez USA's assets for cash,
securities or other property will be considered a liquidation, dissolution or
winding up of Export Erez USA.
The Board of Directors is authorized to provide for the issuance of
additional shares of preferred stock in series and, by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualifications, limitations or restrictions thereof without any further
vote or action by the shareholders. Any future issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of
Export Erez USA without further action by the shareholders and may adversely
affect the voting and other rights of the holders of common stock.
Additional Information Describing Stock
The above descriptions concerning the stock of Export Erez USA do not
purport to be complete. Reference is made to Export Erez USA's Certificate of
Incorporation and By-Laws which are included in the registration statement of
which this prospectus is a part and which are available for inspection at its
offices. Reference is also made to the applicable statutes of the State of
Delaware for a more complete description concerning rights and liabilities of
shareholders.
Admission to Quotation on Nasdaq SmallCap Market or NASD OTC Bulletin Board
If Export Erez USA meets the qualifications, it intends to apply for
quotation of its securities on the NASD OTC Bulletin Board or the Nasdaq
SmallCap Market. Until Export Erez USA meets such qualifications, its securities
may be quoted in the daily quotation sheets of the National Quotation Bureau,
Inc., commonly known as the "pink sheets". If Export Erez USA's securities are
not quoted on the NASD OTC Bulletin Board, a securityholder may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of, Export Erez USA's securities. The over-the-counter market ("OTC") differs
from national and regional stock exchanges in that it (1) is not situated in a
single location but operates through communication of bids, offers and
confirmations between broker-dealers and (2) securities admitted to quotation
are offered by one or more broker-dealers rather than the "specialist" common to
stock exchanges. To qualify for quotation on the NASD OTC Bulletin Board, an
equity security must have one registered broker-dealer, known as the market
maker, willing to list bid or sale quotations and to sponsor such a company
listing. If it meets the qualifications for trading securities on the NASD OTC
Bulletin Board Erez USA's securities will trade on the NASD OTC Bulletin Board
until such future time, if at all, that Erez USA applies and qualifies for
admission for listing on the Nasdaq SmallCap Market. There can be no assurance
that Erez USA will qualify or if qualified that it will be accepted for listing
of its securities on the Nasdaq SmallCap Market.
To qualify for admission for listing on the Nasdaq SmallCap Market, an
equity security must, in relevant summary, (1) be registered under the Exchange
Act; (2) have at least three registered and active market makers, one of which
may be a market maker entering a stabilizing bid; (3) for initial inclusion, be
issued by a company with $4,000,000 in net tangible assets, or $50,000,0000 in
market capitalization, or $750,000 in net income in two of the last three years
(if operating history is less than one year then market capitalization must be
at least $50,000,000); (4) have at a public float of at least 1,000,000 shares
with
25
<PAGE>
a value of at least $5,000,000; (5) have a minimum bid price of $4.00 per share;
and (6) have at least 300 beneficial shareholders.
Trading of Shares
There are no outstanding options, options to purchase, or securities
convertible into the shares of Erez USA which are not being registered hereby.
Export Erez USA has not agreed with any shareholders to register their shares
for sale, other than for this registration. Export Erez USA does not have any
other public offerings in process or proposed.
Transfer Agent and Registrar
Export Erez USA currently serves as its own transfer agent. The Company
intends to apply to StockTrans, Inc., Ardmore, Pennsylvania, to act as transfer
agent for its securities.
Reports to Shareholders
Export Erez USA will furnish to holders of its securities annual
reports containing audited financial statements examined and reported upon, and
with an opinion expressed by, an independent certified public accountant. Export
Erez USA may issue other unaudited interim reports to its shareholders as it
deems appropriate.
CONDITIONS IN ISRAEL
The following information is intended to advise prospective investors
of certain conditions in Israel that could affect the Company.
Political conditions
Since the establishment of the State of Israel in 1948, a state of
hostility existed, varying as to degree and intensity, among Israel and various
Arab countries. A peace agreement was signed between Israel and Egypt in 1979
and limited relations have been established. A peace treaty with the Hashemite
Kingdom of Jordan was signed in 1994, ending the state of war along Israel's
longest border.
Since December 1987, civil unrest has existed in the territories which
came under Israel's control in 1967. In September 1993, Israel and the Palestine
Liberation Organization ("PLO") signed a Declaration of Principles outlining
interim Palestinian self-government arrangements. In May 1994, Israel and the
PLO signed an agreement in Cairo in which the principles of the September 1993
declaration were implemented. In accordance with this agreement, Israel has
transferred the civil administration of the Gaza Strip and Jericho to the
Palestinian Authority and the Israeli army has withdrawn from these areas. In
September 1995, Israel and the PLO signed an interim agreement to further
implement the principles of the September 1993 declaration. The interim
agreement provides for the gradual redeployment of Israel military forces in the
West Bank and the transfer of certain powers and governmental responsibilities
to a Palestinian elected council.
Despite reported progress towards peace between Israel, Arab states and
the Palestinians, no prediction can be made as to whether a full resolution of
these problems will ever be achieved, or as to the nature and timing of any such
resolution. The permanent status arrangements between Israel and the
Palestinians have yet to be determined, and peace treaties with Syria, Lebanon
and other Arab states have yet to be concluded.
Generally, all adult male citizens and permanent residents of Israel
under the age of 51 are, unless exempt, obligated to perform up to 44 days of
military reserve duty annually. Additionally, all such residents are subject to
being called to active duty at any time under emergency circumstances. Many of
the male employees of the Company are currently obligated to perform annual
reserve duty. While the Company has operated effectively under these
requirements in the past, no assessment can be made as to the full impact of
such requirements on the Company in the future, particularly if emergency
circumstances occur.
26
<PAGE>
Certain countries and companies continue to participate in a boycott of
Israeli companies and others doing business in Israel or with Israeli companies.
The Company does not believe that any such boycott has had a material adverse
impact on the Company's current operations, but there can be no assurance that
restrictive laws, policies or practices towards Israel or Israeli businesses
will not have an adverse impact on the Company's business in the future.
Economic conditions
Israel's economy has been subject to numerous de-stabilizing factors,
including a period of rampant inflation in the early to mid 1980s, low foreign
exchange reserves, fluctuations in world commodity prices, military conflicts
and civil unrest. For these and associated reasons, the Israeli Government has
intervened in sectors of the Israeli economy, utilizing among other means,
fiscal and monetary policies, import duties, foreign currency restrictions and
control of wages, prices and exchange rates, and has frequently reversed or
modified its policies in all these areas. There can be no assurance that the
Israeli government will be successful in any attempts to keep prices and
exchange rates stable. To the extent that a significant portion of the Company's
business is conducted in Israel and any future revenues are collected in New
Israeli Shekels, price and exchange rate instability could have a material
adverse effect on the Company. Since the institution of the Israeli Economic
Program in 1985, the rate of inflation, while continuing, has been significantly
reduced, and the rate of devaluation has been substantially diminished.
