<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
NOUVEAU INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 5046 23-2932617
(State or jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or Industrial Classification Identification No.)
organization) Code Number)
</TABLE>
212 PHILLIPS ROAD
EXTON, PENNSYLVANIA 19341
(Address of principal place of business)
GARY W. BLACK, SR.
CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
NOUVEAU INTERNATIONAL, INC.
212 PHILLIPS ROAD
EXTON, PENNSYLVANIA 19341
(610)524-8393/(610) 524-9535 (TELECOPY)
(Name, address, and telephone number of principal executive offices and agent
for service)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT STEVEN BROWN, ESQ. ROGER A. TOLINS, ESQ.
MICHAEL A. MEISLER, ESQ. Tolins & Lowenfels
Brock, Fensterstock, Silverstein, A Professional Corporation
McAuliffe & Wade, LLC 12 East 49th Street
One Citicorp Center New York, New York 10017
153 East 53rd Street (212) 421-1965/(212) 888-7706
New York, New York 10022 (Telecopy)
(212) 371-2000/(212) 371-5500
(Telecopy)
</TABLE>
APPROXIMATE DATE 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 PURSUANT TO RULE
462(B) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX / /
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(C)
UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. / /
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434,
PLEASE CHECK THE FOLLOWING BOX. / /
------------------------
CALCULATION OF REGISTRATION FEE
See attached page.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Series B 8% Cumulative Convertible 1,725,000 $8.00 $13,800,000.00 $4,758.63
Redeemable Preferred Stock Shares (2)
150,000
Representative's Warrants Warrants (3) .001 $150.00 $0.06
Series B 8% Cumulative Convertible 150,000 9.60 1,440,000.00 $496.56
Redeemable Preferred Stock Shares (4)
Common Stock, par value $.001 per 1,440,000 5.50 7,920,000.00 $2,731.04
share Shares (5)
Common Stock, par value $.001 per 216,000 5.50 1,188,000.00 $409.66
share Shares (5) (6)
Common Stock, par value $.001 per 2,812,500 -- -- $0.00
share Shares (7)
Common Stock, par value $.001 per 1,554,225 5.50 8,548,237.50 $2,947.67
share Shares (8)
TOTAL -- -- $32,896,387.50 $11,343.62
</TABLE>
(1) Calculated in accordance with Rule 457 under the Securities Act of 1933, as
amended.
(2) Includes 225,000 shares of Series B 8% Cumulative Convertible Redeemable
Preferred Stock, par value $.001 per share (the "Preferred Stock"), of the
Company which the Representative has the option to purchase to cover
over-allotments, if any.
(3) To be acquired by the Representative.
(4) Issuable upon exercise of the Representative's Warrants.
(5) Issuable pursuant to the terms of the Preferred Stock in payment of
dividends at the option of the Company.
(6) Issuable pursuant to the terms of the Preferred Stock in payment of
dividends, at the option of the Company, with respect to the Shares of
Preferred Stock issuable upon exercise of the Representative's Warrants.
(7) Issuable pursuant to the terms of the Preferred Stock upon the conversion
thereof. No additional consideration is payable in respect of such
conversion. Therefore, no additional filing fee is required.
(8) This Registration Statement also registers the resale from time to time by
the holders thereof of 604,225 shares of Common Stock issuable upon the
exercise of common stock purchase warrants issued by the Company in 1996 and
950,000 shares of Common Stock acquired by an entity in transactions exempt
from registration under the Securities Act of 1933, as amended.
<PAGE>
EXPLANTORY NOTE
This Registration Statement covers the registration of (i) up to 1,725,000
shares of Series B 8% Cumulative Convertible Redeemable Preferred Stock, par
value $.001 per share, (the "Preferred Stock"), including the shares of
Preferred Stock to cover over-allotments of Nouveau International, Inc. (the
"Company"), a Delaware corporation, for sale by the company in an underwritten
public offering, and (ii) and an additional 1,554,225 shares of Common Stock,
par value $.001 per share (the "Common Stock"), of the Company for the sale by
the holders thereof (the "Selling Stockholders") for resale from time to time by
the Selling Stockholders, subject to the contractual restrictions that the
Selling Stockholders may not sell the shares of Common Stock held by the Selling
Stockholders' for a specified period after the closing of the underwritten
public offering.
The complete Prospectus relating to the underwritten offering follows
immediately after this explanatory note. Following the prospectus for the
underwritten offering are pages of the Prospectus relating solely to the shares
of Common Stock held by the Selling Stockholders, including alternative front
and back cover pages and the sections entitled "Concurrent Public Offering,"
"Plan of Distribution," "Selling Stockholders," and Shares Eligible for Future
Sale" to be used in lieu of sections entitled "Concurrent Offering," "Shares
Eligible for Future Sale," and "Underwriting" in the Prospectus relating to the
underwritten offering. Certain sections of the Prospectus for the underwritten
offering will not be used in the Prospectus relating to the shares of Common
Stock held by the Selling Stockholders, such as "Use of Proceeds."
<PAGE>
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF FORM SB-2 LOCATION OR CAPTION IN PROSPECTUS
- ---------------------------------------------------------------- -----------------------------------------------------
<C> <S> <C>
1. Front of the Registration Statement and Outside Front
Cover Page of Prospectus........................... Outside Front Cover Page
Inside Front and Outside Back Cover Pages of the
2. Inside Front and Outside Back Cover Pages of Prospectus
Prospectus.........................................
3. Summary Information and Risk Factors................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price...................... Outside Front Cover Page; Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling Stockholders
8. Plan of Distribution................................. Outside Front Cover Page; Underwriting
9. Legal Proceedings.................................... Business--Legal Proceedings
10. Directors, Executive Officers, Promoters, and Control
Persons............................................ Management--Directors and Executive Officers
11. Security Ownership of Certain Beneficial Owners and
Management......................................... Principal and Management Stockholders
12. Description of Securities............................ Outside Front Cover Page; Description of Securities
13. Interest of Named Experts and Counsel................ Legal Matters; Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... Part II
15. Organization......................................... Not Applicable
16. Description of Business.............................. Business
17. Management's Discussion and Analysis of Plan of Management's Discussion and Analysis of Financial
Operation.......................................... Condition and Results of Operations
18. Description of Property.............................. Business--Facilities
19. Certain Relationships and Related Transactions....... Certain Transactions
20. Market for Common Equity and Related Stockholder
Matters............................................ Dividend Policy; Description of Securities
21. Executive Compensation............................... Management--Executive Compensation
22. Financial Statements................................. Financial Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................ Not Applicable
24. Indemnification of Directors and Officers............ Part II
25. Other Expenses of Issuance and Distribution.......... Part II
26. Recent Sales of Unregistered Securities.............. Part II
27. Exhibits............................................. Part II; Exhibits
28. Undertakings......................................... Part II
29. Financial Statements................................. Financial Statements
</TABLE>
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 1, 1996
PROSPECTUS
1,500,000 SHARES
NOUVEAU INTERNATIONAL, INC.
SERIES B 8% CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
Nouveau International, Inc., a Delaware corporation (the "Company"), is
hereby offering 1,500,000 shares (the "Shares") of its Series B 8% Cumulative
Convertible Redeemable Preferred Stock, par value $.001 per share (the
"Preferred Stock"). In addition, concurrently with this offering, certain
selling stockholders (the "Selling Stockholders") are offering for resale up to
an aggregate of 1,554,225 shares of common stock, par value $.001 per share (the
"Common Stock"), of the Company subject to certain restrictions on resale
described herein. See "Concurrent Sales by Selling Stockholders."
The Preferred Stock entitles the holders to receive, subject to the
limitations described in this Prospectus, a cumulative preferential cash
dividend at a rate per annum of 8% of the stated value per Share (the "Stated
Value") of $8.00 per Share, accruing daily from the date of this Prospectus,
payable semi-annually on each and , commencing
, 1997, until the earlier of the date of the redemption (the
"Redemption Date"), if any, or the date of the conversion (the "Conversion
Date"), thereof. Dividends on the Preferred Stock are payable out of funds
legally available therefor. The Company, in its sole discretion, may elect to
pay such dividend in shares of Common Stock as described herein. See
"Description of Securities--Preferred Stock--Dividends." Unless earlier redeemed
by the Company, each share of Preferred Stock is convertible, at the option of
the holder, commencing one year from the date of this Prospectus, and is
mandatorily convertible by the Company on the date three years from the date of
this Prospectus, into 1.5 shares of Common Stock. The Preferred Stock is
redeemable, in whole, but not in part, at the option of the Company at a price
per share (the "Redemption Price") equal to the sum of the Stated Value and the
accrued and unpaid dividends to the Redemption Date at any time commencing on
the date one year from the date of this Prospectus upon not less than 30 days
prior written notice to the registered holders thereof, provided that the
closing price per share of Preferred Stock has been at least $ for at
least 20 of the 30 trading days ending within 15 days of the date of the notice
of redemption. In the event of the liquidation of the Company, holders of the
Preferred Stock will be entitled to receive a liquidation preference per share
equal to the sum of the Stated Value and all accrued and unpaid dividends to the
date of payment, subject to certain limitations. See "Description of
Securities--Preferred Stock--Liquidation Distribution."
Application has been made to quote the Preferred Stock on the [OTC BULLETIN
BOARD][NASDAQ SMALLCAP MARKET] under the symbol " ." The Common Stock is
traded on the [SMALLCAP MARKET][OTC BULLETIN BOARD] under the symbol "VEND." On
September 24, 1996, the closing sale price for the Common Stock was $5.375 per
share. See "Price Range of the Common Stock."
SEE "RISK FACTORS," COMMENCING ON PAGE 10, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
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>
PRICE TO PUBLIC UNDERWRITING DISCOUNT(1) PROCEEDS TO COMPANY(2)
<S> <C> <C> <C>
Per Share........................ $8.00 $0.80 $7.20
Total(3)......................... $12,000,000 $1,200,000 $10,800,000
</TABLE>
(1) Does not include additional consideration to be received by Americorp
Securities, Inc., as the representative (the "Representative") of the
several underwriters (the "Underwriters"), in the form of (a) a 3%
non-accountable expense allowance and (b) warrants (the "Representative's
Warrants") entitling the Representative to purchase up to 150,000 shares of
Preferred Stock at a price per share equal to 120% of the public offering
price per Share. In addition, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. See "Underwriting."
(2) Before deducting estimated expenses of $740,000, including the
Representative's non-accountable expense allowance of $360,000 ($414,000 in
the event of the exercise in full of the Representative's over-allotment
option), which are payable by the Company.
(3) The Company has granted the Representative an option, exercisable within 45
days from the date of this Prospectus, to purchase up to an additional
225,000 shares of Preferred Stock at the initial public offering price, less
underwriting discounts, solely to cover over-allotments, if any. If the
over-allotment option granted to the Representative is exercised in full,
the Price to Public, Underwriting Discount, and Proceeds to Company, will be
$13,800,000, $1,380,000, and $12,420,000, respectively. See "Underwriting."
------------------------------
The Shares are being offered by the several Underwriters, subject to prior
sale, when, as, and if delivered to, and accepted by, them and subject to their
right to reject orders in whole or in part and to certain other conditions. It
is expected that delivery of certificates will be made against payment therefor
at the offices of Americorp Securities, Inc., One New York Plaza, New York, New
York 10004, on or about , 1996.
------------------------------
AMERICORP SECURITIES, INC. [LOGO]
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE PREFERRED STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE [OTC BULLETIN BOARD][NASDAQ SMALL CAP
MARKET] OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE [OTC BULLETIN BOARD][NASDAQ SMALL CAP MARKET] IN ACCORDANCE WITH RULE 10B-6A
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
THIS PROSPECTUS CONTAINS HISTORICAL INFORMATION AND FORWARD-LOOKING
STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN THIS PROSPECTUS
PURSUANT TO THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS IN FUTURE PERIODS TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE PERFORMANCE SUGGESTED HEREIN. FURTHER,
THE COMPANY OPERATES IN AN INDUSTRY SECTOR WHERE SECURITIES VALUES MAY BE
VOLATILE AND MAY BE INFLUENCED BY ECONOMIC AND OTHER FACTORS BEYOND THE
COMPANY'S CONTROL. IN THE CONTEXT OF THE FORWARD-LOOKING INFORMATION PROVIDED IN
THIS PROSPECTUS AND OTHER REPORTS, PLEASE REFER TO THE DISCUSSION OF RISK
FACTORS DETAILED IN, AS WELL AS OTHER INFORMATION CONTAINED IN, THIS PROSPECTUS
AND THE COMPANY'S OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by the
Company with the Commission pursuant to the informational requirements of the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and the Commission's regional offices located at 7 World Trade
Center, 13th Floor, New York, New York 10048, and 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Electronic reports and other information
filed through the Electronic Data Gathering, Analysis, and Retrieval system are
publicly available through the Commission's Web site (http:// www.sec.gov).
Copies of such material also may be obtained from the public reference section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, reports and other information concerning the Company may be
inspected at the offices of the National Association of Securities Dealers, Inc.
(the "NASD"), 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a portion of a registration statement (the
"Registration Statement") filed with the Commission under the Securities Act.
This Prospectus omits certain of the information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related exhibits for
further information with respect to the Company and the Preferred Stock.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE
DETAILED INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED
HEREIN, THE DISCUSSION IN THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS
THAT INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE
TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER THE
HEADING "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE
INDICATED HEREIN, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO (I)
THE EXERCISE OF THE OVER-ALLOTMENT OPTION, (II) THE ISSUANCE AND/OR EXERCISE OF
THE REPRESENTATIVE'S WARRANTS, (III) THE EXERCISE OF WARRANTS OUTSTANDING ON THE
DATE OF THIS PROSPECTUS EXERCISABLE FOR AN AGGREGATE OF 604,225 SHARES OF COMMON
STOCK, AND (IV) THE ISSUANCE OF SHARES OF COMMON STOCK IN PAYMENT OF ACCRUED AND
UNPAID DIVIDENDS ON THE PREFERRED STOCK PURSUANT TO THE TERMS THEREOF. THE
INFORMATION IN THIS PROSPECTUS RELATING TO SHARES OF COMMON STOCK AND PER SHARE
AMOUNTS (I) GIVES RETROACTIVE EFFECT TO A 1.5204793-FOR-ONE STOCK SPLIT EFFECTED
BY THE COMPANY IN JANUARY 1996, AND (II) GIVES EFFECT TO THE CONTRIBUTION TO THE
COMPANY OF AN AGGREGATE OF 2,000,000 SHARES OF COMMON STOCK BY CERTAIN
STOCKHOLDERS EFFECTED ON , 1996, AND (III) GIVES EFFECT TO THE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF THE COMPANY TO INCREASE THE
AUTHORIZED NUMBER OF SHARES OF PREFERRED STOCK TO 3,000,000 EFFECTED ON
, 1996. SEE "CERTAIN TRANSACTIONS". AS USED IN THIS PROSPECTUS, THE
TERM "COMPANY" MEANS, UNLESS THE CONTEXT OTHERWISE REQUIRES, NOUVEAU
INTERNATIONAL, INC., A DELAWARE CORPORATION, THE SUBSIDIARIES THEREOF, AND THE
PREDECESSORS OF THE FOREGOING.
THE COMPANY
The Company has developed a proprietary turnkey system (the "Food System")
for the automated vending of hot meals. The combination of technologies
developed by the Company which, when combined, comprise the Food System,
currently consists of:
(1) a patented fully-robotic coin-operated hot food vending machine capable
of storing, cooking, and serving specialty foods using proprietary
Company-developed formulations and packaging;
(2) a proprietary packaging system utilizing a patented shape and patent
pending technology that protects a frozen food product from freezer
degradation, but allows the products stored in it to be microwaved,
infrared, or impingement heated/cooked without being removed from the
box;
(3) a proprietary patent pending formulation for dough-based products which
has unique features that allow the products made from this formulation,
such as pizzas and breads, to be baked, frozen, stored frozen, and
rapidly reheated by microwave, infrared, or impingement heating/ cooking
without adversely affecting the taste, consistency, or desired features
of the dough-based food product; and
(4) a microwave oven which has been modified to proprietary specifications
and allows for complete and consistent cooking throughout the food item.
In addition to the fully-robotic vending machine which both stores and cooks
food products utilizing the Company's proprietary formulations, the Company also
offers a non-robotic, food-dispensing machine. The non-robotic machine stores
food products in the Company's proprietary food packaging, but does not cook,
serve food, or take money automatically; rather, it requires the customer to
manually deliver the food product to the machine's microwave and pay a cashier
or attendant. The Company also has in development a semi-robotic machine. The
semi-robotic machine stores frozen food product in the Company's packaging and
takes money automatically, but requires the consumer to manually deliver the
food product to the microwave. The Company currently does not anticipate
marketing the semi-robotic machine until 1998, if at all.
3
<PAGE>
The Company markets its pizza product and its pizza vending machines under
the registered trademark "Pizza Chef-Registered Trademark-". The Company markets
its vending and food-dispensing machines for $1,000 to $7,000 per unit.
The Company believes that its Food System is distinctive in the following
two respects: (i) the packaging system and dough formulation allow dough-based
products to be microwave cooked without damaging the taste and quality of such
products; and (ii) the fully-robotic vending machine operates as a turn-key
system which takes money, cooks, and serves hot food products in times as short
as 60 seconds.
In May 1996, the Company acquired the technology and certain inventory
relating to an additional fully-robotic hot food vending machine. This vending
machine, which is currently in the development stage, differs from the Company's
own machines in that it is designed for the vending of name brand frozen food
products. While the Company's machines are designed to function only with the
Company's proprietary food packaging and formulations, this machine is designed
to vend frozen food product from a variety of major food manufacturers. The
Company believes that having the ability to vend nationally-recognized, name
brand products will allow it to serve a segment of the hot-food vending market
that its current product line does not address.