Trade agreements
Israel is a member of a number of international organizations,
including the United Nations, the International Bank for Reconstruction and
Development, the International Monetary Fund and the International Finance
Corporation. Israel is a longstanding signatory of the General Agreement on
Tariffs and Trade and is an original Member of the World Trade Organization
("WTO"), which provides for the liberalization of international trade in goods
and services. Within the WTO, Israel is eligible for certain preferential
treatment as a developing country, and in certain instances may be eligible for
trade preferences under the Generalized System of Preferences.
Assistance from the United States
The State of Israel receives significant economic and military
assistance from the United States, amounting to an annual average of
approximately $3 billion over the last few years. In addition, in 1992, the
United States approved the issuance of up to $10 billion of loan guarantees
during U.S. fiscal years 1993 to 1998 to help Israel absorb a large influx of
new immigrants primarily from the former Soviet Union. Under the loan guarantee
program, Israel may issue up to $2 billion in principal amount of guaranteed
loans each year, subject to reduction in certain circumstances. If the grants
for economic and military assistance or the U.S. loan guarantees are eliminated
or significantly reduced, the Israeli economy in general, and the Company in
particular, could be materially adversely affected.
LEGAL MATTERS
Legal Proceedings
Export Erez USA is not a party to any litigation and management has no
knowledge of any threatened or pending litigation against it. Export Erez Ltd.
is periodically is engaged in collection litigation for payment of delinquent
accounts in the ordinary course of business in amounts not deemed material.
Legal Opinion
Cassidy & Associates, Washington, D.C. has given its opinion as
attorneys-at-law that the shares registered pursuant to the terms hereof will be
fully paid and non-assessable. Cassidy & Associates has passed on the validity
of the securities being issued but purchasers of the securities offered by this
prospectus should not rely on Cassidy & Associates with respect to any other
matters.
27
<PAGE>
James M. Cassidy, a principal of Cassidy & Associates, is an officer
and director and controlling shareholder of Pierce Mill Associates, Inc., a
selling securityholder herein, which owns 112,500 shares of the common stock of
Export Erez USA and a warrant to purchase 62,500 shares of common stock at an
exercise price of $1.00 per share.
EXPERTS
The financial statements in this Prospectus have been included in
reliance upon the report of Weinberg & Company, P.A., Certified Public
Accountants, and upon the authority of such firm as expert in accounting
FINANCIAL STATEMENTS
The combined audited financial statements for the fiscal years ended
December 31, 1999 and December 31, 1998 and the unaudited financial statements
for the period ended March 31, 2000.
28
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGES 2 - 3 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998
PAGE 4 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
PAGE 5 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998
PAGE 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER
31, 1999 AND 1998
PAGES 7 - 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND 1998
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Export Erez Ltd. and Subsidiary
We have audited the accompanying consolidated balance sheets of Export Erez Ltd.
and Subsidiary as of December 31, 1999 and 1998 and the related consolidated
statements of income and comprehensive income (loss), changes in shareholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above, present
fairly, in all material respects, the financial position of Export Erez Ltd. and
Subsidiary as of December 31, 1999 and 1998 and the results of their operations
and their cash flows for the years then ended, in conformity with United States
generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
February 29, 2000
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
1999 1998
-------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 681,291 $ 670,759
Investment in marketable securities 1,393,123 -
Trade accounts receivable, net 875,557 685,343
Trade accounts receivable - related parties, net 6,864 5,841
Other receivables and debit balances 97,448 75,722
Inventory 690,195 590,239
Deferred taxes 32,421 26,843
-------------- --------------
TOTAL CURRENT ASSETS 3,776,899 2,054,747
-------------- --------------
INVESTMENTS AND DEPOSITS
Investment in marketable securities 602,993 382,546
Deposits for the severance of employer-employee relations 252,442 223,715
-------------- --------------
TOTAL INVESTMENTS AND DEPOSITS 855,435 606,261
-------------- --------------
PROPERTY, PLANT AND EQUIPMENT
Cost, less accumulated depreciation of $384,341 in 1999 and
$317,657 in 1998 397,909 438,375
-------------- --------------
TOTAL ASSETS $ 5,030,243 $ 3,099,383
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1999 1998
--------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES
Short-term bank credit $ 2,012,542 $ 482,531
Trade accounts payable 1,233,710 1,192,899
Other accounts payable and credit balances 204,605 478,363
--------------- ---------------
TOTAL CURRENT LIABILITIES 3,450,857 2,153,793
--------------- ---------------
LONG - TERM LIABILITIES
Deferred taxes $ 3,007 $ 2,753
Provision for the severance of employer-employee relations 141,449 164,075
--------------- ---------------
TOTAL LIABILITIES $ 3,595,313 $ 2,320,621
--------------- ---------------
CONTINGENT LIABILITIES AND COMMITMENTS
SHAREHOLDERS' EQUITY
Ordinary shares, $0.3078 par value, 12,010 shares authorized,
11,760 issued and outstanding 3,620 3,620
Additional paid-in capital 3,115 3,115
Retained earnings 1,443,392 849,317
Accumulated other comprehensive loss (15,197) (77,290)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY $ 1,434,930 $ 778,762
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,030,243 $ 3,099,383
=============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE>
EXPORT EREZ, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND
COMPREHENSIVE INCOME (LOSS)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
<S> <C> <C>
REVENUES $ 4,490,898 $ 4,568,498
Cost of sales and processing 3,121,674 3,589,167
----------------- -----------------
Gross profit 1,369,224 979,331
----------------- -----------------
OPERATING EXPENSES
Selling expenses 244,775 191,243
General and administrative expenses 457,218 458,451
----------------- -----------------
TOTAL OPERATING EXPENSES 701,993 649,694
----------------- -----------------
INCOME FROM OPERATIONS 667,231 329,637
----------------- -----------------
OTHER INCOME
Interest dividend and loss on sale of securities income, net 88,934 25,703
Other income - net 925 4,314
----------------- -----------------
TOTAL OTHER INCOME 89,859 30,017
----------------- -----------------
INCOME BEFORE INCOME TAXES 757,090 359,654
Income tax expense 163,015 130,068
----------------- -----------------
NET INCOME $ 594,075 $ 229,586
----------------- -----------------
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss) 927 (107,796)
Unrealized gain on available-for-sale securities 61,166 74,280
----------------- -----------------
TOTAL OTHER COMPREHENSIVE
INCOME (LOSS) 62,093 (33,516)
----------------- -----------------