The Company's operating strategy is: (i) to continue to secure strategic
licensing and distribution agreements for the manufacture and distribution of
its vending and food dispensing machines on a global basis; (ii) to continue to
develop a network of licensees and distributors for the supply of food products
to owner/operators of the Company's vending and food dispensing machines in such
markets; and (iii) to establish a Company-operated food production facility to
manufacture food products to be vended through the Company's vending and
food-dispensing machines. See "Business--License Agreements" and "Business--Food
Product Line."
Notwithstanding the foregoing, investors should be aware that the Company's
future plans are subject to a number of variables outside of its control, and
there can be no assurance that the Company will be able to implement any or all
of such plans or that such plans, when and if implemented, will be successful.
To date, the Company's operations have been limited to arranging
distributorships for the Company's vending and food-dispensing machines and
selling a limited number of the fully-robotic vending machines to such
distributors from the Company's inventory for test marketing in their local
markets. Accordingly, the Company's future plans are subject to known and
unknown risks and uncertainties that may cause the Company's actual results in
future periods to be materially different from any future performance implied
herein.
Until January 1996, the Company was a publicly traded corporation not
engaged in any business activity and with virtually no assets. In January 1996,
the Company acquired its operating subsidiaries (the "Predecessor Company"), the
theretofore independent owner of the Food System and the technology and
intellectual property relating thereto. At the time of such acquisition, the
Predecessor Company had recently emerged from a bankruptcy proceeding which was
necessitated by circumstances which the Company believes were largely beyond the
control of the Predecessor Company. See "Risk Factors" and "Business--Bankruptcy
Reorganization."
The Company was reincorporated under the laws of the State of Delaware on
January 16, 1996 and was originally incorporated under the laws of the State of
Florida on March 19, 1981 under the name Health Management, Inc. The principal
offices of the Company are located at 212 Phillips Road, Exton, Pennsylvania
19341 and its telephone number is (610) 524-8393.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Shares Offered Hereby............. 1,500,000 of Series B 8% Cumulative Convertible
Redeemable Preferred Stock.
Dividends......................... Except as otherwise described herein, dividends accrue
daily on a cumulative basis at the rate per annum of 8%
of the stated value of $8.00 per Share. Dividends shall
be payable semi-annually on each and ,
commencing , 1997, until the earlier of the
Redemption Date, if any, and the Conversion Date, (each
such date, a "Dividend Payment Date"). Dividends are
payable out of funds legally available therefor.
Dividends accruing during any period commencing
immediately following any Dividend Payment Date (or the
date of this Prospectus in the case of the initial such
period) and terminating on the immediately following
Dividend Payment Date shall be payable on the Dividend
Payment Date on which such dividends accrue in either
cash or, at the option of the Company, shares of Common
Stock (the "Share Payment Option"). In the event the
Company determines to exercise the Share Payment Option
with respect to any Dividend Payment Date, the Company
shall so advise the holders not less than 30 days prior
to such Dividend Payment Date; if such option is not
then exercised by the Company, the Company shall be
deemed to have irrevocably waived such option for the
dividend accruing during the period terminating on such
Dividend Payment Date. The number of shares of Common
Stock to be paid on any Dividend Payment Date in lieu of
such accrued dividends shall equal the quotient of (i)
the product of (A) the Stated Value and (B) 0.04, by
(ii) the average closing bid price for the Common Stock
for the 30 trading days ending ten trading days prior to
the notice to stockholders relating thereto (the "Stock
Dividend Price"). All cash dividends not paid on any
Dividend Payment Date shall cumulate and shall be
payable on or before the earlier of the Redemption Date,
if any, and the Conversion Date.
Optional Conversion............... Unless earlier redeemed by the Company, each share of
Preferred Stock is convertible, at the option of the
holder thereof, commencing one year from the date of
this Prospectus, into 1.5 shares of Common Stock.
Mandatory Conversion.............. Each share of the Preferred Stock is mandatorily
convertible by the Company on the date three years from
the date of this Prospectus into 1.5 shares of Common
Stock.
Optional Redemption............... The Preferred Stock is redeemable, in whole, but not in
part, at the option of the Company at the Redemption
Price per share equal to the sum of (i) the Stated Value
and (ii) all accrued and unpaid dividends to the
Redemption Date at any time commencing one year from the
date of this Prospectus upon not less than 30 days prior
written notice to the registered holders thereof,
provided that the closing price per share of Preferred
Stock has been at least $ for at least 20 of the
30 trading days ending within 15 days of the notice of
redemption.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Liquidation Preference............ In the event of a Liquidation (as hereinafter defined),
the holders of the Preferred Stock shall be entitled to
a liquidation preference (the "Liquidation Preference")
per share equal to the sum of (i) the Stated Value and
(ii) all accrued and unpaid dividends through the date
of such Liquidation (the "Liquidation Date") prior to
distributions to holders of shares of Common Stock and
any series of Preferred Stock of the Company not ranking
prior to, or on a pari passu basis with, the Preferred
Stock.
Offering Price.................... $ 8.00 per Share
Common Stock Outstanding Prior to
this Offering................... 9,249,988 shares(1)
Risk Factors...................... The purchase of the Shares is speculative and involves
substantial risk. Prospective investors should carefully
review and consider the information set forth under
"Risk Factors."
Use of Proceeds................... To satisfy obligations pursuant to the Private
Financings (as hereinafter defined), to acquire a
facility to use in connection with the Company's food
manufacturing operations, to acquire additional baking
equipment, and for general corporate and working capital
purposes.
Proposed [NASDAQ SMALL CAP MARKET]
[OTC BULLETIN BOARD] Trading
Symbol..........................
</TABLE>
- ------------------------
(1) Excludes (i) up to 112,560 shares of Common Stock issuable upon exercise of
the warrants (the "January Warrants") issued by the Company in connection
with a private financing which closed on January 17, 1996 (the "January
Private Financing"), (ii) up to 491,665 shares of Common Stock issuable
upon exercise of the warrants (the "May Warrants," and, together with the
January Warrants, the "Warrants"), issued by the Company in connection with
a private financing which closed in May and July 1996 (the "May Private
Financing," and, together with the January Private Financing, the "Private
Financings"), (iii) up to 225,000 shares of Preferred Stock issuable by the
Company upon exercise of the Representative's over-allotment option, (iv)
up to 150,000 shares of Preferred Stock issuable upon exercise of the
Representative's Warrants, and (v) the issuance of shares of Common Stock
in payment of accrued and unpaid dividends on the Preferred Stock. See
"Underwriting."
6
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following selected statement of operations data for the years ended
December 31, 1995 and 1994, and the selected balance sheet data at December 31,
1995, are derived from the Financial Statements of the Company and notes thereto
included elsewhere herein audited by Richard A. Eisner & Company, LLP,
independent certified public accountants for the Company. The unaudited selected
statement of operations data for the six months ended June 30, 1996 and 1995 and
the unaudited selected balance sheet data at June 30, 1996, are derived from the
unaudited Financial Statements of the Company, which have been prepared on a
basis consistent with the audited Financial Statements of the Company and, in
the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position and results of operations. The results of operations for any
interim period are not necessarily indicative of results to be expected for the
entire year. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements of the Company and notes thereto included elsewhere in
this Prospectus.
STATEMENT OF OPERATIONS DATA:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
-------------------------- ------------------------
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1994(1) 1996 1995(1)
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Net Sales................................................ $ 245,313 $ 943,345 $ 325,325 $ 80,779
Cost of goods sold....................................... 224,282 859,287 294,053 67,174
Gross profit............................................. 21,031 84,058 31,272 13,605
Selling, general, and administrative expenses............ 653,237 1,011,230 1,667,781 183,986
Operating income (loss).................................. (632,206) (927,172) (1,636,509) (170,381)
Gain from settlement of lawsuit.......................... 5,979,459 5,979,459
Interest income.......................................... 105,216 23,686 37,826 31,657
Interest expense......................................... (32,352) (213,179) (12,409) (20,388)
Loss on abandonment and sale of property................. (92,338) (3,279)
Reorganization expense................................... (41,401) (15,000)
Miscellaneous income..................................... 35,680
Income (loss) from continuing operations................. 5,286,378 (1,134,944) (1,611,092) 5,856,027
Extraordinary item
Compromise of pre-petition liabilities................. 2,307,606
Net income (loss)........................................ $7,593,984 $(1,134,944) $(1,611,092) $5,856,027
Net income (loss) per share before extraordinary item.... $ 0.57 $ (0.12) $ (0.17) $ 0.63
Extraordinary item....................................... 0.25 0.00 0.00 0.00
Net income (loss) per share.............................. $ 0.82 $ (0.12) $ (0.17) $ 0.63
Weighted average number of shares outstanding............ 9,249,988 9,249,988 9,249,988 9,249,988
</TABLE>
- ------------------------
(1) The Company petitioned for bankruptcy protection in October 1994 and
operated as a debtor-in-possession through December 8, 1995.
The ratio of earnings to combined fixed charges and preferred stock dividends
is not shown because such ratio is less than one. For purposes of this
computation, earnings consist of income from continuing operations before
income taxes plus fixed charges (excluding capitalized interest). Fixed
charges consist of interest on indebtedness (including capitalized interest
and amortization of deferred financing fees), preferred dividends, and that
portion of lease rental expense representative of the interest factor.
Earnings for the six months ended June 30, 1996 and pro forma earnings for
the six months ended June 30, 1996 were insufficient to cover combined fixed
charges in the amounts of approximately $1,900,000 and $1,750,000,
respectively.
7
<PAGE>
BALANCE SHEET DATA:
<TABLE>
<CAPTION>
AT JUNE 30, 1996
-------------------------
AT DECEMBER 31, AS ADJUSTED
1995 ACTUAL (1)
--------------- --------- --------------
<S> <C> <C> <C>
Cash................................................................ $ 38,971 $ 8,531 $5,492,642
Working capital..................................................... 2,124,713 3,137,569 8,990,972
Total assets........................................................ 4,595,560 4,631,746 9,971,815
Dividends payable on preferred stock................................ -- 65,333 --
Pre-petition liabilities (including current portion)................ 2,577,286 259,546 259,546
Other long-term liabilities......................................... 100,000 -- --
Stockholder equity.................................................. 1,384,870 3,291,776 9,145,179
</TABLE>
- ------------------------
(1) Adjusted to reflect the receipt by the Company of the estimated net proceeds
of $10,060,000 from the sale of the Shares at an assumed initial public
offering price of $8.00 per Share and the application of the net proceeds
therefrom. See "Use of Proceeds."
8
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
For the six months ended June 30, 1996, the ratio of earnings to fixed
charges and preferred stock dividends of the Company and its subsidiaries,
calculated in accordance with generally accepted accounting principles, was
(3.09). For purposes of this computation, earnings consist of income from
continuing operations before income taxes plus fixed charges (excluding
capitalized interest). Fixed charges consist of interest on indebtedness
(including capitalized interest and amortization of deferred financing fees),
preferred dividends, and that portion of lease rental expense representative of
the interest factor. Earnings for the six months ended June 30, 1996 and pro
forma earnings for the six months ended June 30, 1996 were insufficient to cover
combined fixed charges and preferred stock dividends in the amount of
approximately $1,900,000 and $1,750,000, respectively.
9
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE SHARES IS HIGHLY SPECULATIVE, INVOLVES A HIGH DEGREE OF
RISK, AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO MAKING AN INVESTMENT
DECISION, SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE OTHER MATTERS REFERRED TO
HEREIN, INCLUDING THE FINANCIAL STATEMENTS AND NOTES THERETO, THE FOLLOWING RISK
FACTORS. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS.
LOSSES FROM RECENT OPERATIONS; LIMITED OPERATING HISTORY; WORKING CAPITAL
DEFICIENCY. Although the Company had net income for the year ended December 31,
1995 and the six months ended June 30, 1995 of $7,593,984 and $5,856,027,
respectively, the Company incurred operating losses of ($632,206) and
($170,381), respectively, during the same periods and, for the year ended
December 31, 1994 and the six months ended June 30, 1996, the Company had net
losses of ($1,134,944) and ($1,611,092), respectively. Additionally, the
Company's income for the year ended December 31, 1995 and the six months ended
June 30, 1995 was attributable to gains from the settlement of a lawsuit against
Rowe, Inc., a former contract manufacturer of the Company's fully-robotic
vending machines ("Rowe"), and a reduction in the Company's liabilities pursuant
to the Reorganization Plan. See "Business--Bankruptcy Reorganization." In
addition, the Company anticipates continuing material losses through at least
December 31, 1996, and there can be no assurance that the Company will not incur
losses thereafter. As of December 31, 1994, the Company had a working capital
deficiency of $4,668,013. Although the Company had working capital of $2,124,713
and $3,137,569 as of December 31, 1995 and June 30, 1996, respectively, during
such periods the Company was dependent upon (i) loans from Gary W. Black, Sr.,
Chairman of the Board of Directors of the Company and (ii) the Private
Financings to satisfy its working capital requirements. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources." As of August 31, 1996, the Company
had limited cash resources. The Company, including the Predecessor Company, has
a relatively limited operating history, and its operations have been limited to
arranging distributorships for its vending and food-dispensing machines and
selling a limited number of fully-robotic vending machines from its inventory to
such distributors for test marketing in their local markets. Accordingly, the
likelihood of the future success of the Company must be considered in light of
such limited operating history, the recent bankruptcy of the Predecessor
Company, the possibility of future operating losses, as well as the problems,
expenses, difficulties, risks, and complications frequently encountered in
connection with similarly situated companies. In addition, the Company's future
plans are subject to known and unknown risks and uncertainties that may cause
the Company's actual results in future periods to be materially different from
any future performance implied herein. There can be no assurance that future
revenues of the Company will be significant or that the Company's operations
will be profitable. See "Risk Factors--Recent Bankruptcy," "Risk
Factors--Dependence on Contract Manufacturers of Machines," "Risk
Factors--Dependence on Contract Manufacturers of Food Products," and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RECENT BANKRUPTCY. In October 1994, the Predecessor Company sought
protection from creditors under Chapter 11 of the United States Bankruptcy Code
of 1986 (the "Bankruptcy Code"). By order dated December 8, 1995, a Joint Plan
of Reorganization (the "Reorganization Plan") with respect to the Predecessor
Company was confirmed by the United States Bankruptcy Court for the Eastern
District of Pennsylvania and the Predecessor Company emerged from protection
under Chapter 11 of the Bankruptcy Code. Despite the belief of the Company that
a unique confluence of circumstances outside the control of the Predecessor
Company caused the Predecessor Company to seek bankruptcy protection, the
business and reputation of the Predecessor Company have undoubtedly been
damaged. See "Business--Bankruptcy Reorganization."
DEPENDENCE ON CONTRACT MANUFACTURERS OF MACHINES. Although the Company is
currently selling a limited number of the fully-robotic vending machines from
the Company's inventory to its distributors for
10
<PAGE>
test marketing in their local markets, the Company contemplates that virtually
all of the production of its vending and food-dispensing machines will be
conducted by contract manufacturers with which the Company will endeavor to
establish long-term contractual relationships. Accordingly, the Company
anticipates that it will become dependent upon such manufacturers. Currently,
the Company's distributor in the Pacific Rim is a party to a contract with
respect to the manufacturing of such machines with Goryo Manufacturing, Ltd., a
major Korean manufacturing company. With the exception of such contract, neither
the Company nor any distributor of its vending and food-dispensing machines is
party to any contract relating to the manufacture of such machines. The Company
is, however, currently in active negotiations with a number of such contract
manufacturers. While the Company believes that there are numerous contract
manufacturers of substantial commercial stature capable of producing the
Company's vending and food-dispensing machines, there can be no assurance that
the Company will engage any of such manufacturers on terms acceptable to the
Company or at all. Any failure of the Company to enter into one or more
agreements with respect to such matters with satisfactory manufacturers prior to
the exhaustion of the Company's inventory would prevent the Company from
delivering additional machines, and, in such event, the Company and its future
prospects would be materially adversely affected. See "Business."
In addition, one of the causes of the prior bankruptcy of the Predecessor
Company was the failure of a licensee to manufacture the vending machines in
accordance with supplied specifications. Prospective investors must recognize
that, in the event the Company should secure a contract manufacturer for its
vending and food-dispensing machines, the Company will have less control over
all these events than it would if it housed and operated its entire business in
its own facilities. See "Business--Bankruptcy Reorganization."
DEPENDENCE ON CONTRACT MANUFACTURERS OF FOOD PRODUCTS. Currently, the
Company is dependent on contract manufacturers for the production of the food
products distributed, and to be distributed, through its vending and
food-dispensing machines. In the event one or more of such contract
manufacturers are unable to satisfy the Company's requirements for such
products, the Company could be materially adversely affected. While the Company
believes that there are numerous contract manufacturers of food products which
are capable of producing food products utilizing the Company's proprietary
formulations for distribution through the Company's vending machines and
food-dispensing machines, in the event the Company is required to change or
engage additional contract manufacturers, there can be no assurance that the
Company could enter into alternative arrangements with such other manufacturers
on terms acceptable to the Company or at all, and the resultant delay could have
a material adverse effect on the Company. Further, the agreement with one such
contract manufacturer provides that such agreement may be terminated on 90 days
notice. There can be no assurance that such contract will not be terminated. In
addition, the Company is currently considering commencing the manufacture of
food products for distribution through its vending and food-dispensing machines
and seeking food manufacturers with which the Company may enter into co-pack
agreements for the manufacture and distribution of food products utilizing the
Company's proprietary food formulations. There can be no assurance that the
Company will commence manufacturing such products or secure an agreement with
one or more contract manufacturers for such food products. In either of such
events, the Company could be materially adversely affected. See "Business."