COMPREHENSIVE INCOME $ 656,168 $ 196,070
================= =================
Net income per ordinary share - basic and diluted $ 50.52 $ 19.52
================= =================
Weighted average number of shares outstanding
during the period - basic and diluted 11,760 11,760
================= =================
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE>
EXPORT EREZ, LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
Number of Paid-In Retained Comprehensive
Shares Amount Capital Earnings Income (Loss) Total
------ ------ ------- -------- ------------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 11,760 $ 3,620 $ 3,115 $ 619,731 $ (43,774) $ 582,692
Foreign currency translation
loss - - - - (107,796) (107,796)
Unrealized gain on available-
for-sale securities - - - - 74,280 74,280
Net income 1998 - - - 229,586 - 229,586
---------- ------------- ------------ -------------- ------------- -------------
Balance December 31, 1998 11,760 3,620 3,115 849,317 (77,290) 778,762
Foreign currency translation
gain - - - - 927 927
Unrealized gain on available-
sale-securities - - - - 61,166 61,166
Net income 1999 - - - 594,075 - 594,075
---------- ------------- ------------ -------------- ------------- -------------
BALANCE, DECEMBER 31, 1999 11,760 $ 3,620 $ 3,115 $ 1443,392 $ (15,197) $ 1,434,930
========== ============= ============ ============== ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
---------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net profit for the year $ 594,075 $ 229,586
Adjustments to reconcile net profit to net cash provided by operating
activities:
Loss from investment in marketable securities 37,560 -
Depreciation and amortization 70,010 79,238
Decrease (increase) in provision for the severance of employer-employee
relations (51,276) (54)
Deferred taxes (5,286) (26,388)
Loss (gain) from sale of fixed assets (925) (4,314)
Decrease (increase) in trade accounts receivable (190,164) (39,175)
Decrease in other receivables and debit balances (21,609) 114,965
Decrease (increase) in inventory (99,014) (111,128)
Increase (decrease) in trade accounts payable 38,839 221,446
Increase (decrease) in other accounts payable and
credit balances (250,062) (150,336)
---------------- ------------------
Net cash provided by operating activities 122,148 313,840
---------------- ------------------
Cash flows from investing activities:
Purchase of fixed assets (28,796) (103,285)
Proceeds from sale of fixed assets 925 7,890
Deposits for the severance of employer - employee relations - (26,300)
Investment in current marketable securities (1,543,577) -
Investment in marketable securities (243,551) (40,298)
Proceeds from sale of marketable securities 197,034 -
---------------- ------------------
Net cash used in investing activities (1,617,965) (161,993)
---------------- ------------------
Cash flows from financing activities:
Short-term bank credit, net 1,505,236 237,398
---------------- ------------------
Net cash provided by financing activities 1,505,236 237,398
---------------- ------------------
Effect of exchange rate changes on cash 1,113 (89,880)
---------------- ------------------
Net increase in cash and cash equivalents 10,532 299,365
Cash and cash equivalents at beginning of year 670,759 371,394
---------------- ------------------
Cash and cash equivalents at end of year $ 681,291 $ 670,759
================ ==================
</TABLE>
The accompanying notes are an integral part of the financial statements
6
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
Note 1 - Descriptions of Business
Export Erez Ltd. ("the Company") was incorporated in Israel and
commenced operations in 1983 under the name R.T.V Ltd., which was
changed to Export Erez Ltd. in 1987.
The Company manufactures textile products designed mainly for the
defense industry, although in recent years it has penetrated additional
markets in Israel and overseas, in both military and civilian
industries.
The Company's wholly owned subsidiary Mayotex Ltd., was incorporated in
Israel in 1990. Mayotex is engaged in weaving fabric and tapes, which
it sells to the Company and to other customers. It also produces end
products for civilian market requiring fabric with special qualities
(high degrees of strength, waterproofing, etc.) Mayotex is producing
animal products as stripes, collars, etc.
Note 2 - Significant Accounting Policies
a. Basis of Presentation
The accompanying consolidated financial statements are presented in
United States dollars under United States Generally Accepted Accounting
Principles.
b. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiary. All intercompany accounts and transactions
have been eliminated in consolidation.
c. Foreign Currency Translation
The accompanying consolidated financial statements are presented in
United States dollars. The functional currency of Export Erez, Ltd. and
its subsidiary is the New Israeli Shekel (NIS). Financial statements
for these entities are translated into United States dollars at
year-end exchange rates as to assets and liabilities and weighted
average exchange rates as to revenues and expenses. Capital accounts
are translated at their historical exchange rates when the capital
transactions occurred.
d. Comprehensive Income (Loss)
The Company accounts for Comprehensive Income (Loss) under the
Financial Accounting Standards Board 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, and is effective
for fiscal years beginning after December 15, 1997.
7
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
The foreign currency translation gains (losses) resulting from the
translation of the financial statements of Export Erez, Ltd. and its
subsidiary expressed in New Israeli Shekels (NIS) to United States
dollars are reported as Other Comprehensive Income (Loss) in the
Statement of Income and as Accumulated Other Comprehensive Income
(Loss) in the Statement of Shareholders' Equity.
The unrealized gains and losses, net of tax, resulting from the
valuation of available-for-sale securities at their fair market value
at year end are reported as Other Comprehensive Income (Loss) in the
Statement of Income and as Accumulated Other Comprehensive Income
(Loss) in the Statement of Shareholders' Equity.
e. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that effect the reported amounts of assets
and liabilities and disclose the nature of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
g. Investment in Marketable Securities
The Company's policy is to invest in various equity or debt
instruments. The Company accounts for such investments in accordance
with Statement of Financial Accounting Standards No. 115 "Accounting
for Certain Investments in Debt and Equity Securities." ("SFAS 115")
Management determines the appropriate classification of its investments
at the time of acquisition and reevaluates such determination at each
balance sheet date. Trading securities are carried at fair value, with
unrealized trading gains and losses included in earnings.
Available-for-sale securities are carried at fair value, with
unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity. Investments classified as
held-to-maturity are carried at amortized cost. In determining realized
gains and losses, the cost of the securities sold is based on the
specific identification method.
h. Allowance for Doubtful Accounts
The allowance for doubtful accounts has been determined by specifically
identifying debts which collectability is uncertain.
8
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
i. Inventories
Inventories are valued at the lower of cost or market value. The cost
includes expenses of transporting the goods, and is determined on a
specific identification basis.
j. Fixed Assets
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the
estimated useful life of the assets.
k. Revenue Recognition
Revenues from sales of products are recognized upon shipment.
l. Income Taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109.
"Accounting for Income Taxes" ("Statement No. 109"). Under Statement
No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
m. Earnings per Share
Basic earnings per share are computed based on the weighted average
number of Ordinary Shares outstanding during each year. Diluted
earnings per share are computed based on the weighted average number of
Ordinary Shares outstanding during each year including Ordinary Share
equivalents. There were no Ordinary Share equivalents outstanding at
December 31, 1999 and 1998. Accordingly, a reconciliation between basic
and diluted earnings per share is not presented.
Note 3 - Trade Accounts Receivable
a. Third Parties
<TABLE>
<CAPTION>
1999 1998
---------------- -----------------
<S> <C> <C>
Customers in Israel
Open accounts $ 631,601 $ 387,482
Post dated checks received from customers 101,908 70,980
Overseas customers 157,418 226,881
Less allowance for doubtful accounts (15,370) -
---------------- -----------------
$ 875,557 $ 685,343
================ =================
</TABLE>
10
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
b. Related Parties
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Customers in Israel
Open accounts - related parties (See Note 17) $ 81,551 $ 80,404
Less allowance for doubtful accounts (74,687) (74,563)
------------ ------------
$ 6,864 $ 5,841
============ ============
</TABLE>
Trade accounts receivable - related parties are due from two companies (the
"affiliates") whereby the principal shareholder of the Company is a principal
shareholder of those affiliates. Certain amounts are in dispute and an allowance
has been established.
Note 4 - Other Receivables and Debit Balances
<TABLE>
<CAPTION>
1999 1998
--------------- -----------------
<S> <C> <C>
Government institutions $ 30,300 $ 51,323
Employees and institutions for wage 13,720 12,851
Advances to suppliers and service providers 52,524 7,098
Prepaid expenses 904 4,450
--------------- -----------------
$ 97,448 $ 75,722
=============== =================
</TABLE>
Note 5 - Investment in Marketable Securities
a. The investments in marketable securities represent participation
certificates in mutual funds. GAAP in the United States requires that
an investment in equity securities not classified as held-to-maturity
trading securities shall be classified as available for sale and
reported at fair value. Unrealized holding gains and losses shall are
reported in a separate component of shareholders' equity as part of
other comprehensive income, until realized. The Company classifies
available-for-sale securities which it intends to hold more than one
year as non-current. A reconciliation of original cost to fair market
value for securities held at December 31 follows:
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
<S> <C> <C>
Investment in marketable securities, at
cost $ 1,860,670 $ 308,266
Unrealized gain 135,446 74,280
------------------- -------------------
Investment in marketable securities at
fair value 1,996,116 382,546
Less current portion 1,393,123 -
------------------- -------------------
Non-current portion $ 602,993 $ 382,546
=================== ===================
</TABLE>
10
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
Note 6 - Business Segments
During 1999 and 1998 the Company operated and managed its operations in one
business segment. Therefore, segment information has not been presented.
Note 7 - Fixed Assets
Fixed assets consisted of the following at December 31:
<TABLE>
<CAPTION>
Estimated
Useful
1999 1998 Life
------------------ ------------------ ------------------
<S> <C> <C> <C>
Buildings $ 160,583 $ 160,316 15-25 Years
Motor Vehicles 191,132 193,831 5-7 Years
Office Equipment and Furniture 108,808 91,419 3-14 Years
Equipment 318,521 307,366 5 Years
------------------ ------------------
779,044 752,932
Less: Accumulated Depreciation 384,341 317,657
------------------ ------------------
394,703 435,275
Deposits for Fixed Assets 3,206 3,100
------------------ ------------------
$ 397,909 $ 483,375
================== ==================
</TABLE>
Note 8 - Short-Term Bank Credit
a. Comprised as follows:
<TABLE>
<CAPTION>
Interest Rates 1999 1998
-------------------- --------------- ---------------
<S> <C> <C> <C>
Overdraft 14%-18% $ 613,980 $ 381,565
Loan linked to CPI 12% 1,398,562 100,966
--------------- ---------------
$ 2,012,542 $ 482,531
=============== ===============
</TABLE>
b. With respect to liens - see Note 14.
Note 9 - Trade Accounts Payable
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
Open accounts $ 461,052 $ 462,466
Post-dated checks given to suppliers 772,658 730,433
------------------ ------------------
$ 1,233,710 $ 1,192,899
================== ==================
</TABLE>
11
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
Note 10 - Other Accounts Payable and Credit Balances
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
Employees and institutions
for wage $ 40,959 $ 62,588
Related parties (See Note 17) 381 4,871
Advances from customers - 174,870
Accrued expenses 163,266 236,034
------------------ ------------------
$ 204,606 $ 478,363
================== ==================
</TABLE>
Note 11 - Deposits and Provisions for the Severance of Employer-Employee
Relations
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Deposits for the severance of employer-employee relations
$ 252,442 $ 223,715
Provision for the severance of employer-employee relations
$ 141,449 $ 164,075
</TABLE>
Under Israeli law, the Company and its subsidiary are required to make severance
payments to terminated employees. The calculation is based on the employee's
latest salary and the period employed. For certain employees, including
officers, the obligation for severance pay is discharged by payment of premiums
to insurance companies under approved plans.
Certain classes of the Company's employees are included in the comprehensive
defined contribution pension plan for industrial workers and the Company is
contributing to a pension fund in order to secure a pension for such employees.
The Company contributes 13% of the employees salary each week to the pension
fund. Contributions were approximately $28,000 and $25,000 in 1999 and 1998,
respectively. Part of the Company's contributions relates to the Company's
liability for severance pay in respect of the period commencing from the date
when the employee joined the program. The amount required to cover the liability
of the Company for severance pay to such employees prior to their joining the
program was deposited with a severance pay fund. For employees other than those
referred to above, the Company's liability is covered by regular payments to
severance pay funds.
12
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
The amounts maintained with insurance companies and the pension fund are not
under control of the Company and therefore are not reflected in the financial
statements. The deposits presented in the balance sheet include profits
accumulated to balance sheet date. The amounts deposited may be withdrawn only
after fulfillment of the obligations under the Severance Pay Law.
Note 12 - Taxes on Income
The Company is taxed in Israel at a flat rate of 36% and is subject to the
Israel Income Tax Law (Inflation Adjustment) of 1985. Under this law results
for income tax purposes are measured in real terms in accordance with the
changes in the Israeli Consumer Price Index (CPI).