DEPENDENCE ON DISTRIBUTORS. The distributors of the Company's vending and
food-dispensing machines are, and will be, required, among other things, to
obtain suitable locations in which to place such machines and to maintain and
service such machines satisfactorily. In the event such distributors do not
obtain a sufficient number of suitable locations or maintain or service such
machines satisfactorily, the Company could be materially adversely affected.
UNCERTAINTY OF PROTECTION OF INTELLECTUAL PROPERTY; DEPENDENCE ON
INTELLECTUAL PROPERTY. The Company's ability to compete effectively depends,
and will depend, in large part, on its ability to maintain the proprietary
nature of its products and technologies. The Company has received a number of
patents
11
<PAGE>
covering the method, use, and certain system components of the Food System. The
Company has received two U.S. patents and one additional patent application has
been filed by the Company in the United States. In addition, seven foreign
patents have been issued and two additional foreign patent applications have
been filed by the Company. There can be no assurance that any of such patent
applications will be approved or that any of such patents or patent
applications, if approved, will afford the Company any meaningful protection of
its proprietary rights. Notwithstanding the foregoing, the Company has no
knowledge of any infringement of its patents by third parties. Furthermore,
there can be no assurance that others will not develop such know-how and
information independently or otherwise design around the patents issued to the
Company. Moreover, there can be no assurance that the Company's proprietary
technology will not infringe existing patents or other rights owned or held by
third parties. If the Company's products are found to infringe upon the patents,
or otherwise impermissibly to utilize, the intellectual property of others, the
Company's ability to conduct its business could be materially adversely
affected. In such event, the Company may be required to obtain licenses from
such third parties or otherwise to obtain licenses to utilize the patents or
proprietary rights of others. There can be no assurance that any licenses
required under any such patents or proprietary rights could be obtained on terms
acceptable to the Company, or at all. See "Business--Patents."
FOREIGN OPERATIONS. Although the Company has recently commenced focusing
its efforts on the North American market, substantially all of the Company's
current sales of vending and food-dispensing machines and the related food
products are outside of the United States. Although the Company's foreign sales
are, and are anticipated to be, denominated in U.S. dollars, the foreign
activities of the Company are, and will be, subject to the risks customarily
associated with such activities. These risks include transportation delays and
interruptions, the imposition of import and export controls and tariffs,
expropriation, naturalization, and other economic, political, and regulatory
policies of local governments, as well as the laws and policies of the United
States affecting foreign trade and investment. There can be no assurance that
the Company will not encounter significant difficulties in the collection of
foreign accounts receivable. Although foreign accounts receivable insurance,
letters of credit, and other methods can be employed to mediate such risk, the
exposure of the Company to problems in collecting foreign accounts receivable
will increase with an increased level of foreign business.
POTENTIAL PRODUCT LIABILITY EXPENSE. As a result of the Company's
involvement in the hot food vending industry, the Company may be exposed to
significant potential product liability claims, although it has never been the
subject of litigation with respect to such a claim. The Company maintains a
product liability insurance policy in the amount of $1,000,000 per occurrence
and up to an aggregate of $3,000,000 per year, which amounts the Company
believes are reasonable and customary in the industry. There can be no assurance
that such insurance will continue to be available to the Company on acceptable
terms or at all. Accordingly, in the event of a product liability claim
determined adversely to the Company, if such claim should not be covered in its
entirety by such insurance, the Company could be materially adversely affected.
COMPETITION. The Company currently faces, and will face, direct competition
in the hot food automated vending market and there can be no assurance that
larger, better capitalized companies will not enter such market. The Company
may, in the future, compete with such larger companies for, among other things:
(i) the procurement of licensees; (ii) prime locations for product distribution;
and (iii) quality distributors for the Company's products. There can be no
assurance that the Company will be able to compete effectively against such
companies.
The domestic vending industry is dominated by a handful of large national
firms such as ARAMARK, Service America, and Canteen, which may have competitive
advantages in purchases from machine and product manufacturers, and in placing
vending machines in attractive locations. If such large firms entered the hot
food vending machine market, they would enjoy the advantage of "owning" many
prime locations through exclusive contractual arrangements. For example, a firm
might contract with a large hospitality
12
<PAGE>
chain, such as Marriott, whereby they will retain exclusive access to locations
at the chain's facilities. In addition, the pre-existence of a well-trained,
readily available service network and other capital intensive infrastructure
requirements also tends to work in favor of larger, more sophisticated, and
better-capitalized firms. See "Business--Competition."
LIMITATIONS ON DIVIDENDS; DIVIDEND POLICY. Pursuant to the terms of the
Preferred Stock, dividends thereon accrue on a cumulative basis at the rate per
annum of 8% of Stated Value. The Preferred Stock provides that the Company, in
its sole discretion, may pay such dividends as accrued either in cash or in the
form of Common Stock, in the sole discretion of the Company. Notwithstanding the
foregoing and in accordance with the General Corporation Law of the State of
Delaware, in the event the Company does not have adequate capital legally
available for the payment of such dividend, the Company may be restricted from
paying such dividend in any form, notwithstanding the terms of the Preferred
Stock. In such event, the value of the Preferred Stock, as well as the ability
of the holders to dispose of such securities, could be materially adversely
affected.
Pursuant to the terms of the Preferred Stock, the Preferred Stock is
convertible at the option of the holder thereof commencing on the date one year
from the date of this Prospectus, and is manditorily convertible by the Company
on the date three years from this Prospectus, into shares of Common Stock. See
"Description of Securities --Preferred Stock--Conversion." The Preferred Stock
is redeemable, under certain circumstances, in whole, but not in part, at the
option of the Company, at the Redemption Price equal to the sum of the Stated
Value and the accrued and unpaid dividends to the Redemption Date. See
"Description of Securities--Preferred Stock--Redemption." The Company has never
declared or paid, and is not anticipated in the foreseeable future to declare or
pay, a dividend on the Common Stock, and the Company expects that the Company's
future earnings will be retained for expansion or development of the Company's
business. See "Dividend Policy."
Whether the Company will pay dividends on the Common Stock in the future
will be at the discretion of the Company's Board of Directors and will depend
upon, among other things, future earnings, operations, capital requirements and
surplus, the general financial condition of the Company, restrictive covenants
in loan or other agreements to which the Company may become subject, and other
factors as the Board of Directors of the Company may deem relevant. See
"Description of Securities--Preferred Stock-- Dividends."
NEED FOR ADDITIONAL FINANCING. Based on the Company's operating plan, the
Company believes that the net proceeds of this offering, available cash, and
anticipated cash flow from operations will be sufficient to satisfy the
Company's anticipated capital requirements for at least 18 months from the date
of this Prospectus. After such time, the Company anticipates that it will
require additional debt or equity financing to meet its current plans for
expansion. In addition, the Company is obligated to pay certain amounts pursuant
to the terms of the Reorganization Plan relating to the emergence of the
Predecessor Company and its subsidiaries from bankruptcy. See
"Business--Bankruptcy Reorganization." To the extent the Company's cash flow is
insufficient to fund these obligations as well as the Company's plans for
expansion, the Company would be required to satisfy these obligations with
alternative sources of financing, if available. No assurance can be given that
the Company will be successful in obtaining additional financing on favorable
terms, or at all. If the Company is unable to obtain additional financing, its
ability to satisfy its obligations and current plans for expansion could be
materially adversely affected. The Company has financed its operations to date
primarily from sales of securities, cash flow from operations, loans from banks,
and loans from directors, officers, and stockholders. See "Use of Proceeds" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
GOVERNMENT REGULATION. The manufacturing, processing, packaging, storage,
distribution, and labeling of food products, as well as the regulation of
microwave food preparation devices, including the Company's vending machines and
food-dispensing machines, are subject to regulation by various governmental
entities, including the United States Food and Drug Administration. The Company
believes that its
13
<PAGE>
production and distribution processes, as well as its products, satisfy all
applicable laws and regulations. Failure to comply with such applicable laws and
regulations could subject the Company to civil remedies, including fines,
injunctions, recalls, or seizures, as well as potential criminal sanctions,
which could have a material adverse effect on the Company.
CONCURRENT SALES BY SELLING STOCKHOLDERS. The Registration Statement, of
which this Prospectus forms a part, also includes a separate prospectus relating
to the offering and resale by the Selling Stockholders of an aggregate of
604,225 shares of Common Stock issuable upon the exercise of the Warrants and an
additional 950,000 shares of Common Stock held by CSB Financial, LLC. Of the
shares of Common Stock issuable upon the exercise of the Warrants, one-third may
be sold commencing on each of the dates six months, 12 months, and 18 months
from the date of this Prospectus. The shares of Common Stock held by CSB
Financial, LLC may not be sold for the period of 18 months from the date of this
Prospectus. In each such case, such securities may be sold prior to such dates
with the prior written consent of the Representative.
Sales of such shares of Common Stock, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock. As a
result of this offering and the registration of the resale of such shares of
Common Stock, the freely tradeable Common Stock will be increased by 950,000 to
2,449,988 shares of Common Stock. If the Warrants are exercised in their
entirety, there will then be freely tradeable an additional 1,554,225 shares of
Common Stock, including the aforementioned 950,000 shares of Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE. Of the 9,249,988 shares of Common Stock
currently outstanding, approximately 6,950,000 shares are "restricted
securities" as that term is defined in Rule 144 under the Securities Act ("Rule
144") and may, under certain circumstances, be sold without registration under
the Securities Act. The sale, or availability for sale, of a substantial number
of shares of Common Stock in the public market subsequent to this offering
pursuant to Rule 144 or otherwise could materially adversely affect the market
price of the Common Stock and could impair the Company's ability to raise
additional capital through the sale of its equity securities or debt financing.
The availability of Rule 144 to the holders of restricted securities of the
Company would be conditioned on, among other factors, the availability of
certain public information concerning the Company. All executive officers,
directors, and five percent or greater stockholders of the Company, have agreed,
however, not to sell or otherwise dispose of any securities of the Company for a
period of 24 months from the date of this Prospectus without the
Representative's prior written consent. The holders of the Representative's
Warrants, as well as the holders of the Warrants, will have certain demand
registration rights with respect to such warrants and the securities underlying
such warrants. See "Shares Eligible for Future Sale" and
"Underwriting--Representative's Warrants."
In addition, the Registration Statement, of which this Prospectus forms a
part, also includes a separate prospectus relating to the offering and resale by
the Selling Stockholders of an aggregate of 604,225 shares of Common Stock
issuable upon exercise of the Warrants and an additional 950,000 shares of
Common Stock held by CSB Financial, LLC. The investors in the Private Financings
have agreed that, of the shares of Common Stock issuable upon exercise of the
Warrants, one-third may be sold commencing on each of the dates six months, 12
months, and 18 months from the date of this Prospectus. The shares of Common
Stock held by CSB Financial, LLC may not be sold for the period of 18 months
from the date of this Prospectus. In each such case such securities may be sold
prior to such dates with the prior written consent of the Representative. See
"Concurrent Sales by Selling Stockholders."
VOLATILITY OF MARKET PRICE. The market prices for securities of small and
growth-oriented companies have been, and may continue to be, and historically
the Common Stock has been, and may continue to be, highly volatile, and the
market price for the Preferred Stock may be highly volatile. Future
announcements by the Company or its competitors, including periodic
announcements of operating results, competitive
14
<PAGE>
products, and technological innovations, may have a material impact upon the
market price for the Preferred Stock and the Common Stock.
SUBSTANTIAL OPTIONS AND WARRANTS RESERVED. The Company has reserved from
the authorized, but unissued, Common Stock 604,225 shares of Common Stock
issuable upon exercise of the Warrants. The Company will also sell to the
Representative, in connection with this offering, for nominal consideration, the
Representative's Warrants to purchase 150,000 shares of Preferred Stock at a
price per share equal to 120% of the initial public offering price per Share,
subject to adjustment as provided therein. The existence of the Representative's
Warrants, the Warrants, and other options or warrants may prove to be a
hindrance to future financings, since the holders of such warrants and options
may be expected to exercise them at a time when the Company would otherwise be
able to obtain additional equity capital on terms more favorable to the Company.
The Company has agreed that, under certain circumstances, it will register
under federal and state securities laws the Representative's Warrants and/or the
shares of Preferred Stock issuable upon the exercise thereof (the "Warrant
Shares").
PREFERRED STOCK; POSSIBLE ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER
PROVISIONS. The Company's Certificate of Incorporation, as amended, authorizes
the Board of Directors to issue up to 3,000,000 shares of preferred stock, $.001
par value per share. The preferred stock may be issued in one or more series,
the terms of which may be determined at the time of issuance by the Board of
Directors, without further action by stockholders, and may in subsequent series
include voting rights (including the right to vote as a series on particular
matters), preferences as to dividends and liquidation, conversion and redemption
rights, and sinking fund provisions. Currently, 70 shares of Series A 4%
Cumulative Convertible Redeemable Preferred Stock are outstanding, all of which
will be redeemed upon the closing of this offering; other than the Preferred
Stock, the Company has no present plans for the issuance of additional series of
preferred stock. However, the issuance of any additional shares of preferred
stock could materially adversely affect the rights of holders of Preferred Stock
and, therefore, could reduce the value of the Preferred Stock. In addition,
specific rights granted to future holders of preferred stock could be used to
restrict the Company's ability to merge with, or sell its assets to, a third
party, thereby preserving control of the Company by present stockholders. See
"Description of Securities."
The ability of the Board of Directors to issue preferred stock could
discourage, delay, or prevent a takeover of the Company.
SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR REPAYMENT OF PRIVATE
FINANCINGS. Approximately 50.7% ($5,100,000) of the estimated net proceeds from
the sale of the Shares at an assumed public offering price of $8.00 per Share
has been allocated for the repayment of the Private Financings. See "Use of
Proceeds."
SUBSTANTIAL PORTION OF NET PROCEEDS ALLOCATED FOR GENERAL CORPORATE AND
WORKING CAPITAL PURPOSES. Approximately 28.7% ($2,890,000) of the estimated net
proceeds from the sale of the Shares at an assumed public offering price of
$8.00 per Share has been allocated for general corporate and working capital
purposes. Such proceeds may be utilized in the discretion of the Board of
Directors. As a result, investors will not know in advance how such net proceeds
will be utilized by the Company. See "Use of Proceeds."
15
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale by the Company
of the Shares at the assumed public offering price of $8.00 per Share, after
deducting the underwriting discount and expenses payable by the Company, are
estimated to be approximately $10,060,000 ($11,626,000 if the Representative's
over-allotment option is exercised in full).
The Company presently intends to use the net proceeds of this offering as
follows: approximately $5,100,000 (50.7%) to repay the Private Financings;
approximately $1,320,000 (13.1%) to acquire a facility to use in connection with
the Company's food manufacturing operations; $750,000 (7.5%) to acquire
additional baking equipment; and approximately $2,890,000 (28.7%) for general
corporate and working capital purposes.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the sale of the Shares based upon the Company's currently
contemplated operations, the Company's business plan, and current economic and
industry conditions and is subject to reapportionment of proceeds among the
categories listed above or to new categories in response to, among other things,
changes in its plans, regulations, industry conditions, and future revenues and
expenditures. The amount and timing of expenditures will vary depending on a
number of factors, including changes in the Company's contemplated operations or
business plan and changes in economic and industry conditions.
Based on the Company's operating plan, the Company believes that the net
proceeds of this offering, together with revenues from continuing operations,
will be sufficient to satisfy its capital requirements and finance its plans for
expansion for at least the next 18 months. Such belief is based upon certain
assumptions, and there can be no assurance that such assumptions will prove to
be accurate. Accordingly, there can be no assurance that such resources will
satisfy the Company's capital requirements for such period. After such 18 month
period, the Company anticipates that it may require additional financing in
order to meet its current plans for expansion. Such financing may take the form
of the issuance of common or preferred equity securities or debt securities, or
may involve bank financing. In addition, contingencies may arise which may
require the Company to obtain additional capital. There can be no assurance that
the Company will be able to obtain such additional capital on a timely basis, on
favorable terms, or at all. In any of such events, the Company may be unable to
implement its current plans for expansion. See "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."
Net proceeds, if any, received by the Company from the sale of Shares
issuable upon exercise of the over-allotment option, and proceeds, if any,
received by the Company upon exercise of the Representative's Warrants, will be
utilized for general corporate and working capital purposes.
16
<PAGE>
CAPITALIZATION
The following table sets forth the short-term debt and the capitalization of
the Company at June 30, 1996 and the as adjusted short-term debt and
capitalization of the Company at June 30, 1996, adjusted to give effect to the
receipt by the Company of estimated net proceeds of approximately $10,060,000
from the sale of the Shares at the assumed public offering price of $8.00 per
Share and the application of the net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
ACTUAL AS ADJUSTED(4)
------------ --------------
<S> <C> <C>
Short-term debt:
Senior notes payable (1) $ 437,445 --
Pre-petition liabilities 124,773 124,773
------------ --------------
562,218 124,773
------------ --------------
------------ --------------
Long-term debt--pre-petition liabilities 134,773 134,773
------------ --------------
Preferred stock--$.001 par value, authorized 3,000,000 shares:
Issued and outstanding--Series A-70 shares; as adjusted--0
shares (2) 3,233,333
Issued and outstanding--Series B-0 shares; as
adjusted--1,500,000 shares 10,060,000
(liquidation preference--$12,000,000)
Common stock--$.001 par value; 25,000,000 shares authorized,
9,249,988 outstanding; as adjusted 9,249,988 (3) 9,250 9,250
Paid in capital 963,795 963,795
Accumulated deficit (914,602) (1,887,886)
------------ --------------
Total stockholders' equity 3,291,776 9,145,179
------------ --------------
Total capitalization $ 3,426,549 $ 9,279,952
------------ --------------
------------ --------------
</TABLE>
- ------------------------
(1) Assumes that a portion of the net proceeds of this offering will be used to
repay the senior notes issued in May 1996.