Income tax expense expressed in U.S. Dollars in 1999 and 1998 was as
follows:
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Current Israel $ 173,483 $ 139,746
Deferred (10,468) (9,678)
------------ -------------
$ 163,015 $ 130,068
============ =============
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31 are as
follows:
<TABLE>
<CAPTION>
1999 1998
------------------- ----------------
<S> <C> <C>
Deferred taxes benefit - current - in respect of:
Allowance for doubtful accounts $ 32,421 $ 26,843
=================== ================
Deferred taxes liability - non current - in respect of:
Depreciable fixed assets $ 3,007 $ 2,753
=================== ================
</TABLE>
Note 13 - Contingent Liabilities and Commitments
Contracts
a. Under a lease agreement dated January 1, 1998 between the Company and a
principal shareholder in the Company, the Company leases an industrial
building located at Erez Industrial Zone. (See Note 17)
The lease is for a 12 months period and is renewable for an additional
period of 12 months at the end of each rent period. The annual rent
payments total approximately $85,500 based on the average exchange rate
for the latest period presented.
13
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
b. Under a lease agreement effective January 1, 1998 between the Company
and M.L. Investments Ltd. ("M.L."), the Company leases from M.L. an
industrial building located near the city of Netivot.
The lease is for a period of 2 years and is renewable up to an
additional 3 years. The annual rent payments total approximately
$12,632 based on the average exchange rate for the latest period
presented. The contract was extended to December 31, 2000 at the same
conditions.
c. Long Term Contracts
At March 16, 1999 the Company signed a limited partnership ("the
partnership") agreement, unlimited at time, with Orlight Industries
(1959) Ltd. ("O.I."). According to the agreement the partnership will
operate in the field of production and marketing of helmets, for
exporting purposes only. The partnership will not conduct any business
relations with any Israeli entity.
The Company will enable the partnership full production environment for
the production of helmets, including manpower, production area,
production lines maintenance, office, management and marketing
services, all of which will be charged by the Company at cost.
O.I. will grant the partnership the know-how and technical support, and
will bear the costs of designing a production line. All know-how that
will be granted by O.I. to the partnership is the exclusively property
of O.I. Each party has a first refusal option in providing the
partnership production services or any other services, at a price
offered to the partnership by a third party plus 10%. In the case that
the partnership wishes to purchase goods from the Company, the Company
is obliged to sell the goods at cost plus 10%.
The Company is obliged not to operate at the partnership operational
field for a period of 3 years after the partnership ceases to operate.
As of December 1998 and 1999 there have been no investments in the
partnership.
Note 14 - Liens
a. To secure its short- term liabilities, the Company has registered
unlimited charges on its assets in favor of Bank Hapoalim, Ltd. and
Bank Leumi Ltd as detailed below:
1.Current liens on all assets, securities, notes and other trade
instruments which are deposited with Bank Hapoalim, Ltd, and Bank
Leumi Ltd.
2.The amounts of credit secured with these liens are shown in the
following items (See Note 8) of the Company's balance sheets:
<TABLE>
<CAPTION>
1999 1998
---------------- --------------
<S> <C> <C>
Short-term credit $ 2,012,542 $ 482,531
================ ==============
</TABLE>
14
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
b. To insure the liabilities of the Company to the Israeli Ministry of
Defense and Anidatex, Ltd. (a customer of the Company) the Company
provided $29,201 and $19,430, respectively (translated using the
average exchange rate for the latest period presented) in revolving
Bank guarantees.
Note 15 - Share Capital
a. At December 31, 1999 and 1998 the share capital of the Company is as
follows:
Number of Shares
--------------------------------------
Outstanding Issued and
Share Capital Outstanding Authorized
----------------- ---------------- ----------------
1999 $ 3,620 11,760 12,010
============= ================
================
1998 $ 3,620 11,760 12,010
============= ================ ================
Note 16 - Financial Instruments
a. Fair Value of Financial Instruments
The Company's financial instruments are principally non-derivative
assets and non-derivative liabilities (non-derivative assets include
cash and cash equivalents, deposits in banks and other financial
institutions, marketable securities, trade accounts receivable,
receivables and other debit balances non-derivative liabilities include
short-term credit from banks and others. trade accounts payable, and
payables and other credit balances). Because of the nature of these
financial instruments, fair value generally equals or approximates the
amounts presented in the financial statements.
b. Interest Rate Risk
The interest rates of the loans are disclosed in Note 8 to the
financial statements.
c. Concentrations of Credit Risk
At December 31, 1999 and 1998, the Company held cash and cash
equivalents, in the total amount of $681,291 and $670,759,
respectively, most of these amounts were deposited with Israeli banks.
Under Israeli law, the Bank of Israel insures all bank deposits without
limits on the amount. Therefore, the Company does not anticipate losses
in respect of these items.
15
<PAGE>
The majority of the Company's sales are made to Government institutions
and the private market in Israel. Consequently the exposure to credit
risks relating to trade receivables is limited.
The Company performs ongoing credit evaluations of its customers and
generally does not require collateral. An appropriate allowance for
doubtful accounts is included in the accounts.
Note 17 - Related Parties
a. Transactions with Related Parties
The Company has signed lease agreements with the principal shareholder
in the Company. (See Note 13a)
b. Income and Expenses from Transactions with Related Parties
<TABLE>
<CAPTION>
1999 1998
------------- -----------
<S> <C> <C>
Expenses
Salaries and related expenses $ 69,005 $ 80,926
Lease and rent expenses 84,919 94,196
</TABLE>
c. Balances with Related Parties
<TABLE>
<CAPTION>
1999 1998
------------- -----------
<S> <C> <C>
Trade accounts receivable $ 81,551 $ 80,404
Other accounts payable and credit balances 381 4,871
</TABLE>
Note 18 - Supplementary Information to Statements of Operations
Including Concentrations
a. Sales:
1. Composed as follows:
<TABLE>
<CAPTION>
1999 1998
--------------- ------------------
<S> <C> <C>
Local Israel sales $ 3,777,781 $ 4,190,433
Export sales 713,117 378,065
--------------- ------------------
Total sales $ 4,490,898 $ 4,568,498
=============== ==================
</TABLE>
16
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
2. Sales to Single Customers Exceeding 10% of Sales
<TABLE>
<CAPTION>
1999 1998
--------------- ------------------
<S> <C> <C>
Customer A $ 2,073,623 $ 2,602,038
=============== ==================
</TABLE>
b. Cost of Sales and Processing:
<TABLE>
<CAPTION>
1999 1998
---------------- ------------------
<S> <C> <C>
Purchases of raw materials $ 2,106,825 $ 2,423,824
Salaries and related expenses 858,592 1,023,111
Maintenance 34,858 46,747
Lease and rent 146,998 131,527
Quality control 14,113 4,573
Shipment 8,327 13,875
Depreciation 36,808 42,839
Vehicles maintenance 14,166 13,799
Changes in inventory (99,013) (111,128)
---------------- ------------------
$ 3,121,674 $ 3,589,167
================ ==================
</TABLE>
c. Selling Expenses:
<TABLE>
<CAPTION>
1999 1998
--------------- ------------------
<S> <C> <C>
Sales commissions and consulting fees $ 179,869 $ 85,307
Advertising and sales promotion 64,906 105,936
--------------- ------------------
$ 244,775 $ 191,243
=============== ==================
</TABLE>
d. General and Administrative Expenses:
<TABLE>
<CAPTION>
1999 1998
--------------- ------------------
<S> <C> <C>
Salaries and related expense $ 107,025 $ 120,291
Professional services 173,662 75,559
Office maintenance 38,169 30,685
Rent - 4,907
Bank services 16,373 19,707
Insurance 11,580 11,251
Security 36,217 53,494
Vehicles maintenance 14,538 21,210
Depreciation and amortization 33,201 41,503
Doubtful debt expenses 15,378 67,393
Other 11,075 12,451
--------------- ------------------
$ 457,218 $ 458,451
=============== ==================
</TABLE>
17
<PAGE>
EXPORT EREZ, LTD AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999 AND 1998
e. Financial Income, Net:
<TABLE>
<CAPTION>
1999 1998
--------------- ------------------
<S> <C> <C>
Interest on short-term bank credit $ (78,085) $ (50,223)
Interest on short-term loan (45,944) (9,885)
Loss on sale of marketable securities, net (37,559) -
Dividend income from marketable securities 217,603 -
Interest income from short-term deposits and
securities 30,513 85,811
--------------- ------------------
$ 88,934 $ 25,703
=============== ==================
</TABLE>
f. Other Income (Expenses):
Other income is gain (loss) from the sale of fixed assets.
Note 19 - Agreement
In November 1998 the Company executed an agreement with a consultant whereby the
consultant will provide services with regard to assisting the Company to become
a public company in the United States. The fee to be paid by the Company is
$140,000 and a 5-year transferable warrant to acquire up to 250,000 registered
shares of the Company's common stock at an exercise price of $1.00 per share. As
of December 31, 1999 the Company paid $35,000.
Note 20 - Subsequent Events
In April 2000 the Company was acquired by Export Erez USA, Inc. ("Export USA"),
an inactive reporting shell, in exchange for 11,500,000 shares of Export USA.
Immediately subsequent to the closing the stockholders of Export Erez, Ltd.
become stockholders of approximately 95.83% of Export USA. This transaction is
treated as a recapitalization of the Company.
18
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
<PAGE>
EXPORT EREZ LTD AND SUBSIDIARY
TABLE OF CONTENTS
PAGES 1 - 2 CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2000
(UNAUDITED) AND DECEMBER 31, 1999
PAGE 3 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME (LOSS) (UNAUDITED) FOR THE THREE MONTHS
ENDED MARCH 31, 2000 AND 1999
PAGE 4 CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
PAGES 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF
MARCH 31, 2000
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, 2000
(Unaudited) December 31, 1999
--------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 884,467 $ 681,291
Investment in marketable securities - 1,393,123
Trade accounts receivable, net 686,912 875,557
Trade accounts receivable - related parties, net 7,067 6,864
Other receivables and debit balances 6,282 97,448
Inventory 760,432 690,195
Deferred taxes 33,378 32,421
- -
-------------- ---------------
TOTAL CURRENT ASSETS 2,378,538 3,776,899
-------------- ---------------
INVESTMENTS AND DEPOSITS
Investment in marketable securities 999,640 602,993
Deposits for the severance of employer-employee relations 267,045 252,442
-------------- ---------------
TOTAL INVESTMENTS AND DEPOSITS 1,266,685 855,435
-------------- ---------------
PROPERTY, PLANT AND EQUIPMENT, NET 429,076 397,909
-------------- ---------------
TOTAL ASSETS $ 4,074,299 $ 5,030,243
============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
1
<PAGE>
2
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 2000
(Unaudited) December 31, 1999
--------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES
Short-term bank credit $ 671,054 $ 2,012,542
Trade accounts payable 1,136,689 1,233,710
Other accounts payable and credit balances 331,673 204,605
--------------- ---------------
Total current liabilities 2,139,416 3,450,857
--------------- ---------------
LONG - TERM LIABILITIES
Deferred taxes 2,759 3,007
Provision for the severance of employer-employee relations 154,337 141,449
--------------- ---------------
TOTAL LIABILITIES 2,296,512 3,595,313
--------------- ---------------
CONTINGENT LIABILITIES AND COMMITMENTS
SHAREHOLDERS' EQUITY
Ordinary shares, $0.3078 par value, 12,010 shares authorized,
11,760 issued and outstanding 3,620 3,620
Additional paid-in capital 3,115 3,115
Retained earnings 1,674,343 1,443,392
Accumulated other comprehensive income (loss) 96,709 (15,197)
--------------- ---------------
TOTAL SHAREHOLDERS' EQUITY 1,777,787 1,434,930
--------------- ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 4,074,299 5,030,243
============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
3
<PAGE>
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, 2000 March 31, 1999
-------------------- -------------------
<S> <C> <C>
REVENUES $ 1,257,091 $ 1,327,356
Cost of sales and processing 727,968 824,568
-------------------- -------------------
Gross profit 529,123 502,788
-------------------- -------------------
OPERATING EXPENSES
Selling expenses 35,834 45,390
General and administrative expenses 98,776 124,795
-------------------- -------------------
TOTAL OPERATING EXPENSES 134,610 170,185
-------------------- -------------------
INCOME FROM OPERATIONS 394,513 332,603
-------------------- -------------------
OTHER INCOME
Interest, dividends and gain (loss) on sale of securities income, net (41,514) (27,814)
Other income - net 2,302 945
-------------------- -------------------
TOTAL OTHER INCOME (39,212) (26,869)
-------------------- -------------------
INCOME BEFORE INCOME TAXES 355,301 305,734
Income tax expense (124,350) (112,359)
-------------------- -------------------
NET INCOME $ 230,951 $ 193,375
-------------------- -------------------
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss) 39,602 (51,230)
Unrealized gain on available-for-sale securities 72,305 44,036
-------------------- -------------------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 111,907 (7,194)
-------------------- -------------------
COMPREHENSIVE INCOME $ 342,858 $ 186,181
==================== ===================