(2) Assumes that a portion of the net proceeds of this offering will be used to
redeem the Series A Preferred Stock.
(3) Retroactively adjusted to reflect 2,000,000 shares of common stock
contributed by certain stockholders of the Company.
(4) Does not include any shares issuable upon the exercise of outstanding stock
options or warrants.
17
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the OTC Bulletin Board under the symbol
"VEND." The following table sets forth the high and low closing sale prices
quoted with respect to the Common Stock for the period from January 1, 1994
through September 24, 1996 as reported by the OTC Bulletin Board. At September
26, 1996, the Company had approximately 150 stockholders of record.
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
1994:
First Quarter............................................................. $ .25 $ .25
Second Quarter............................................................ .25 .25
Third Quarter............................................................. .25 .125
Fourth Quarter............................................................ .125 .0625
1995:
First Quarter............................................................. $ .125 $ .125
Second Quarter............................................................ .625 .125
Third Quarter............................................................. 1.00 .625
Fourth Quarter............................................................ 1.75 .25
1996:
First Quarter............................................................. $ 5.75 $ 2.50
Second Quarter............................................................ 5.75 5.00
Third Quarter (through September 24, 1996)................................ 6.50 5.00
</TABLE>
On September 24, 1996 the last sale price of the Common Stock as reported by
the OTC Bulletin Board was $5.375 per share.
DIVIDEND POLICY
Pursuant to the terms of the Preferred Stock, dividends thereon accrue on a
cumulative basis at the rate per annum of 8% of Stated Value. The Preferred
Stock provides that the Company may, in its sole discretion, pay such dividends
as accrued either in cash or in the form of Common Stock. Notwithstanding the
foregoing and in accordance with the General Corporation Law of the State of
Delaware, in the event the Company does not have adequate capital legally
available for the payment of such dividends, the Company may be restricted from
paying such dividend in any form, notwithstanding the terms of the Preferred
Stock. In such event, the value of the Preferred Stock, as well as the ability
of the holders to dispose of such securities, could be materially adversely
affected.
Pursuant to the terms of the Preferred Stock, the Preferred Stock is
convertible, at the option of the holder, commencing one year from the date of
this Prospectus, and is mandatorily convertible by the Company on the date three
years from the date of this Prospectus, into shares of Common Stock. See
"Description of Securities--Preferred Stock--Conversion." The Preferred Stock is
redeemable under certain circumstances, in whole, but not in part, at the option
of the Company at the Redemption Price equal to the sum of the Stated Value and
the accrued and unpaid dividends to the Redemption Date. The Company has never
declared or paid, and is not anticipated in the foreseeable future to declare or
pay, a dividend on the Common Stock, and the Company expects that the Company's
future earnings will be retained for expansion or development of the Company's
business.
Whether the Company will pay dividends in the future will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements and surplus, the
general financial condition of the Company, restrictive covenants in loan or
other agreements to which the Company may become subject, and other factors as
the Board of Directors of the Company may deem relevant.
18
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the years ended
December 31, 1995 and 1994, and the selected balance sheet data at December 31,
1995 are derived from the Financial Statements of the Company and notes thereto
included elsewhere herein audited by Richard A. Eisner & Company, LLP,
independent certified public accountants for the Company. The unaudited selected
statement of operations data for the six months ended June 30, 1996 and 1995 and
the unaudited selected balance sheet data at June 30, 1996, are derived from the
unaudited financial statements of the Company, which have been prepared on a
basis consistent with the audited Financial Statements of the Company and, in
the opinion of management, include all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position and results of operations. The results of operations for any
interim period are not necessarily indicative of results to be expected for the
entire year. The following data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements of the Company and notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
DECEMBER 31, DECEMBER 31, JUNE 30, JUNE 30,
1995 1994 (1) 1996 1995 (1)
------------- ------------- ------------- -------------
STATEMENT OF OPERATIONS DATA:
Net Sales........................................... $ 245,313 $ 943,345 $ 325,325 $ 80,779
Cost of goods sold.................................. 224,282 859,287 294,053 67,174
Gross profit........................................ 21,031 84,058 31,272 13,605
Selling, general, and administrative expenses....... 653,237 1,011,230 1,667,781 183,986
Operating income (loss)............................. (632,206) (927,172) (1,636,509) (170,381)
Gain from settlement of lawsuit..................... 5,979,459 5,979,459
Interest income..................................... 105,216 23,686 37,826 31,657
Interest expense.................................... (32,352) (213,179) (12,409) (20,388)
Loss on abandonment and sale of property............ (92,338) (3,279)
Reorganization expense.............................. (41,401) (15,000)
Miscellaneous income................................ 35,680
Income (loss) from continuing operations............ 5,286,378 (1,134,944) (1,611,092) 5,856,027
Extraordinary item
Compromise of pre-petition liabilities............ 2,307,606
Net income (loss)................................... $ 7,593,984 $ (1,134,944) $ (1,611,092) $ 5,856,027
Net income (loss) per share before extraordinary
item.............................................. $0.57 $(0.12) $(0.17) $0.63
Extraordinary item.................................. 0.25 0.00 0.00 0.00
Net income (loss) per share......................... $0.82 $(0.12) $(0.17) $0.63
Weighted average number of shares
outstanding....................................... 9,249,988 9,249,988 9,249,988 9,249,988
</TABLE>
- ------------------------
(1) The Company petitioned for bankruptcy protection in October 1994 and
operated as a debtor-in-possession through December 8, 1995.
The ratio of earnings to combined fixed charges and preferred stock dividends
is not shown because such ratio is less than one. For purposes of this
computation, earnings consist of income from continuing operations before
income taxes plus fixed charges (excluding capitalized interest). Fixed
charges consist of interest on indebtedness (including capitalized interest
and amortization of deferred financing fees), preferred dividends, and that
portion of lease rental expense representative of the interest factor.
Earnings for the six months ended June 30, 1996 and the pro forma earnings
for the six months ended June 30, 1996 were insufficient to cover combined
fixed charges in the amounts of approximately $1,900,000 and $1,750,000,
respectively.
19
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA:
AT DECEMBER 31, AT JUNE 30, 1996
-----------------------
AS ADJUSTED
1995 ACTUAL (1)
---------------- --------- ------------
<S> <C> <C> <C>
Cash........................................... $ 38,971 $ 8,531 $5,492,642
Working capital................................ 2,124,713 3,137,569 8,990,972
Total assets................................... 4,595,560 4,631,746 9,971,815
Dividends payable on preferred stock........... -- 65,333 --
Pre-petition liabilities (including current
portion)..................................... 2,577,286 259,546 259,546
Other long-term liabilities.................... 100,000 -- --
Stockholder equity............................. 1,384,870 3,291,776 9,145,179
</TABLE>
- ------------------------
(1) Adjusted to reflect the receipt by the Company of the estimated net
proceeds of $10,060,000 from the sale of the Shares at an assumed initial
public offering price of $8.00 per Share and the application of the net
proceeds therefrom. See "Use of Proceeds."
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM
THOSE IMPLIED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH ELSEWHERE IN THIS
PROSPECTUS.
GENERAL
The Company has developed a proprietary turnkey system for the automated
vending of hot meals. As a result of circumstances which the Company believes
were beyond the control of the Predecessor Company, in October 1994, the
Predecessor Company sought protection from creditors under Chapter 11 of the
Bankruptcy Code. During the pendency of such proceedings, the Predecessor
Company essentially ceased operations. The Predecessor Company emerged from
bankruptcy in December 1995. In January, May, and July, 1996, the Company
completed private placements of its securities which provided the Company with
funds to resume limited operations. To date, the Company's operations have been
limited to arranging distributorships for the Company's vending and
food-dispensing machines and selling a limited number of the fully-robotic
vending machines to such distributors from the Company's inventory for test
marketing in their local markets. See "Business--Bankruptcy Reorganization."
Until January 1996, the Company, under its prior name, Health Management,
Inc., was a publicly traded corporation not engaged in any business activity and
with virtually no assets. In January 1996, the Company acquired the Predecessor
Company and since such time has continued the operations of the Predecessor
Company on a limited scale.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Net sales increased by $244,744, to $325,325 for the six months ended June
30, 1996, as compared to $80,779 for the six months ended June 30, 1995. Net
sales consisted of approximately $228,591 in vending machine sales,
approximately $11,010 in machine parts sales, and approximately $85,724 in food
product sales. Such increase was primarily attributable to increased sales as
well as to an increased level of operations in general following the emergence
of the Company from bankruptcy in December 1995. One domestic purchaser
accounted for $42,524 in food product sales. All of the machines sold were pizza
vending machines.
Cost of goods sold increased by $226,879, to $294,053 for the six months
ended June 30, 1996, compared to $67,174 for the six months ended June 30, 1995.
Cost of goods sold as a percentage of net sales increased to 90.4% for the six
months ended June 30, 1996, as compared to 83.2% for the six months ended June
30, 1995. The increase in cost of goods sold was primarily attributable to the
increased net sales of the Company during the six months ended June 30, 1996.
The increase in cost of goods sold as a percentage of net sales was primarily
attributable to higher costs of vending machine components sourced directly by
the Company in small quantities.
Gross profit increased by $17,667, to $31,272 for the six months ended June
30, 1996, as compared to $13,605 for the six months ended June 30, 1995. Such
increase was attributable to the aforementioned increase in net sales which more
than offset the aforementioned increase in cost of goods sold and the
aforementioned increase in cost of goods sold as a percentage of net sales.
General and administrative expenses increased by $1,168,852, to $1,329,069
for the six months ended June 30, 1996, compared to $160,217 for the six months
ended June 30, 1995. Such increase was primarily
21
<PAGE>
attributable to the Company's recommencement of operations following its
emergence from bankruptcy. See "Business--Bankruptcy Reorganization."
Selling expense increased by $314,923, to $338,712 for the six months ended
June 30, 1996, compared to $23,769 for the six months ended June 30, 1995. Such
increase was primarily attributable to the Company's recommencement of
operations following its emergence from bankruptcy. See "Business-- Bankruptcy
Reorganization."
Loss from operations increased by $1,466,128, to $1,636,509, for the six
months ended June 30, 1996, compared to $170,381 for the six months ended June
30, 1995. Such increase was primarily attributable to increased net sales offset
by increased cost of goods sold, general and administrative expenses, and
selling expenses.
Other income (expenses) decreased from $6,026,408 for the six months ended
June 30, 1995, to $25,417 for the six months ended June 30, 1996. Such other
income (expenses) for the six months ended June 30, 1995 was comprised of gain
from the settlement of a lawsuit in the amount of $5,979,459, miscellaneous
income in the amount of $35,680, and interest income in the amount of $31,657,
offset by interest expense in the amount of ($20,388). Such other income
(expenses) for the six months ended June 30, 1996 was comprised of interest
income in the amount of $37,826, offset by interest expense in the amount of
($12,409).
Dividends accrued on preferred stock increased from $0 on June 30, 1995 to
$65,333 on June 30, 1996.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Net sales decreased by $698,032, to $245,313 for the year ended December 31,
1995, compared to $943,345 for the year ended December 31, 1994. Such decrease
was primarily attributable to lower sales of pizzas and vending machines and the
absence of license fees during the year ended December 31, 1995 resulting from
the cessation of operations by the Company during the pendency of its bankruptcy
proceeding. Approximately 50% of net sales for the year ended December 31, 1995
and approximately 35% of net sales for the year ended December 31, 1994 were
derived from one customer, AMTRAK, and consisted of bulk sales of pizzas. See
"Risk Factors" and "Business."
Cost of goods sold decreased by $635,005, to $224,282 for the year ended
December 31, 1995, compared to $859,287 for the year ended December 31, 1994.
Cost of goods sold as a percentage of net sales remained relatively consistent
at 91.4% for the year ended December 31, 1995, as compared to 91.1% for the year
ended December 31, 1994. The decrease in cost of goods sold was primarily
attributable to the decreased net sales of the Company during the year ended
December 31, 1995.
Gross profit decreased by $63,027, to $21,031 for the year ended December
31, 1995, compared to $84,058 for the year ended December 31, 1994. Such
decrease was attributable to the aforementioned decrease in net sales offset by
the aforementioned decrease in cost of goods sold.
General and administrative expenses decreased by $317,448, to $618,398 for
the year ended December 31, 1995, compared to $935,846 for the year ended
December 31, 1994. Such decrease was primarily attributable to the reduction of
a substantial portion of the salaries of the Company's staff during the year
ended December 31, 1995.
Selling expense decreased by $40,545, to $34,839 for the year ended December
31, 1995, compared to $75,384 for the year ended December 31, 1994. Such
decrease was primarily attributable to the aforementioned decrease in sales
during the year ended December 31, 1995.
Other income (expenses) increased from ($207,772) for the year ended
December 31, 1994, to $5,918,584 for the year ended December 31, 1995. Other
income (expenses) for the year ended December 31, 1994 was comprised of interest
income of $23,686, interest expense of ($213,179), loss on the abandonment and
sale of property of ($3,279), and reorganization expenses of ($15,000). Other
income
22
<PAGE>
(expenses) for the year ended December 31, 1995 was comprised of gain from the
settlement of a lawsuit between the Predecessor Company and Rowe, Inc. of
$5,979,459 (See "Business--Bankruptcy Reorganization"), interest income of
$105,216, interest expense of ($32,352), loss on the abandonment and sale of
property of ($92,338), and reorganization expense of ($41,401).
As a result of the foregoing, net income (loss) per share increased by $.94
to $.82 for the year ended December 31, 1995, as compared to ($.12) for the year
ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company used cash in operating activities during the six months ended
June 30, 1996 in the amount of $1,194,165.
As of June 30, 1996, the Company had working capital of approximately
$3,137,569, compared with a working capital deficiency of $285,103 on June 30,
1995.
In March 1996 and July 1996, the Company received an additional $230,000 and
$100,000, respectively, net, as part of the aforementioned settlement with Rowe.
The remaining balance is due in a single installment of $500,000 in June 1997.
See "Business--Bankruptcy Reorganization."
During the six months ending June 30, 1996, the Company raised net proceeds
of approximately $3,843,000 in the Private Financings. Substantially all of
these funds have been expended during the period to repay liabilities existing
prior to the filing of the Company's petition for bankruptcy protection. The
Company raised an additional $383,482 in net proceeds in July 1996 in the May
Private Financing. Substantially all of these funds have been expended during
the period.
During September 1996, the Company borrowed an aggregate of $140,000 from a
non-affiliated stockholder of the Company to meet the Company's short term
capital needs. Such principal amount accrues interest at the prime rate of
interest plus one percent and is repayable on the earlier of the date of this
offering and September , 1997.
Upon the closing of this offering, the Company is required to redeem the 70
shares of Series A 4% Cumulative Convertible Redeemable Preferred Stock of the
Company issued in the January Private Financing for approximately $3,600,000,
including accrued dividends of approximately $100,000, and to repay the Series A
10% Senior Notes of the Company issued in the May Private Financing for
approximately $1,500,000, including interest of approximately $50,000. See "Use
of Proceeds."
As of September 30, 1996, the Company had limited cash resources. The
Company will require additional funding to fund its corporate operations, its
food production operation, for working capital and to purchase vending machines.
No assurance can be given that the Company will be able to obtain additional
financing. In the event the Company is not able to raise funds on a timely basis
the operations of the Company could be materially adversely affected.
23
<PAGE>
BUSINESS
GENERAL
The Company has developed a proprietary turnkey system (the "Food System")
for the automated vending of hot meals. The combination of technologies
developed by the Company which, when combined, comprise the Food System,
currently consists of:
(1) a patented fully-robotic coin-operated hot food vending machine
capable of storing, cooking, and serving specialty foods using proprietary
Company-developed formulations and packaging;
(2) a proprietary packaging system utilizing a patented shape and patent
pending technology that protects a frozen food product from freezer
degradation, but allows the products stored in it to be microwave, infrared,
or impingement heated/cooked without being removed from the box;
(3) a proprietary patent pending formulation for dough-based products
which has unique features that allow the products made from this
formulation, such as pizzas and breads, to be baked, frozen, stored frozen,
and rapidly reheated by microwave, infrared, or impingement heating/cooking
without adversely affecting the taste, consistency, or desired features of
the dough-based food product; and
(4) a microwave oven which has been modified to proprietary
specifications and allows for complete and consistent cooking throughout the
food item.
In addition to the fully-robotic vending machine which both stores and cooks
food products utilizing the Company's proprietary formulations, the Company also
offers a non-robotic, food-dispensing machine. The non-robotic machine stores
food products in the Company's proprietary food packaging, but does not cook,
serve food or take money automatically; rather, it requires the customer to
manually deliver the food product to the machine's microwave and pay a cashier
or attendant. The Company also has in development a semi-robotic machine. The
semi-robotic machine stores frozen food product in the Company's packaging and
takes money automatically, but requires the consumer to manually deliver the
food product to the microwave. The Company currently does not anticipate
marketing the semi-robotic machine until 1998, if at all.
The Company markets its pizza product and its pizza vending machines under
the registered trademark "Pizza Chef-Registered Trademark-". The Company markets
its vending and food-dispensing machines for $1,000 to $7,000 per unit.
The Company believes that its Food System is distinctive in the following
two respects: (i) the packaging system and dough formulation allow dough-based
products to be microwave cooked without damaging the taste and quality of such
products; and (ii) the fully-robotic vending machine operates as a turn-key
system which takes money, cooks, and serves hot food products in times as short
as 60 seconds.
In May 1996, the Company acquired the technology and certain inventory
relating to an additional fully-robotic hot food vending machine for
approximately $75,000. This vending machine, which is currently in the
development stage, differs from the Company's own machines in that it is
designed for the vending of name brand frozen food products. While the Company's
machines are designed to function only with the Company's proprietary food
packaging and formulations, this machine is designed to vend frozen food product
from a variety of major food manufacturers. The Company believes that having the
ability to vend nationally-recognized, name brand products will allow it to
serve a segment of the hot-food vending market that its current product line
does not address.
The Company's operating strategy is: (i) to continue to secure strategic
licensing and distribution agreements for the manufacture and distribution of
its vending and food-dispensing machines on a global basis; (ii) to continue to
develop a network of licensees and distributors for the supply of food products
to owner/operators of the vending and food-dispensing machines in such markets;
and (iii) to establish a
24
<PAGE>
Company-operated food production facility to manufacture food products to be
vended through the Company's vending and food-dispensing machines. See
"Business--License Agreements" and "Business-- Food Product Line."
The Company licenses its technology to third-party manufacturers and to
third-party distributors outside the United States for the assembly and
distribution of the vending and food-dispensing machines. Currently, the Company
has, among other agreements: a technology license and distribution agreement
with a distributor in the Pacific Rim which has, with the Company's approval,
recently sublicensed the manufacture of the fully-robotic vending machine to
Goryo Manufacturing Ltd., a major Korean manufacturing company. The Company has
entered into agreements granting master distributorships of the Company's
products in Argentina, Brazil, Chile, Paraguay, New Zealand, Singapore, and
Portugal and a memorandum of understanding in the City of Moscow.
The Company intends to license the production of its food products in the
United States and other countries as well as to produce such products in
Company-owned and operated facilities when and if sufficient demand for its food
products exists. Currently, the Company has a co-pack agreement with Crestar,
whereby Crestar prepares a portion of the food products on behalf of the Company
using the Company's proprietary formulations. The food products are then sold by
the Company to customers both directly and through third-party distributors. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations--Liquidity and Capital Resources."
In addition, the Company owns its own baking equipment and operated its own
bakeries until October 1994, when a predecessor of the Company was required to
discontinue baking operations as a result of its seeking protection from
creditors under the Bankruptcy Code. Presently such equipment is not in use, and
the Company has not yet recommenced baking operations on its own. In February
1996, the Company entered into an agreement to purchase a facility located in
West Chester, Pennsylvania, presently leased by the Company, that was designed
as a USDA certified production facility and is capable of housing the Company's
baking equipment and which will allow the Company to undertake its own food
manufacturing and development operations and to maintain consistent quality
control with regard to its food products. As a result of the Company's limited
working capital, the Company believes that it is unlikely that the Company is
currently capable of acquiring such facility at this time and making the
necessary renovations thereto. Accordingly, the Company negotiated with a third
party to acquire such facility and lease such facility to the Company. The
Company currently has an option to purchase this facility at a price of
$1,360,000. There can be no assurance that an agreement will be reached with
such third party on terms acceptable to the Company on a timely basis or at all.
Notwithstanding the foregoing, investors should be aware that the Company's
future plans are subject to a number of variables outside of its control, and
there can be no assurance that the Company will be able to implement any or all
of such plans or that such plans, when and if implemented, will be successful.
To date, the Company's operations have been limited to arranging
distributorships for the Company's vending and food-dispensing machines and
selling a limited number of the fully-robotic vending machines to such
distributors from the Company's inventory for test marketing in their local
markets. Accordingly, the Company's future plans are subject to known and
unknown risks and uncertainties that may cause the Company's actual results in
future periods to be materially different from any future performance implied
herein.
BANKRUPTCY REORGANIZATION
In December 1995, the Predecessor Company emerged from protection under
Chapter 11 of the Bankruptcy Code. The Company believes that a unique confluence
of circumstances, outside the control of the Predecessor Company, caused the
Predecessor Company to seek bankruptcy protection in October 1994. In 1993, the
business and reputation of the Predecessor Company was damaged due to a
fraudulent telemarketing operation owned and operated by a private label
customer reselling vending
25
<PAGE>
machines, using the technology of the Predecessor Company. As part of its
telemarketing operation, such customer accepted deposits for machines and never
delivered a majority of the orders for such machines to the Predecessor Company.
The Predecessor Company had no contractual relationship with any third party
other than with such customer. The Predecessor Company was never implicated in
any wrongdoing with respect to such telemarketing fraud and, in fact, requested
and cooperated with a federal investigation of such customer.
In addition, such customer's aggressive sales techniques caused order rates
to increase at a rate well beyond the Predecessor Company's manufacturing
capacity, which caused the Predecessor Company to have to rely on a third-party
manufacturer, Rowe, to produce machines for customers of this party. Rowe failed
to produce machines on a timely basis and also failed to adhere to the
specifications established by the Predecessor Company in the manufacture of the
vending machines, the result of which was problems with the refrigeration unit
and the microprocessor controller. Business was adversely affected as a result
of cancellations due to the taint of such telemarketing fraud, as well as due to
Rowe's inability to manufacture an adequate supply of machines and its delivery
of improperly manufactured machines.
By December 1992, the Predecessor Company had received approximately $4.15
million of financing and services from Teleflex, Inc. ("Teleflex"). In the wake
of the aforementioned telemarketing fraud and the problems caused by Rowe,
Teleflex, which was the Predecessor Company's principal source of financing,
withdrew its funding and foreclosed on the assets of the business, including the
proprietary technology of the business serving as collateral for the loans made
by Teleflex thereto. The foreclosure and withdrawal of funding led the
Predecessor Company to seek bankruptcy protection in October 1994.
By order entered June 7, 1995, the Bankruptcy Court approved the Settlement
Agreement between the Predecessor Company and Rowe (the "Settlement Agreement"),
which provided a resolution of the Predecessor Company's dispute with Rowe
regarding the faulty manufacture of vending machines by Rowe. The terms of the
settlement included the following: (i) cash payments to the Predecessor Company
of $3,938,000, of which $500,000 remains to be paid in June 1997; (ii) the
return of 450 fully-robotic vending machines and the parts for an additional 450
machines to the Predecessor Company; and (iii) the withdrawal of Rowe's proof of
claim in the Predecessor Company's bankruptcy proceeding in the aggregate amount
of $884,975.
The Reorganization Plan was approved by the Bankruptcy Court on or about
December 8, 1995 and became a final order on December 18, 1995.
Under the Reorganization Plan, the claims of the principal creditors of the
Predecessor Company are to be satisfied as follows:
(i) The Reorganization Plan provides for cash payments to Teleflex
totaling $3,444,708. Of this amount, in June 1995, the Predecessor Company
paid Teleflex $1.2 million and, in February 1996, the Company paid Teleflex
approximately $2.2 million. In addition, Teleflex had an allowed unsecured
claim of approximately $965,000;
(ii) National Penn Bank, which had already received payments aggregating
$175,000 out of proceeds from the settlement with Rowe, was paid $5,000 in
January 1996 to discharge its secured claim; and
(iii) Unsecured creditors will receive 10% of the amount of their allowed
claims, 5% payable on each of December 18, 1996 and December 18, 1997. The
amount of unsecured debt at the time of approval of the Reorganization Plan
was approximately $3,500,000, and included the aforementioned Teleflex
unsecured debt in the amount of $965,000.
As of the date of this Prospectus, approximately $96,500 is owed to
Teleflex.
26
<PAGE>
THE VENDING INDUSTRY
The U.S. vending industry generated in excess of $29 billion in sales volume
for 1995. The industry's product sales are divided into 14 different categories.
Some of the product categories include, in order of sales volume, canned cold
drinks (38% of total industry sales), candy & snacks (18% of total sales), hot
drinks (8% of sales), all-purpose foods (7% of sales), and cigarettes (6% of
sales). The vending industry's 9,800 operating entities include independent,
regional, and national organizations. The industry is characterized by small,
entrepreneurial local owner-operators; in 1995, 68% of the total number of
operators had three or fewer employees. While the percentage of organizations
employing 20 or more full-time staff was 10%. In total, it is estimated that the
industry has in place approximately 1.8 million machine site locations.
MANUFACTURING AND DISTRIBUTION
The Company plans to achieve its manufacturing goals through a system of
joint ventures and licenses of technology to manufacturers located in the
following strategic geographical areas: Europe, the Pacific Rim, and North
America. The Company's distributor in the Pacific Rim has, with the Company's
approval, entered into a sublicense relating to the manufacture of the Company's
vending machine with Goryo Manufacturing Ltd., a major Korean manufacturing
company. In addition, the Company has engaged in discussions with a United
States manufacturing company relating to the manufacture of the Company's
non-robotic vending machines. There can be no assurance that the Company will
enter into a definitive agreement with such manufacturer on terms reasonable to
the Company or at all.
It is the Company's intention that distribution will be accomplished through
a system of master distributors which will have the right to distribute products
and machines on an exclusive basis in specified regions. Such master
distributors may contract with sub-distributors upon approval by the Company.
Each master distributor will be required to purchase minimum quantities of
products or lose their exclusivity.
To date, the Company's operations have been limited to arranging
distributorships for the Company's vending and food-dispensing machines and
selling a limited number of fully-robotic vending machines to such distributors
from the Company's inventory for test marketing in their local markets.
Accordingly, the Company's future plans are subject to known and unknown risks
and uncertainties that may cause the Company's actual results in future periods
to be materially different from any future performance implied herein. In the
event that the Company does not enter into agreements providing for the
manufacture of the Company's vending machines and food-dispensing machines prior
to the exhaustion of the Company's inventory, the Company may be unable to
deliver additional machines for test marketing or other purposes. In such event,
the Company would be materially adversely affected.
LICENSE AGREEMENTS
In October 1993, the Company signed an exclusive, five-year technology
licensing and distribution agreement in the Pacific Rim region with Woneel
Mercantile, Ltd., a South Korean manufacturer of consumer products.
Subsequently, Woneel, with the Company's approval, contracted with Goryo
Manufacturing, Ltd. ("Goryo"), a major Korean manufacturing company, to
manufacture the Company's vending machines. The agreement calls for Woneel to
purchase machines from Goryo and to pay the Company a fixed royalty per machine.
In December 1995, the Company entered into a memorandum of understanding
with Zernostandart, a Russian corporation headquartered in Moscow, which
established Zernostandart as a master distributor for the City of Moscow. In
order to maintain its exclusive rights, Zernostandart must purchase a minimum
number of units over the next year.
In November 1995, the Company entered into an agreement with Kwang Hap Siang
(S) Pte Ltd., a Singapore corporation. In order to maintain its exclusive
rights, the agreement requires Kwang Hap Siang (S) Pte Ltd. to purchase a
minimum number of units over five years. The distributor also has first rights
of
27
<PAGE>
refusal for Malaysia and Indonesia for a period of twelve months from the
receipt of the first products in Singapore. This agreement may be terminated by
Kwang Hap Siang (S) Pte Ltd. upon 90 days notice.
In July 1996, the Company entered into four agreements with American
Exchange S.A. ("American"), an Argentine corporation. Under the terms of these
agreements, American was granted exclusive rights to distribute the Company's
products in Argentina, Brazil, Chile, and Paraguay. In order to maintain its
exclusive rights, each agreement requires American to purchase a minimum number
of units over five years.
In July 1996, the Company entered into an agreement with Importacoes e
Vendas de Qualidade-Importacao, Exportacao, Industria e Comercio de Produtos
Alimentares, Lda ("IVQ Lda"), a Portuguese corporation. In order to maintain its
exclusive rights, the agreement requires IVQ Lda to purchase a minimum number of
units over five years.
In September 1996, the Company entered into an agreement with Nouveau
Distributors, Ltd., a New Zealand corporation. In order to maintain its
exclusive rights, the agreement requires Nouveau Distributors, Ltd. to purchase
a minimum number of units over five years.
MACHINE PRODUCT LINE
The Company's current product line includes machines dedicated to the hot
vending and dispensing of pizza and sandwiches. The machines are available in
two technological categories: the fully-robotic machines and non-robotic
machines.
The robotic machines are fully-automatic in all respects. They are able to
store, cook, and serve hot food, as well as take money, in a fully-automated
fashion. The Company's current fully-robotic vending machine is capable of
storing up to 220 pizzas or 100 sandwich units.
The non-robotic machines are automatic only in their ability to store food
properly. They are unable to cook, serve, or take money automatically, thus a
user will be required to deliver the frozen product manually to the machine's
microwave and pay a cashier. The Company's current non-robotic vending machine
is capable of storing up to 80 pizzas or 40 sandwich units.
In addition to its current product line, the Company is developing (i)
fully-robotic vending machines capable of cooking, storing, and serving hot
sandwiches and pizzas and (ii) non-robotic food-dispensing machines capable of
storing sandwiches and pizzas. The Company also has in development a
semi-robotic machine. The semi-robotic machine stores frozen food product in the
Company's packaging and takes money automatically, but requires the consumer to
manually deliver the food product to the microwave. It is anticipated that such
semi-robotic vending machines will be capable of storing pizzas, sandwiches, or
pizzas and sandwiches. The Company currently does not anticipate marketing the
semi-robotic machine until 1998, if at all.
In May 1996, the Company acquired the technology and certain inventory
relating to an additional fully-robotic hot food vending machine for $75,000.
This vending machine, which is in the developmental stage, differs from the
Company's own machines in that it is designed for the vending of name brand
frozen food products. While the Company's machines are designed to function only
with the Company's proprietary food packaging and formulations, this machine is
designed to vend frozen food product from a variety of major food manufacturers.
The Company believes that having the ability to vend nationally-recognized, name
brand products will allow it to serve a segment of the hot food vending market
that its current product line does not address.
FOOD PRODUCT LINE
The Company has developed a proprietary formulation that allows dough to be
cooked or reheated in a high-energy microwave oven without negatively impacting
its constitution. As a result, the Company has
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<PAGE>
developed a complete line of product offerings consisting of its proprietary
dough formulations coupled with natural ingredients. The offerings will fall
into four primary categories: Pizza Chef-Registered Trademark- Pizzas, Li'l Bite
Sandwiches (currently produced using non-proprietary dough formulations), Pasta
Chef products, and Pocket Snacks.
The Company's current line of food products is comprised of both pizza and
sandwich products. The pizza product is available in approximately ten different
varieties, including breakfast pizza. The sandwich line currently consists of
cheeseburgers, chicken sandwiches, and barbeque pork sandwiches, each of which
are packaged as three small sandwiches per box. In addition to these offerings,
the Company also has developed other lines of food product, using their
proprietary food formulation, including Hot Pocket Pita Snacks and pasta dishes.
However, the Company intends to focus solely on the marketing of its sandwich
and pizza lines for the foreseeable future.
In August 1994, the Company established a five-year co-pack supply agreement
with Crestar, pursuant to which Crestar will produce pizzas for the Company at
an annually adjusted fixed price on an exclusive basis, thereby providing the
Company with predictable product costs. The supply agreement may be terminated
by Crestar any time upon 90 days notice.
GOVERNMENT REGULATION
The Company is required to comply with certain rules and regulations of the
U.S. Food and Drug Administration. Compliance with such rules and regulations is
required as a result of the inclusion of a robotically operated microwave oven
in the Company's vending machines.
To be used in the United States, the Company's vending machines must also be
in compliance with the standards of Underwriters Laboratories.
The Company's products are also subject to local foreign regulations where
such products are in use.
The Company is also in voluntary compliance with the manufacturing standards
outlined by the National Automatic Merchandising Association.
PATENTS, TRADEMARKS, AND PROPRIETARY PROTECTION
The Company holds design and utility patents on its vending machines and its
packaging system. The Company has patent pending technology for the food
formulation for its dough based products and for its pizza box and coating. The
Company has been granted patents on the packaging system in the United States,
Japan, Israel, United Kingdom, Korea, Italy, France, and Mexico. The Company has
been granted patents on the delivery system in Israel, United Kingdom, and
Korea. The Company has applied for patents in other select foreign
jurisdictions.
The Company has registered the "Pizza Chef-Registered Trademark-" name and
logo and has applied for registration with the Patent and Trademark Office for
"Nouveau Chef". The Company is aware that a number of concerns may be using the
Pizza Chef-Registered Trademark- name in their businesses. The Company has
retained special trademark counsel to prosecute any party that is using the
Pizza Chef-Registered Trademark- name in violation of the Company's
registration.
The Company enters into confidentiality agreements with all persons and
entities who or which may have access to its technology. However, no assurance
can be given that such agreements, the patents or any additional patents which
may be issued to the Company will prevent third parties from developing similar
or competitive technologies.
There can be no assurance that the patents will provide the Company with any
significant competitive advantages, or that challenges will not be instituted
against the validity or enforceability of its patents, or if instituted that any
such challenges will not be successful. The cost of litigation to uphold the
validity and prevent infringement can be substantial. In addition, no assurance
can be given that the Company will have
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<PAGE>
sufficient resources to either institute or defend any action, suit or other
proceeding by or against the Company with respect to any claim of infringement
of patent or other proprietary rights.
COMPETITION
The Company's distinctive systems approach combines the custom designed
food, package, and oven into a self-contained, fully-robotic vending machine.
Each machine features an on-board computer/ microprocessor, self-diagnostic
controller, storage freezer, product selector and transporter, and high-energy
directional microwave, all of which provides a system that serves the customer a
fresh, ready-to-eat hot meal in as little as 60 seconds.
The Company currently faces, and will face, direct competition in the hot
food automated vending market and, there can be no assurance that larger, better
capitalized companies will not enter such market. The Company may, in the
future, compete with such larger companies for, among other things: (i) the
procurement of licensees; (ii) prime locations for product distribution; and
(iii) quality distributors for the Company's products. There can be no assurance
that the Company will be able to compete effectively against such companies.
The Company is aware of a number of attempts to design and build machines
which mimic, and would compete with the Company's fully-robotic vending machine.
Some of the more notable efforts have been made by Hot Choice, American Pizza
Company, Cafe Quik, Mister Crispy French Fries, and Edgewater Foods/Presto
Pizzeria. There can be no assurance that additional entrants into the hot food
vending machine industry will not be forthcoming.