Net income per ordinary share - basic and diluted $ 19.64 $ 16.44
==================== ===================
Weighted average number of shares outstanding during the period - basic and
diluted 11,760 11,760
==================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements
4
<PAGE>
EXPORT EREZ LTD. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Three
Months Ended March
Ended March 31, 2000 31, 1999
-------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net profit for the year $ 230,951 $ 193,375
Adjustments to reconcile net profit to net cash provided by operating activities:
Gain from investment in marketable securities (3,289) -
Depreciation and amortization 18,346 17,929
Decrease (increase) in provision for the severance of employer-employee relations 1,552 (6,291)
Deferred taxes (335) 4,775
Loss (gain) from sale of fixed assets (2,303) (945)
Decrease (increase) in trade accounts receivable 213,070 (212,825)
Decrease in other receivables and debit balances 93,473 45,981
Decrease (increase) in inventory (49,559) 134,631
Increase (decrease) in trade accounts payable (132,633) (221,862)
Increase (decrease) in other accounts payable and credit balances 120,294 (127,567)
-------------------- -------------------
Net cash provided by operating activities 489,567 (172,799)
-------------------- -------------------
Cash flows from investing activities:
Purchase of fixed assets (37,806) (1,683)
Proceeds from sale of fixed assets 2,461 945
Investment in marketable securities (308,703) (8,179)
Proceeds from sale of marketable securities 1,428,850 -
-------------------- -------------------
Net cash used in investing activities 1,084,802 (8,917)
-------------------- -------------------
Cash flows from financing activities:
Short-term bank credit, net (1,392,415) 167,253
-------------------- -------------------
Net cash provided by financing activities (1,392,415) 167,253
-------------------- -------------------
Effect of exchange rate changes on cash 21,222 20,576
-------------------- -------------------
Net increase in cash and cash equivalents 203,176 6,113
Cash and cash equivalents at beginning of period 681,291 670,759
-------------------- -------------------
Cash and cash equivalents at end of period $ 884,467 $ 676,872
==================== ===================
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE>
EXPORT EREZ USA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
and the rules and regulations of the Securities and Exchange Commission
for interim financial information. Accordingly, they do not include all
the information and footnotes necessary for a comprehensive
presentation of financial position and results of operations.
It is management's opinion that all material adjustments (consisting of
normal recurring adjustments) have been made which are necessary for a
fair financial statement presentation. The results for the interim
period are not necessarily indicative of the results to be expected for
the year.
For further information, refer to the consolidated financial statements
and footnotes included in the Company's Form SB-2 for the year ended
December 31, 1999.
NOTE 2 INVENTORY
Inventory at March 31, 2000 consisted of the following:
Raw materials $ 594,156
Work in process 91,724
Finished goods 74,552
-------------
$ 760,432
=============
NOTE 3 SUBSEQUENT EVENT
In April 2000, the Company consummated an Agreement and Plan of
Reorganization (the "Agreement") with Export Erez USA, Inc., a Delaware
public shell with no operations, ("USA") whereby all of the members in
the Company had their shares converted into 11,500,000 shares or
approximately 96% of the common stock of USA.
Under Generally Accepted Accounting Principles, a company whose
stockholders receive over fifty percent of the stock of the surviving
entity in a business combination is considered the acquirer for
accounting purposes. Accordingly, the transaction was accounted for as
an acquisition of USA and recapitalization of the Company. The
financial statements subsequent to the acquisition includes the
following: (1) the balance sheet consists of the net assets of the
Company at historical costs and the net assets of USA at historical
cost; (2) the statement of operations consists of the operations of the
Company for the period presented and the operations of USA from the
recapitalization date.
6
<PAGE>
EXPORT EREZ USA, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF MARCH 31, 2000
AND DECEMBER 31, 1999
<PAGE>
EXPORT EREZ USA, INC.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2 BALANCE SHEETS AS OF MARCH 31, 2000 AND
DECEMBER 31, 1999
PAGE 3 - 4 NOTES TO BALANCE SHEETS AS OF MARCH 31, 2000 AND
DECEMBER 31, 1999
<PAGE>
4 INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Export Erez USA, Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of Export Erez USA, Inc. (a
development stage company) as of March 31, 2000 and December 31, 1999. 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 balance sheets are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the balance sheets referred to above present fairly in all
material respects, the financial position of Export Erez USA, Inc. (a
development stage company) as of March 31, 2000 and December 31, 1999, in
conformity with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 7, 2000
<PAGE>
EXPORT EREZ USA, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
---------------------- -------------------------
ASSETS
<S> <C> <C>
TOTAL ASSETS $ - $ -
------------ ====================== =========================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES $ - $ -
---------------------- -------------------------
STOCKHOLDERS' EQUITY
Preferred stock, $.0001 par value, 20 million shares authorized,
none issued and outstanding - -
Common stock, $.0001 par value, 100 million shares authorized,
500,000 issued and outstanding 50 50
Capital in excess of par 75 75
Deficit accumulated during development stage (125) (125)
---------------------- -------------------------
Total Stockholders' Equity - -
---------------------- -------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ - $ -
------------------------------------------ ====================== =========================
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
EXPORT EREZ USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO BALANCE SHEETS
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------- ---------------------------------------------
(A) ORGANIZATION AND BUSINESS OPERATIONS
Export Erez USA, Inc. (a development stage company) ("the
Company") was incorporated in Delaware on March 24, 1999
under the name Acanthus Acquisition Corporation to serve
as a vehicle to effect a merger, exchange of capital
stock, asset acquisition or other business combination
with a domestic or foreign private business. On May 19,
1999 an acquisition candidate was identified and the
Company changed its name to Export Erez USA, Inc. As of
March 31, 2000 and December 31, 1999, the Company had not
yet commenced any formal business operations , and all
activity to date relates to the Company's formation and
search for an acquiree. The Company's fiscal year end is
December 31.
In April 2000, the Company consummated an Agreement and
Plan of Reorganization ("the Agreement") with Export Erez
Ltd., an Israeli operating company, whereby all of the
members in Export Erez Ltd. had their shares converted
into 11,500,000 shares or approximately 96% of the common
stock of the Company.
Under Generally Accepted Accounting Principles, a company
whose stockholders receive over fifty percent of the stock
of the surviving entity in a business combination is
considered the acquirer for accounting purposes.
Accordingly, the transaction was accounted for as an
acquisition of the Company and recapitalization of Export
Erez Ltd. The financial statements subsequent to the
acquisition includes the following: (1) the balance sheet
consists of the net assets of the Company at historical
costs and the net assets of Export Erez Ltd. at historical
cost; (2) the statement of operations consists of the
operations of Export Erez Ltd. for the period presented
and the operations of the Company from the
recapitalization date.