The domestic vending industry is dominated by a handful of large national
firms such as ARAMARK, Service America, and Canteen, which may have competitive
advantages in purchases from machine and product manufacturers, and in placing
vending machines in attractive locations. If such large firms entered the hot
food vending machine market, they would enjoy the advantage of "owning" many
prime locations through exclusive contractual arrangements. For example, a firm
might contract with a large hospitality chain, whereby the firm will retain
exclusive access to locations at the chain's facilities. In addition, the pre-
existence of a well-trained, readily available service network and other capital
intensive infrastructure requirements also tend to work in favor of larger, more
sophisticated, and better-capitalized firms.
CORPORATE OFFICES
Pursuant to a sublease agreement, the Company leases approximately 15,000
square feet located at 212 Philips Road, Exton, Pennsylvania 19341, where the
Company currently maintains its corporate offices, limited warehouse, and
assembly facility. The term of the sublease agreement is three years ending in
October 1998. The current base rent under the sublease agreement is $67,792 per
annum. Other annual operating expenses under the sublease agreement are
currently $11,600 per annum.
During April 1996, the Company leased approximately 16,400 square feet in
Exton, Pennsylvania across the street from its other 15,000 square foot Exton
plant. The term of this lease is three years. The current annual rent under the
terms of this lease is $65,600.
The Company, in February 1996, entered into an agreement to purchase a
facility capable of manufacturing the Company's food products. The Company has
paid $110,000 to lease such facility until the closing of the purchase thereof.
As a result of the Company's limited working capital, the Company believes that
it is unlikely that the Company is capable of acquiring such facility at this
time and making the necessary renovations thereto. Accordingly, the Company has
commenced negotiations with a third party to acquire such facility and lease
such facility to the Company. These can be no assurance that an agreement will
be reached with such third party on terms acceptable to the Company, on a timely
basis, or at all.
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<PAGE>
EMPLOYEES
On September 1, 1996, the Company, including the subsidiaries thereof, had
an aggregate of 29 full-time employees. Of such employees, seven were in
management, three were sales and marketing personnel, four were administrative
personnel, and 15 were operations personnel. None of the Company's employees are
represented by a union. The Company believes that its relations with its
employees are satisfactory.
LEGAL PROCEEDINGS
The Company is not party to any material pending legal proceedings.
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MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS, AND KEY CONSULTANT
The following table sets forth certain information concerning the Board of
Directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE TITLE
- ------------------------------------- ----------- ------------------------------------------------------------
<S> <C> <C>
Gary W. Black, Sr.(1) 55 Chairman of the Board of Directors and Chief Executive
Officer
Robert J. Brock, Sr. 56 President, Chief Operating Officer, and Director
Frederick W. Johnson 57 Production Manager, Secretary, and Director
Gary W. Black, Jr. 37 General Manager of Vending Division and Field Service
Manager
Brett A. Black 29 General Manager of Food Division
David J. Roth 54 Director
Kalman Carmel 52 Consultant
</TABLE>
- ------------------------
(1) Gary W. Black, Sr. is the father of Gary W. Black, Jr. and Brett A. Black.
Each director is elected for a period of one year at the Company's annual
meeting of stockholders and serves until the next meeting and until his
successor is duly elected and qualified. Officers are elected by, and serve at
the discretion of, the Board of Directors. The Board of Directors intends to
establish Audit and Compensation Committees following the closing of this
offering.
The following is a brief summary of the background of each director and
executive officer of the Company.
GARY W. BLACK, SR., CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE
OFFICER. Mr. Black has served as Chairman of the Board of Directors and as
Chief Executive Officer of the Company since January 1996. Mr. Black founded the
Predecessor Company in 1989 and brings thirty years of experience in the fields
of materials engineering, actuation, and mechanism design and systems analysis
to the Company. In addition, he served as President of the Predecessor Company
at the time of the commencement of the bankruptcy proceeding relating to such
company. His background covers sub-systems design for numerous space hardware
programs, commercial and military aircraft, weapons systems, and automotive
engine combustion. Mr. Black holds numerous patents on exotic materials,
chemical formulations, weapons delivery systems, packaging, electro-mechanical
actuation devices, and, most recently, on food composition and robotic vending
equipment. Prior to founding and becoming Chief Executive Officer of the
Predecessor Company, Mr. Black held a number of positions in a number of
aerospace and defense product manufacturing companies, including the position of
Vice President of Teleflex.
ROBERT J. BROCK, SR., PRESIDENT, CHIEF OPERATING OFFICER, AND DIRECTOR. Mr.
Brock, President, Chief Operating Officer and a Director of the Company since
1996, has served as Manager of Corporate Services of the Company since December
1995. He served as Vice President and Manager of Corporate Services with the
Predecessor Company since 1989, including at the time of the commencement of the
bankruptcy proceeding of the Predecessor Company. Mr. Brock also brings over
thirty years of manufacturing experience to the Company, has an extensive
background in manufacturing, particularly within the scope of military
equipment, and has held leadership positions related to plant management,
production operations, and personnel management. Mr. Brock has responsibility
for Human Resources and Operations Management, and reports to the Company's
Chief Executive Officer.
FREDERICK W. JOHNSON, PRODUCTION MANAGER, SECRETARY, AND DIRECTOR. Mr.
Johnson brings almost thirty years of experience in industrial management to the
Company. Mr. Johnson received a degree in
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Business Administration with a major in Industrial Management from Drexel
University in 1961. Mr. Johnson held management positions with Handy & Harmon
Tube, Speeline Inc., Commodore Optoelectronics and Franke over a twenty year
period. Mr. Johnson joined the Company as Production Manager and has held this
position for over five years. His responsibilities include oversight of
production of vending machines, shift management, labor relations, quality
control and production control. Mr. Johnson reports directly to the Chief
Operating Officer. He is an active member of both the Chamber of Commerce and
the American Manufacturing Association.
GARY W. BLACK, JR., GENERAL MANAGER OF VENDING DIVISION AND FIELD SERVICE
MANAGER. Mr. Black has served as General Manager of the Company's Vending
Division and Field Service Manager of the Company since 1990. He was involved
with the engineering and design of the pizza vending machine, as well as related
equipment. As Field Service Manager, Mr. Black travels domestically and
internationally while aiding in the purchasing, manufacturing, and servicing of
all equipment in the field as well as customer relations. Mr. Black is also
responsible for sub-contractors and training aids. Mr. Black's background is in
the aircraft and weapons systems industries.
BRETT A. BLACK, GENERAL MANAGER FOOD DIVISION. Mr. Black started with the
Company in 1989 and was critical to the development of the specialty food
products and packaging. Mr. Black aided in the development of the robotic food
service machines and he has assumed responsibility for all marketing support,
such as logo design, brochures, show design, and trade show coordination. In
1991, Mr. Black became General Manager of the Food Division, becoming
responsible for all plant operations, production design, equipment acquisitions,
vendor selections, and plant design.
DAVID J. ROTH, DIRECTOR. Mr. Roth has been a Director of the Company since
September 1996. From 1985 to the present, Mr. Roth has served as Chairman of
Roth Equities, Ltd., a private investment company. Additionally, Mr. Roth has
served as Chairman of D.J.L. Communications, Inc., a reseller of long distance
telephone services.
KALMAN CARMEL has served as a consultant of the Company since April 15,
1996. Since prior to 1991, Mr. Carmel has been a private investor and, through
an affiliated entity, has been an independent consultant with clients in the
textile, finance, and health care industries, among others.
EXECUTIVE COMPENSATION
The following table sets forth the compensation for services in all
capacities to the Company for the fiscal year ended December 31, 1995 to the
Chief Executive Officer and the Chief Operating Officer of the Company.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION SALARY(1)
- ----------------------------------------------------------------------------------- ---------
<S> <C>
Gary W. Black, Sr., Chairman of the Board of Directors and Chief Executive Officer $ 41,500
Robert J. Brock, Sr., President, Chief Operating Officer, and Director $ 43,365
</TABLE>
- ------------------------
(1) Commencing in January, 1996, the salary of Mr. Black was increased to
$150,000 per annum and the salary of Mr. Brock was increased to $80,000 per
annum. Excludes an automobile allowance in the amount of $750 per month in
the case of Mr. Black. See "Management--Employment Agreements." Commencing
September 1, 1996, each individual elected to defer 30% of his respective
salary and Mr. Black elected to defer his automobile allowance pending the
closing of this offering.
DIRECTORS' LIMITATION OF LIABILITY
The Company's Certificate of Incorporation and By-Laws include provisions to
(a) eliminate the personal liability of directors for monetary damages resulting
from breaches of their fiduciary duty (except for liability for breaches of the
duty of loyalty, acts, or omissions not in good faith or which involve
33
<PAGE>
intentional misconduct or a knowing violation of law, violations under Section
174 of the Delaware General Corporation Law, or for any transaction from which
the director derived an improper personal benefit) and (b) indemnify the
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law, including circumstances under which indemnification is
otherwise discretionary. The Company believes that these provisions are
necessary to attract and retain qualified persons as directors and officers.
The Company has applied for directors' and officers' liability insurance.
At present, there is no pending litigation or proceeding involving a
director, officer, employee, or other agent of the Company as to which
indemnification is being sought, nor is the Company aware of any threatened
litigation that may result in claims for indemnification by any director,
officer, employee, or other agent.
Insofar as indemnification for liability arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
EMPLOYMENT AND CONSULTING AGREEMENTS
On June 3, 1996, the Company entered into five-year employment agreements
with Gary W. Black, Sr., the Chairman of the Board and Chief Executive Officer
of the Company, Robert J. Brock, Sr., the President and Chief Operating Officer
and a Director of the Company, Frederick W. Johnson, the Production Manager and
Secretary and a Director of the Company, Gary W. Black, Jr., the General Manager
of the Vending Division and Field Services Manager of the Company, and Brett A.
Black, the General Manager of the Food Division of the Company. By mutual
agreement of the Company and such individuals, their respective employment
agreements with the Company were terminated effective September 1996.
The Company has entered into a consulting agreement with KMC Capital Corp.
("KMC"), an entity affiliated with Kalman Carmel. Pursuant to the terms of the
agreement, as amended in September 1996, the monthly compensation payable to KMC
for the rendering of consulting services is currently $12,500, payable through
April 15, 1999.
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth, as of the date of this Prospectus, the
ownership of the Common Stock by (i) each person who is known by the Company to
own of record or beneficially more than 5% of the outstanding Common Stock, (ii)
each of the Company's directors and executive officers, and (iii) all directors
and executive officers of the Company as a group. Except as otherwise indicated,
the stockholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) PERCENTAGE OF CLASS
- --------------------------------------------------------------------- -------------------- ---------------------
<S> <C> <C>
Gary W. Black, Sr.(2)................................................ 2,535,625(3) 27.4%
Glengarry Family Investments, L.P.................................... 300,000 3.2
1220 Pine Street
Norristown, Pennsylvania 19401
Robert J. Brock, Sr.(2).............................................. 100,000 1.1
Frederick W. Johnson(2).............................................. 25,000 *
Gary W. Black, Jr.................................................... 450,000(4) 4.9
Brett A. Black....................................................... 100,000 1.1
David J. Roth........................................................ 0 *
CSB Financial, LLC(5)(6)............................................. 950,000 10.3
c/o Stuart B. Ratner, P.C.
111 Prospect Street
Stamford, Connecticut 06901
Attention: Stuart B. Ratner
All directors and executive officers of the Company as a group (two (3)(4) %
persons)........................................................... 2,660,625 28.8
</TABLE>
- ------------------------
* Less than 1%.
(1) Except as otherwise indicated, all of the referenced shares of Common Stock
are owned beneficially and of record. Beneficial ownership has been
determined in accordance with Rule 13d-3 promulgated under the Exchange Act.
(2) The address of the referenced stockholder is Nouveau International, Inc.,
212 Phillips Road, Exton, Pennsylvania 19341.
(3) Includes 300,000 shares of Common Stock owned of record by Glengarry Family
Investments, L.P., a Delaware limited partnership the sole limited partner
of which is a corporation owned by the spouse of Gary W. Black, Sr.
("Glengarry"). Gary W. Black, Jr., the son of Mr. Black, is the sole general
partner of such partnership.
(4) Includes 300,000 shares of Common Stock owned of record by Glengarry, of
which Gary W. Black, Jr. is the sole general partner.
(5) Mr. Carmel, a key consultant of the Company, is a member and affiliate of
the referenced entity.
(6) David J. Roth, a Director of the Company, is a member of the referenced
entity, but disclaims any beneficial ownership of the Shares.
35
<PAGE>
CERTAIN TRANSACTIONS
In February 1996, the Company advanced Mr. Gary W. Black, Sr. $200,000. In
April 1996, $100,000 was repaid with interest at the rate of 10% per annum. The
remainder of the advance will be repaid on or before February 7, 1997 with
interest thereon at the rate of 8% per annum.
In January 1996, Gary W. Black, Sr. received 6,750,000 shares of Common
Stock in connection with the acquisition of the Predecessor Company by the
Company.
In September 1996, Gary W. Black, Sr., Glengarry, and other stockholders of
the Company contributed 764,375, 750,000, and 485,625 shares of Common Stock,
respectively, a total of 2,000,000 shares, to the capital of the Company.
With respect to employment agreements between the Company and its officers
and directors, see "Management--Employment and Consulting Agreements."
36
<PAGE>
DESCRIPTION OF SECURITIES
The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Company's Certificate of
Incorporation, as amended and supplemented, copies of which are available, free
of charge, upon request.
PREFERRED STOCK
SERIES B CUMULATIVE CONVERTIBLE REDEEMABLE PREFERRED STOCK
DESIGNATION AND CLASS. The Company is authorized to issue up to 3,000,000
shares of Preferred Stock, including 225,000 shares of Preferred Stock issuable
upon exercise of the Representative's overallotment option and 150,000 shares of
Preferred Stock issuable upon exercise of the Representative's Warrants. The
Preferred Stock shall be issuable in registered form only without dividend
coupons. The Preferred Stock will have the dividend rights, conversion rights,
and rights upon liquidation and redemption set forth below.
DIVIDENDS. Except as otherwise described herein, dividends accrue daily on
a cumulative basis at the rate per annum of 8% of the Stated Value of $8.00 per
Share. Dividends shall be payable semi-annually on each Dividend Payment Date.
Dividends are payable out of funds legally available therefor. Dividends
accruing during any period commencing immediately following any Dividend Payment
Date (or the date of this Prospectus in the case of the initial such period) and
terminating on the immediately following Dividend Payment Date shall be payable
on the Dividend Payment Date on which such dividends accrue in either cash or,
at the option of the Company, shares of Common Stock. In the event the Company
determines to exercise the Share Payment Option with respect to any Dividend
Payment Date, the Company shall so advise the holders not less than 30 days
prior to such Dividend Payment Date, which notice shall state (i) the
determination of the Board of Directors of the Company to exercise the Share
Payment Option and (ii) the number of shares of Common Stock per share of
Preferred Stock issuable in satisfaction of such dividend; if such option is not
then exercised by the Company, the Company shall be deemed to have irrevocably
waived such option for the dividend accruing during the period terminating on
such Dividend Payment Date. The number of shares of Common Stock to be paid in
lieu of such accrued dividends shall equal the quotient of (i) the product of
(A) the Stated Value and (B) 0.04, by (ii) the Stock Dividend Price. All cash
dividends not paid as accrued shall cumulate and shall be payable on or before
the earlier of the Redemption Date, if any, and the Conversion Date.
CONVERSION. Unless earlier redeemed by the Company, each share of Preferred
Stock shall be convertible, at the option of the holder thereof, commencing one
year from the date of this Prospectus into 1.5 shares of Common Stock. Each
holder may exercise such rights to conversion by surrendering the certificate
evidencing the shares of Preferred Stock to be converted with the notice of
exercise of right of conversion on the reverse side of such certificate properly
completed and executed to the offices of the transfer agent, Continental Stock
Transfer & Trust Company. Such offices will initially be located at Two
Broadway, 19th Floor, New York, New York 10004. If fewer than all of the shares
of Preferred Stock evidenced by a stock certificate are converted, a new
certificate will be issued for the remaining number of shares of Preferred
Stock. Certificates evidencing the Preferred Stock may be exchanged for new
certificates of different denominations by presenting the Preferred Stock
certificates at the office of the transfer agent.
Notwithstanding the foregoing, each share of Preferred Stock is mandatorily
convertible by the Company, on the date three years from the date of this
Prospectus, into 1.5 shares of Common Stock.
OPTIONAL REDEMPTION. The Preferred Stock is redeemable, in whole, but not
in part, at the option of the Company at the Redemption Price per share equal to
the sum of (i) the Stated Value and (ii) all accrued and unpaid dividends to the
Redemption Date at any time commencing one year from the date of this
37
<PAGE>
Prospectus upon not less than 30 days prior written notice to the registered
holders thereof, provided that the closing price per share of Preferred Stock
has been at least $ for at least 20 of the 30 trading days ending within
15 days of the notice of redemption. Such notice of redemption shall set forth
(i) the determination of Board of Directors of the Company to redeem the
Preferred Stock; (ii) the Redemption Price per share of Preferred Stock; (iii)
the Redemption Date; (iv) the address of the Company or agency thereof to which
the certificates evidencing the Preferred Stock should be surrendered for
redemption; and (v) that, following the Redemption Date, the sole right of the
holder of any certificates representing shares of Preferred Stock shall be to
receive the Redemption Price, without interest thereon. The Redemption Price
will be paid out of funds legally available therefor.
LIQUIDATION. In the event of a Liquidation, the holders of the Preferred
Stock shall be entitled to a Liquidation Preference per share equal to the sum
of (i) the Stated Value and (ii) all accrued and unpaid dividends through the
Liquidation Date prior to distributions to holders of shares of Common Stock and
any series of Preferred Stock of the Company not ranking prior to, or on a pari
passu basis with, the Preferred Stock. "Liquidation" means any event of any
voluntary or involuntary liquidation, dissolution, or winding up of the Company.
For purposes hereunder, a consolidation, merger, or reorganization of the
Company with any other corporation, or a sale, assignment, or transfer of all,
or substantially all, of the assets of the Company pursuant to which such
transferee assumes the obligations of the Company, whether or not the Company
continues in existence, shall not be deemed to be a liquidation, dissolution, or
winding up of the Company. Following the receipt by the holders of the
Liquidation Preference, the holders of the Preferred Stock will have no right or
claim to any of the remaining assets of the Company.
FRACTIONAL SHARES. No fractional shares of Common Stock will be issued upon
the payment of dividends on the Preferred Stock or upon the conversion of the
Preferred Stock. All fractional shares of Common Stock shall be rounded up to
the next integral number of shares of Common Stock.
GENERALLY
The Company is authorized to issue up to 3,000,000 shares of preferred
stock, par value $.001 per share, of which 70 shares of Series A Preferred Stock
are outstanding on the date hereof, all of which will be redeemed upon the
consummation of this offering. The preferred stock may be issued in one or more
series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by stockholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion rights, redemption
rights, and sinking fund provisions. The issuance of any such preferred stock
could adversely affect the rights of the holders of Common Stock and, therefore,
reduce the value of the Common Stock. The ability of the Board of Directors to
issue preferred stock could discourage, delay, or prevent a takeover of the
Company.
SERIES A PREFERRED STOCK
The Series A Preferred Stock is mandatorily redeemable at a price per share
equal to the original issuance price plus accrued and unpaid dividends on the
earlier of (i) the date of a public offering of the Common Stock for a minimum
gross proceeds of $5,000,000 or (ii) January 17, 1997. If the Series A Preferred
Stock is not redeemed through a public offering, the Company has the right to
convert the Series A Preferred Stock into 1,125,000 shares of Common Stock. The
Series A Preferred Stock has a liquidation value equal to its redemption value.
COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of Common Stock,
of which 9,249,988 are outstanding on the date hereof. Holders of Common Stock
are entitled to one vote for each share held of record on each matter submitted
to a vote of stockholders. There is no cumulative voting for the election of
directors. Subject to the prior rights of any series of preferred stock which
may from time to time be
38
<PAGE>
outstanding, if any, holders of Common Stock are entitled to receive ratably,
dividends when, as, and if declared by the Board of Directors out of funds
legally available therefor and, upon the liquidation, dissolution, or winding up
of the Company, are entitled to share ratably in all assets remaining after
payment of liabilities and payment of accrued dividends and liquidation
preferences on the preferred stock, if any. Holders of Common Stock have no
preemptive rights and have no rights to convert their Common Stock into any
other securities. The outstanding Common Stock is validly authorized and issued,
fully-paid, and nonassessable.
TRANSFER AGENT, REGISTRAR, AND PAYING AGENT
The Company has appointed American Stock Transfer & Trust Corporation as
transfer agent and registrar for the Common Stock and transfer agent, registrar,
and paying agent for the Preferred Stock.
LISTING ON NASDAQ
The Company has applied for quotation of the Preferred Stock on the Nasdaq
SmallCap Market under the symbol " ." No assurance can be given that an
active trading market for the Preferred Stock will develop or be sustained or at
what price the Preferred Stock will trade.
The Common Stock is quoted on the OTC Bulletin Board under the symbol
"VEND." The Company has applied for quotation of the Common Stock on the Nasdaq
SmallCap Market under the symbol "VEND." No assurance can be given that an
active trading market for the Common Stock will develop or be sustained or at
what price the Common Stock will trade.
CONCURRENT SALES BY SELLING STOCKHOLDERS
The Registration Statement, of which this Prospectus forms a part, also
includes a separate prospectus relating to the offering and resale by the
Selling Stockholders of an aggregate of 604,225 shares of Common Stock issuable
upon the exercise of the Warrants and an additional 950,000 shares of Common
Stock held by CSB Financial, LLC. The investors in the Private Financings have
agreed that, of the shares of Common Stock issuable upon exercise of the
Warrants, one-third may be sold commencing on each of the dates six months, 12
months, and 18 months from the date of this Prospectus. The shares of Common
Stock held by CSB Financial, LLC may not be sold for the period of 18 months
from the date of this Prospectus.
Sales of such shares of Common Stock, or even the potential of such sales,
could have an adverse effect on the market price of the Common Stock. As a
result of the registration of the resale of such shares of Common Stock, the
freely tradeable Common Stock will be increased by 950,000 to 2,449,988 shares
of Common Stock. If the Warrants are exercised in their entirety, there will
then be an additional 1,554,225 shares of Common Stock that are freely
tradeable, including the aforementioned 950,000 shares of Common Stock.
39
<PAGE>
UNDERWRITING
GENERAL
The Underwriters named below, for which Americorp Securities, Inc. is acting
as Representative, have severally, and not jointly, agreed, subject to the terms
and conditions contained in the Underwriting Agreement, to purchase, and the
Company has agreed to sell, the Shares offered hereby in the amount set forth
opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Americorp Securities, Inc........................................................
Total........................................................................ 1,500,000
</TABLE>
A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement, to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions. The Underwriters shall be obligated to purchase all of the
Shares if any are purchased.
Through the Representative, the Underwriters have advised the Company that
they propose to offer the Shares to the public at the public offering price set
forth on the cover page of this Prospectus and that they may allow to certain
dealers who are members of the NASD, and to certain foreign dealers, concessions
of not in excess of $ per share, of which amount a sum not in excess of
$ per share may in turn be reallowed by such dealers to other dealers
who are members of the NASD and to certain foreign dealers. After the
commencement of this offering, the concessions and the reallowances may be
changed by the Representative.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company has agreed to pay to the Representative an expense allowance, on
a non-accountable basis, equal to 3% of the gross proceeds derived from the sale
of the Shares. The Company has also agreed to pay certain of the
Representative's expenses in connection with this offering, including expenses
in connection with qualifying the Shares offered hereby for sale under the laws
of such states as the Representative may designate. In addition, the Company
will sell to the Representative, and to its designees, at a purchase price of
$.001 per warrant, the Representative's Warrants to purchase an aggregate of
150,000 shares of Preferred Stock exercisable at 120% of the offering price.
The officers and directors of the Company holding an aggregate of 2,810,625
shares of Common Stock have agreed not to publicly sell or otherwise dispose of
their shares of Common Stock, securities of the Company convertible into, or
exercisable or exchangeable for, shares of Common Stock, or shares of Common
Stock received upon conversion, exercise, or exchange of such securities, to the
public without the prior consent of the Representative for a period of 24 months
from the date of this Prospectus. In addition, the Company has agreed that for a
period of 24 months after the date of this Prospectus it will not sell any
shares of Common Stock, or options or warrants to purchase Common Stock other
than (i) the Representative's Warrants, (ii) shares of Common Stock issued in
connection with the exercise of any such warrants, (iii) shares of Common Stock
issued upon the exercise of options and warrants outstanding on the date hereof,
(iv) shares of Common Stock issued in connection with an acquisition by the
Company and (v) shares of Common Stock issued in payment of dividends on, or
upon conversion of, the Preferred Stock pursuant to the terms thereof.
40
<PAGE>
OVER-ALLOTMENT OPTION
The Company has granted to the Representative, individually and not as
Representative of the several Underwriters, an option, exercisable during the
45-day period commencing on the date of this Prospectus, to purchase at the
public offering price per share less underwriting discount, up to an aggregate
of 225,000 shares of Preferred Stock for the sole purpose of covering
over-allotments, if any. After the commencement of this offering, the
Representative may confirm sales of shares of Preferred Stock subject to this
over-allotment option. Purchases of shares of Preferred Stock upon exercise of
the over-allotment option will result in the realization of additional
compensation by the Representative.
REPRESENTATIVE'S WARRANTS
In connection with this offering, the Company has agreed to sell to the
Representative, at the price of $.001 per warrant, the Representative's Warrants
to purchase 150,000 shares of Preferred Stock. The Representative's Warrants are
exercisable for a period of four years commencing one year from the date hereof
at an exercise price per share (the "Exercise Price") equal to 120% of the
public offering price per share. The Representative's Warrants may not be sold,
transferred, assigned, pledged, or hypothecated for a period of 12 months from
the date of the Prospectus, except to members of the selling group and officers
and partners of the Representative and members of the selling group. The
Representative's Warrants contain anti-dilution provisions providing for
adjustment of the number of shares for which such warrants are exercisable and
the Exercise Price upon the occurrence of certain events, including stock
dividends, stock splits, recapitalizations, and sales of Common Stock below
current market price (as defined therein). The holders of the Representative's
Warrants have no voting, dividend, or other rights as stockholders of the
Company with respect to shares of Common Stock underlying the Representative's
Warrants, unless the Representative's Warrants have been exercised.
A new registration statement or post-effective amendment to the Registration
Statement will be required to be filed and declared effective before
distribution to the public of the Representative's Warrants and the Warrant
Shares. The Company has agreed to make, on one occasion during the period
beginning one year after the date hereof and ending four years thereafter, if
requested by the holders of a majority of the Representative's Warrants or
Warrant Shares, all necessary filings to permit a public offering of the Warrant
Shares and to use its best efforts to cause such filing to become effective
under the Securities Act and to remain effective for at least 12 months, at the
Company's sole expense. Notwithstanding the foregoing, the Company shall have no
obligation to prepare and file such new registration statement or post-effective
amendment to the Registration Statement if, within 20 days after it receives the
request therefor, the Company or insiders who own individually in excess of 5%
of the Common Stock agree to purchase the Representative's Warrants and/or the
underlying securities from such requesting holders at a price, in the case of
the Representative's Warrants, equal to the difference between the exercise
price of the Representative's Warrants and the current market price (as defined)
of the underlying securities. In addition, the Company has agreed to give
advance notice to holders of the Representative's Warrants and Warrant Shares of
its intention to file a registration statement, and in such case, holders of the
Representative's Warrants and the Warrant Shares shall have the right to require
the Company to include the Warrant Shares in such registration statement at the
Company's expense.
During the period that the Representative's Warrants are exercisable, the
Representative and any transferee will have the opportunity to profit from a
rise in the market price of the Preferred Stock with a resulting dilution in the
interest of other stockholders. In addition, the terms on which the Company will
be able to obtain additional capital during the exercise period may be adversely
affected since the Representative is likely to exercise the Representative's
Warrants at a time when the Company would, in all likelihood, be able to obtain
capital by a new offering of securities on terms more favorable than those
provided by the terms of the Representative's Warrants.
41
<PAGE>
OBSERVER OF THE BOARD
In connection with this offering, the Company has agreed that, for the
three-year period commencing on the date of the Prospectus, the Representative
has the right to appoint a designee as an observer at all meetings of the
Company's Board of Directors. This designee has the right to attend all meetings
of the Board of Directors and shall be entitled to receive reimbursement for all
out-of-pocket expenses of attendance at such meetings. In addition, such
designee shall be indemnified to the same extent as the Company's directors.
The foregoing is a summary of the principal terms of the Underwriting
Agreement and the Representative's Warrants, does not purport to be complete,
and is qualified in its entirety by reference to the form of Underwriting
Agreement and the form of Representative's Warrant, which have been filed as
exhibits to the Registration Statement.
In addition to the foregoing, the Representative, individually and not as
representative of the several Underwriters, acted as the placement agent in
connection with the Private Financings and, in connection therewith, received
commissions in the aggregate of $497,500.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Brock,
Fensterstock, Silverstein, McAuliffe & Wade, LLC, New York, New York, special
securities counsel. Certain legal matters in connection with the offering will
be passed upon for the Underwriters by Tolins & Lowenfels, A Professional
Corporation, New York, New York. Brock, Fensterstock, Silverstein, McAuliffe &
Wade, LLC has rendered legal services to the Representative from time to time.
EXPERTS
The financial statements of Nouveau International, Inc. as at December 31,
1995, and for the two years then ended and the financial statements of Health
Management, Inc. as at December 31, 1995 and
for the year then ended have been audited by Richard A. Eisner & Company, LLP,
independent certified public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon such reports given
upon the authority of said firm as experts in accounting and auditing.
42
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
HISTORICAL:
Nouveau International Inc. and Subsidiaries
Report of Independent Auditors..................................................... F-2
Consolidated Balance Sheets as at December 31, 1995, December 31, 1994 and June 30,
1996 (Unaudited)................................................................. F-3
Consolidated Statements of Operations for the Years Ended December 31, 1995 and
December 31, 1994 and for the Six Months Ended June 30, 1996 (Unaudited) and June
30, 1995 (Unaudited)............................................................. F-4
Consolidated Statements of Changes in Stockholder's Equity (Capital Deficiency) for
the Years Ended December 31, 1994 and December 31, 1995 and for the Six Months
Ended June 30, 1996 (Unaudited).................................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995 and
December 31, 1994 and for the Six Months Ended June 30, 1996 (Unaudited) and June
30, 1995 (Unaudited)............................................................. F-6
Notes to Financial Statements...................................................... F-7
Health Management Inc.
Report of Independent Auditors..................................................... F-15
Balance Sheet as at December 31, 1995.............................................. F-16
Statement of Operations for the Year Ended December 31, 1995....................... F-17
Statement of Changes in Capital Deficiency for the year ended December 31, 1995.... F-18
Statement of Cash Flows for the Year Ended December 31, 1995....................... F-19
Notes to Financial Statements...................................................... F-20
PRO FORMA :
Pro Forma Consolidated Statement of Operations for the Year Ended December 31,
1995............................................................................. F-21
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Nouveau International, Inc.
We have audited the accompanying consolidated balance sheets of Nouveau
International, Inc. and subsidiaries as at December 31, 1995 and December 31,
1994 and the related consolidated statements of operations, changes in
stockholder's equity (capital deficiency) 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 financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements enumerated above present fairly, in
all material respects, the financial position of Nouveau International, Inc. and
subsidiaries at December 31, 1995 and December 31, 1994, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
As discussed in Note A, in January 1996, the Company was acquired by Health
Management, Inc. through a reverse acquisition of stock.