(B) USE OF ESTIMATES
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3
<PAGE>
EXPORT EREZ USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO BALANCE SHEETS
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
NOTE 2 STOCKHOLDERS' EQUITY
(A) PREFERRED STOCK
The Company is authorized to issue 20,000,000 shares of
preferred stock at $.0001 par value, with such designations,
voting and other rights and preferences as may be determined
from time to time by the Board of Directors.
(B) COMMON STOCK
The Company is authorized to issue 100,000,000 shares of
common stock at $.0001 par value. In May 1999, the Company
issued 500,000 shares and 250,000 common stock warrants
exercisable at $1.00 per share to five stockholders at
par value.
NOTE 3 RELATED PARTIES
Legal counsel to the Company is a firm owned by a director of
the Company who also owns 100% of the outstanding stock of a
principal stockholder.
NOTE 4 ACCUMULATED DEFICIT DURING DEVELOPMENT STAGE
The accumulated deficit represents various organization costs
of the Company contributed by principal stockholders to the
Company.
4
<PAGE>
================================================================================
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and, if given or made, such information or representations may not
be relied on as having been authorized by Export Erez USA or by any of the
underwriters. Neither the delivery of this prospectus nor any sale made
hereunder shall under any circumstances create an implication that there has
been no change in the affairs of the Company since the date hereof. This
prospectus does not constitute an offer to sell, or solicitation of any offer to
buy, by any person in any jurisdiction in which it is unlawful for any such
person 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 as
of any time subsequent to the date of the Prospectus.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page
Prospectus Summary..............................................................................
Risk Factors....................................................................................
Available Information ..........................................................................
The Company.....................................................................................
Business........................................................................................
Dividend Policy.................................................................................
Management's Discussion and Analysis of Financial Condition and Results of Operations...........
Management......................................................................................
Security Ownership of Certain Beneficial Owners and Management .................................
Selling Securityholders.........................................................................
Description of Securities.......................................................................
Conditions in Israel ...........................................................................
Legal Matters...................................................................................
Experts.........................................................................................
Financial Statements............................................................................
</TABLE>
Until ________ all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligations to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
EXPORT EREZ USA, INC.
1,000,000 shares of common stock to be sold by the
holders thereof, and
250,000 shares of common stock underlying warrants, to
be sold by the holders thereof
----------
PROSPECTUS
----------
June ____, 2000
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Export Erez USA is incorporated in Delaware. Under Section 145 of the
General Corporation Law of the State of Delaware, a Delaware corporation has the
power, under specified circumstances, to indemnify its directors, officers,
employees and agents in connection with actions, suits or proceedings brought
against them by a third party or in the right of the corporation, by reason of
the fact that they were or are such directors, officers, employees or agents,
against expenses incurred in any action, suit or proceeding. The Certificate of
Incorporation and the By-Laws of Export Erez USA provide for indemnification of
directors and officers to the fullest extent permitted by the General
Corporation Law of the State of Delaware.
The General Corporation Law of the State of Delaware provides that a
certificate of incorporation may contain a provision eliminating the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director provided that such provision
shall not eliminate or limit the liability of a director:
For any breach of the director's duty of loyalty to the corporation or
its stockholders;
For acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; Under
Section 174 (relating to liability for unauthorized
acquisitions or redemptions of, or dividends on, capital
stock) of the General Corporation Law of the State of
Delaware; or
For any transaction from which the director derived an improper
personal benefit.
Export Erez USA's Certificate of Incorporation contains such a provision.
INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS
CONTROLLING THE COMPANY PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION
OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST
PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses in connection with this
Registration Statement. All of such expenses are estimates, other than the
filing fees payable to the Securities and Exchange Commission.
<TABLE>
<S> <C>
Filing Fee - Securities and Exchange Commission $ 108
Fees and Expenses of Accountants 40,000
Fees and Expenses of legal counsel 100,000
Blue Sky Fees and Expenses 3,500
Printing and Engraving Expenses 10,000
Miscellaneous Expenses 3,700
Total $ 157,308
</TABLE>
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Pursuant to the exchange with Export Erez Ltd., Export Erez USA issued
11,490,212 shares to Joseph Postbinder and 9,788 shares of its common stock to
Meira Postbinder pursuant to Regulation D of the General Rules and Regulations
of the Securities and Exchange Commission.
In exchange for services rendered to the Company, pursuant to
Regulation D of the General Rules and Regulations of the Securities and Exchange
Commission, on May 20, 1999, Export Erez USA issued 112,500 shares of its common
stock to Pierce Mill Associates, Inc., 112,500 shares of its common stock to
James McKillop, 225,000 shares of its common stock to Jovanda Ltd., and 25,000
shares of its common stock to each of Joseph Berzak and Joseph Zeewi.
On May 25, 2000, Export Erez USA issued an aggregate of 500,000 shares
of its common stock to 60 employees, consultants and service providers pursuant
to Regulation D of the General Rules and Regulations of the Securities and
Exchange Commission.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
3.1 Certificate of Incorporation of Export Erez USA, Inc., as amended
3.2 By-Laws of Export Erez USA, Inc.
4.1 Form of common stock certificate
4.2* Form of warrant
5.1* Opinion of Cassidy & Associates
21.1 Subsidiaries of Export Erez USA, Inc.
24.1 Consent of Weinberg & Company, certified public accountants
24.3* Consent of Cassidy & Associates (included in Exhibit 5)
27.1* Financial Data Schedule
-----
* To be filed by Amendment.
** Previously filed.
(b) The following financial statement schedules are included in this
Registration Statement.
None
ITEM 28. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in
II-2
<PAGE>
the opinion of the Securities and Exchange Commission is that such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned registrant hereby undertakes that:
(i) For purposes of determining any liability under the Securities Act of
1933, 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 registrant pursuant to Rule 424(b)(1) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(ii) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form SB-2 and has duly caused
this Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in Israel on the 6th day of June, 2000.
EXPORT EREZ USA, INC.
By: /s/ Joseph Postbinder
President
By: /s/ Meira Postbinder
Vice President of Financing
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Joseph Postbinder Chairman, President
and a Director June 6, 2000
/s/ Meira Postbinder Vice President of Financing
and a Director June 6, 2000
/s/ Shlomo M. Lev-Yehudi Director June 6, 2000
/s/ Tsippy Moldovan Director June 6, 2000
/s/ Dan Zarchin Director June 6, 2000
</TABLE>
II-4