Richard A. Eisner & Company, LLP
New York, New York
February 7, 1996
F-2
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1994 1996
--------- ----------- -----------
<S> <C> <C> <C>
(DEBTOR-IN-
POSSESSION) (UNAUDITED)
ASSETS
Current assets:
Cash...................................................................... $ 38,971 $ 16,932 $ 8,531
Restricted cash (Note C).................................................. 338,000
Accounts receivable--net of allowance for doubtful
accounts of $13,720 at June 30, 1996.................................... 22,083 28,979 147,899
Inventory (Notes B[3] and D).............................................. 3,174,659 621,298 3,338,213
Loans receivable, stockholder (Note E).................................... 100,000
Settlement receivable (Note F)............................................ 362,694 533,340
Deferred financing costs (Note B[5])...................................... 144,042
Prepaid expenses and other current assets................................. 32,287 32,287 70,741
--------- ----------- -----------
Total current assets................................................ 3,968,694 699,496 4,342,766
Property and equipment, net (Notes B[4] and G).............................. 117,250 265,099 191,829
Settlement receivable (Note F).............................................. 448,142
Other assets................................................................ 61,474 38,508 97,151
--------- ----------- -----------
TOTAL............................................................... $4,595,560 $1,003,103 $4,631,746
--------- ----------- -----------
--------- ----------- -----------
LIABILITIES
Current liabilities:
Notes payable--net of discount for warrants of $562,555 (Note J).......... $ 437,445
Current portion of prepetition liabilities (Note H)....................... $1,310,577 $5,318,371 124,773
Accounts payable, accrued expenses and other current liabilities.......... 149,640 49,138 352,646
Loan payable, stockholder (Note I)........................................ 183,764
Fees payable (Note F)..................................................... 200,000 225,000
Dividends payable......................................................... 65,333
--------- ----------- -----------
Total current liabilities........................................... 1,843,981 5,367,509 1,205,197
Prepetition liabilities (Note H)............................................ 1,266,709 1,844,708 134,773
Fees payable (Note F)....................................................... 100,000
--------- ----------- -----------
Total liabilities................................................... 3,210,690 7,212,217 1,339,970
--------- ----------- -----------
Commitments and contingencies (Note K)
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
Preferred stock, 1,000,000 shares authorized, 70 shares of Series A 4%
cumulative convertible redeemable issued and outstanding (liquidation
value--$3,500,000) (Notes L and N[3])..................................... 3,233,333
Common stock, $.001 par value, 25,000,000 shares authorized, 9,249,988
shares issued and outstanding (Note N[3])................................. 389,714 389,714 9,250
Additional paid-in capital.................................................. 963,795
Retained earnings (deficit)................................................. 995,156 (6,598,828) (914,602)
--------- ----------- -----------
Total stockholder's equity (capital deficiency)..................... 1,384,870 (6,209,114) 3,291,776
--------- ----------- -----------
TOTAL............................................................... $4,595,560 $1,003,103 $4,631,746
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-3
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(NOTE B[1])
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
1995 1994 1996 1995
------------ ------------- ------------- ------------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Net sales (Notes M[2] and N[1])....................... $ 245,313 $ 943,345 $ 325,325 $ 80,779
Cost of goods sold.................................... 224,282 859,287 294,053 67,174
------------ ------------- ------------- ------------
Gross profit...................................... 21,031 84,058 31,272 13,605
------------ ------------- ------------- ------------
Operating expenses:
General and administrative............................ 618,398 935,846 1,329,069 160,217
Selling............................................... 34,839 75,384 338,712 23,769
------------ ------------- ------------- ------------
653,237 1,011,230 1,667,781 183,986
------------ ------------- ------------- ------------
(Loss) from operations.................................. (632,206) (927,172) (1,636,509) (170,381)
------------ ------------- ------------- ------------
Other income (expenses):
Gain from settlement of lawsuit (Note F).............. 5,979,459 5,979,459
Miscellaneous income.................................. 35,680
Interest income....................................... 105,216 23,686 37,826 31,657
Interest (expense).................................... (32,352) (213,179) (12,409) (20,388)
(Loss) on abandonment and sale of property (Note G)... (92,338) (3,279)
Reorganization expense................................ (41,401) (15,000)
------------ ------------- ------------- ------------
5,918,584 (207,772) 25,417 6,026,408
------------ ------------- ------------- ------------
Income (loss) before extraordinary item................. 5,286,378 (1,134,944) (1,611,092) 5,856,027
Extraordinary item:
Compromise of prepetition liabilities (Note H)........ 2,307,606
------------ ------------- ------------- ------------
NET INCOME (LOSS)....................................... $ 7,593,984 $ (1,134,944) $ (1,611,092) $ 5,856,027
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
Net income (loss) per share before extraordinary item... $.57 $(.12) $(.17) $.63
Extraordinary item...................................... .25
------------ ------------- ------------- ------------
NET INCOME (LOSS) PER SHARE............................. $.82 $(.12) $(.17) $.63
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
Weighted average number of shares outstanding (Note
B[10])................................................ 9,249,988 9,249,988 9,249,988 9,249,988
------------ ------------- ------------- ------------
------------ ------------- ------------- ------------
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-4
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
(CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
COMMON STOCK,
PREFERRED $.001 PAR VALUE,
STOCK, 25,000,000
70 SHARES SHARES TOTAL
SERIES A 4% AUTHORIZED, STOCKHOLDER'S
CUMULATIVE 9,249,988 SHARES ADDITIONAL RETAINED EQUITY
CONVERTIBLE ISSUED AND PAID-IN EARNINGS (CAPITAL
REDEEMABLE OUTSTANDING CAPITAL (DEFICIT) DEFICIENCY)
----------- ---------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
(NOTE L)
Balance--January 1, 1994.................. $ 389,714 $(5,463,884) $(5,074,170)
Net (loss)................................ (1,134,944) (1,134,944)
-------- ----------- ------------
Balance--December 31, 1994................ 389,714 (6,598,828) (6,209,114)
Net income................................ 7,593,984 7,593,984
-------- ----------- ------------
Balance--December 31, 1995................ 389,714 995,156 1,384,870
Net effect of the exchange of 6,750,000 (380,464)
shares of HMI's common stock for all of
the outstanding shares of Nouveau
International, Inc.'s common stock...... $ 380,464 -0 -
Issuance of 70 shares of Series A 4% $3,000,000
cumulative convertible redeemable
preferred stock less costs of $500,000.. 3,000,000
Issuance of warrants to purchase 333,332
shares of common stock, in connection
with a private placement, at an exercise
price of $2.00 per share................ 583,331 583,331
Net (loss)................................ (1,611,092) (1,611,092)
Accretion for preferred stock dividends
payable................................. (65,333) (65,333)
Accretion for preferred stock liquidation 233,333
preference.............................. (233,333) -0 -
----------- -------- ----------- ----------- ------------
BALANCE--JUNE 30, 1996 (UNAUDITED)........ $3,233,333 $ 9,250 $ 963,795 $ (914,602) $3,291,776
----------- -------- ----------- ----------- ------------
----------- -------- ----------- ----------- ------------
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-5
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(NOTE B[1])
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -------------------------
<S> <C> <C> <C> <C>
1995 1994 1996 1995
----------- ------------ ------------ -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)....................................... $ 7,593,984 $ (1,134,944) $ (1,611,092) $ 5,856,027
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Litigation settlement............................... (2,941,459) (3,479,459)
Loss on abandonment and sale of property............ 92,338 3,279
Compromise of prepetition liabilities............... (2,307,606)
Depreciation and amortization....................... 58,276 63,987 37,182 35,233
Interest imputed on lawsuit settlement.............. (97,266) (31,658)
Bad debt reserve.................................... 13,720
Discount for warrant valuation...................... 20,776
Changes in operating assets and liabilities:
(Increase) decrease in restricted cash............ (338,000) 338,000
(Increase) decrease in accounts receivable........ 6,896 14,790 (139,536) 6,311
(Increase) decrease in inventory.................. 39,553 88,939 (163,554) 20,119
Decrease in settlement receivable................. 277,496
(Increase) decrease in other assets............... (22,966) 5,478 (74,131) (15,500)
Increase (decrease) in accounts payable and
accrued fees and expenses:
Prepetition................................... (46,783) 603,434 (21,032)
Postpetition.................................. (849,498) 49,138 128,006 (731,837)
(Decrease) in customer deposits................... (17,542)
----------- ------------ ------------ -----------
Net cash provided by (used in) operating
activities.................................... 1,187,469 (323,441) (1,194,165) 1,659,236
----------- ------------ ------------ -----------
Cash flows from investing activities:
Loans made to stockholder............................... (200,000)
Loan repaid by stockholder.............................. 100,000
Purchase of property and equipment...................... (3,765) (25,444) (98,458)
Proceeds from sale of asset............................. 1,000
----------- ------------ ------------
Net cash (used in) investing activities......... (2,765) (25,444) (198,458)
----------- ------------ ------------
Cash flows from financing activities:
Sale of preferred stock................................. 3,500,000
Proceeds from short-term borrowings..................... 1,000,000
Payment of offering costs............................... (657,345)
Proceeds from loans made by investor.................... 90,169
Payment of secured prepetition liabilities.............. (1,346,429) (10,134) (2,296,708) (1,346,429)
Loans from (repaid to) stockholder...................... 183,764 268,616 (183,764)
----------- ------------ ------------ -----------
Net cash provided by (used in) financing
activities.................................... (1,162,665) 348,651 1,362,183 (1,346,429)
----------- ------------ ------------ -----------
NET INCREASE (DECREASE) IN CASH........................... 22,039 (234) (30,440) 312,807
Cash--beginning of year................................... 16,932 17,166 38,971 16,932
----------- ------------ ------------ -----------
CASH--END OF YEAR......................................... $ 38,971 $ 16,932 $ 8,531 $ 329,739
----------- ------------ ------------ -----------
----------- ------------ ------------ -----------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest................ $ 29,931 $ 4,976 $ 10,668 $ 20,388
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
F-6
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE A)--MERGER BETWEEN HEALTH MANAGEMENT, INC. AND NOUVEAU INTERNATIONAL,
INC.:
In January 1996, all of the outstanding stock of the Company was acquired by
Health Management, Inc. ("HMI") in exchange for 6,750,000 shares, representing
60% of HMI common stock. HMI was a nonoperating company, therefore, this
transaction was accounted for as a recapitalization instead of a business
combination.
(NOTE B)--BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
[1] THE COMPANY:
Nouveau International, Inc. and subsidiaries (the "Company") manufactures
and distributes hot food vending machines and related food products. The Company
uses certain proprietary machine and food technology in the manufacture of its
products.
On October 24, 1994, the Company (the "Debtor") filed petitions for relief
under Chapter 11 of the federal bankruptcy laws in the United States Bankruptcy
Court and subsequently submitted a plan of reorganization to the court. Under
Chapter 11, certain claims against the Debtor in existence prior to the filing
of the petitions for relief under the federal bankruptcy laws were stayed while
the Debtor continued business operations as debtor-in-possession. On December 8,
1995 the plan of reorganization (the "Plan") was confirmed.
[2] PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Nouveau International, Inc. include
the accounts of its wholly owned subsidiaries, Nouveau Foods International,
Inc., Nouveau Vend International, Inc., and Nouveau Equities, Inc. Intercompany
balances have been eliminated in the consolidated financial statements.
[3] INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out method) or
market.
[4] PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the assets (5 to 7 years).
[5] DEFERRED FINANCING COSTS:
Deferred financing costs are being amortized over the term of the related
debt, which is one year.
[6] REVENUE RECOGNITION:
Revenue is recognized when goods are shipped.
[7] RESEARCH AND DEVELOPMENT:
Research and development costs are expensed as incurred.
F-7
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE B)--BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES: (CONTINUED)
[8] INCOME TAXES:
The Company accounts for income taxes in accordance with the provisions of
SFAS No. 109 "Accounting for Income Taxes." SFAS No. 109 provides for income
taxes to be accounted for based on the difference between reported amounts of
assets and liabilities and their tax bases.
The confirmation of the plan of reorganization has eliminated all net
operating loss carryforwards which were available to offset future taxable
income.
[9] USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.
[10] EARNINGS (LOSS) PER SHARE:
Earnings (loss) per share is based on the weighted average number of shares
outstanding during each period, retroactively restated for the exchange and
merger with HMI (Note A), and the contribution of 2,000,000 shares of common
stock back to the Company by certain shareholders (Note N[3]), as if these
transactions took place at the beginning of the period. The effect of warrants
and options is computed, if dilutive, using the treasury stock method.
(NOTE C)--CASH:
As of December 31, 1995, the Company had $338,000 which was received as part
of the lawsuit settlement referred to in Note F. These funds were being held in
a restricted escrow account for payment to a secured creditor and the Company's
attorneys.
(NOTE D)--INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1995 1994 1996
------------ ---------- ------------
<S> <C> <C> <C>
(UNAUDITED)
Component parts........................................................... $ 1,443,885 $ 153,560 $ 1,597,870
Work-in-process........................................................... 151,800 55,962 223,220
Finished machines......................................................... 1,578,974 411,776 1,517,123
------------ ---------- ------------
Total............................................................... $ 3,174,659 $ 621,298 $ 3,338,213
------------ ---------- ------------
------------ ---------- ------------
</TABLE>
Included in inventory at December 31, 1995 and June 30, 1996 is
approximately $900,000 of parts and substantially all of the work-in-process and
finished machines which were received from a vendor pursuant
F-8
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE D)--INVENTORIES: (CONTINUED)
to the litigation settlement referred to in Note F. These goods were valued at
their current replacement cost.
(NOTE E)--LOAN RECEIVABLE, STOCKHOLDER:
Loan receivable from stockholder is due February 7, 1997 with interest at 8%
per annum.
(NOTE F)--LITIGATION SETTLEMENT:
In 1995, the Company settled a lawsuit with the former supplier of its
vending machines. Under the terms of the settlement agreement, the supplier
cancelled accounts payable of $884,975 and agreed to pay the Company cash of
$3,938,000 and deliver to the Company inventory parts, work-in-process and
finished machines held by them, which were valued at $2,592,914. The Company has
received cash payments totalling $3,338,000 through June 1996. An installment of
$100,000 which was due in June 1996, was received in July 1996. A final
installment of $500,000 is due in June 1997.
The settlement balance receivable is shown at its net present value
discounted at an effective interest rate of 11% per annum. The bankruptcy court
ordered that a portion of the cash proceeds of the settlement be used to pay a
secured claim owed to a creditor (Note H) and attorneys' fees for services
rendered in connection with the settlement of the lawsuit. Fees payable to the
litigating attorneys amount to $225,000 at June 30, 1996.
(NOTE G)--PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1995 1994 1996
---------- ---------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Machinery and equipment..................................................... $ 228,428 $ 425,027 $ 262,142
Furniture and fixtures...................................................... 23,015 23,015 56,967
Transportation equipment.................................................... 10,796 7,032 13,596
Leasehold improvements...................................................... 27,990
---------- ---------- -----------
262,239 455,074 360,695
Less accumulated depreciation............................................... 144,989 189,975 168,866
---------- ---------- -----------
Total............................................................... $ 117,250 $ 265,099 $ 191,829
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
In July 1995, the Company abandoned leasehold improvements with a net book
value of $90,640.
F-9
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE H)--PREPETITION LIABILITIES:
Prepetition liabilities consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- JUNE 30,
1995 1994 1996
------------ ------------ -----------
<S> <C> <C> <C>
(UNAUDITED)
Secured:
Former investor................................... $ 2,244,708 $ 3,444,708
Bank.............................................. 146,429
------------ ------------
2,244,708 3,591,137
------------ ------------
Priority:
Tax claims........................................ 33,293 80,076
Former stockholder................................ 48,000 $ 10,000
------------ ------------ -----------
81,293 80,076 10,000
------------ ------------ -----------
Unsecured:
Stockholders...................................... 22,636 226,356 8,638
Trade and other miscellaneous claims.............. 132,131 2,300,333 144,390
Former investor................................... 96,518 965,177 96,518
------------ ------------ -----------
251,285 3,491,866 249,546
------------ ------------ -----------
Total....................................... 2,577,286 7,163,079 259,546
Less current portion................................ 1,310,577 5,318,371 124,773
------------ ------------ -----------
Noncurrent portion.................................. $ 1,266,709 $ 1,844,708 $ 134,773
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
When the Company petitioned for bankruptcy in October 1994 two claims were
owed to secured creditors. The first claim was owed to a bank who was paid in
full in June of 1995. The payment amounted to $175,000 including accrued
interest of $28,571. The remaining claim was owed to a former investor in the
Company who was paid $1,200,000 in 1995 from the proceeds of the litigation
settlement referred to in Note F and $2,244,708 from the proceeds received from
the sale of preferred stock (Note L).
The plan of reorganization did not provide for the payment of interest to
the secured creditor subsequent to the date of petition. Contractual interest on
these loans was approximately 11% per annum and if it would have continued to
accrue, it would have amounted to approximately $315,000 for the year ended
December 31, 1995, $71,000 for the period of October 24, 1994 through December
31, 1994 and $100,000 for the six months ended June 30, 1996.
In June 1995, the Bankruptcy Court ordered the Company to pay $46,783 to the
Internal Revenue Service from the proceeds of the initial payment received from
the litigation settlement. Priority claims include remaining payroll tax
liabilities owed to a state government and unpaid rent due to a former
stockholder for leased premises which were vacated in 1995.
Upon confirmation of the plan of reorganization, unsecured claims, including
those due to certain stockholders and the former investor were settled for 10%
of their prepetition amount and are payable in
F-10
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE H)--PREPETITION LIABILITIES: (CONTINUED)
two equal installments of 5% each in December 1996 and December 1997.
Cancellation of debt pursuant to the plan of reorganization resulted in an
extraordinary gain of $2,307,606 in 1995.
Minimum payments remaining for all claims due under the plan of
reorganization are as follows:
<TABLE>
<CAPTION>
PRIORITY UNSECURED TOTAL
---------- ---------- ----------
<S> <C> <C> <C>
1996..................................................... $ 124,773 $ 124,773
1997..................................................... $ 10,000 124,773 134,773
---------- ---------- ----------
$10,000.... $ 249,546 $ 259,546
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
(NOTE I)--LOANS PAYABLE--STOCKHOLDER:
These loans were repaid in January 1996 with interest at 10% per annum.
Interest expense on these loans amounted to $2,421 for the year ended December
31, 1995.
(NOTE J)--NOTES PAYABLE:
In May 1996 the Company received $870,000 representing the net proceeds of a
private placement offering of 4 units, each consisting of a Series A 10% Senior
Note in the principal amount of $250,000 and a warrant to purchase 83,333 shares
of common stock, at an exercise price of $2.00 per share. These notes are due on
the earlier of May 23, 1997 or the closing of a public offering of the Company's
common stock, for minimum gross proceeds of $5,000,000. The warrants expire in
May 1999.
In July 1996 the Company received an additional $383,482, representing the
net proceeds of a private placement offering of one and 9/10 units of the same
securities described above.
F-11
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE K)--COMMITMENTS AND CONTINGENCIES:
[1] In June 1996 the Company entered into employment agreements with five
of its officers which expire in June 2000. The contracts provide for certain
minimum levels of compensation plus annual increases based on the Consumer Price
Index. Future minimum compensation payments, exclusive of any increases, are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDING
DECEMBER 31,
-------------
<S> <C>
1997............................................................................ $ 111,000
<CAPTION>
YEAR ENDING
DECEMBER 31,
-------------
<S> <C>
1997............................................................................ 422,000
1998............................................................................ 422,000
1999............................................................................ 422,000
2000............................................................................ 176,000
------------
Total................................................................... $ 1,553,000
------------
------------
</TABLE>
The Company has also adopted a management incentive plan which provides the
officers with an incentive bonus pool which is set at five percent of the
Company's pretax profits, subject to Board of Directors approval. Maximum
bonuses payable under the plan may not exceed the officers' base compensation
exclusive of any increases.
The employment contracts and management incentive plan were both terminated
in September 1996 with the consent of the employees.
[2] The Company occupies premises pursuant to an operating lease which
expires in July 1998. In addition, the Company entered into a three year lease
in January 1996 for a building which it intends to use as a facility to assemble
and store pizza vending machines. The new lease expires in March 1999. These
leases are subject to escalations for the Company's pro rata share of real
estate taxes and operating expenses. Future minimum rental payments, exclusive
of escalation payments for taxes and utilities, under these leases are as
follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDING
DECEMBER 31,
-------------
<S> <C>
1996.............................................................................. $ 69,179
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
-------------
<S> <C>
1997.............................................................................. 131,182
1998.............................................................................. 110,437
1999.............................................................................. 18,450
----------
Total..................................................................... $ 329,248
----------
----------
</TABLE>
F-12
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE K)--COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Company also leases certain storage facilities on a month-to-month
basis. In 1995 rent expense amounted to $61,357 including $24,668 paid to a
former stockholder. In 1994 rent expense amounted to $34,105 which was paid to a
former stockholder.
For the six months ended June 30, 1996, rent expense amounted to $75,092.
For the same period in 1995, rent expense amounted to $12,600 which was paid to
a former stockholder.
[3] In February 1996 the Company formed Nouveau Equities, Inc. and entered
into contract for the purchase of a building in which it will operate a food
processing plant. The purchase price of the building is $1,360,000. The Company
has made a nonrefundable down payment of $70,000 and is currently seeking
additional financing which is needed to fund the balance of the purchase price.
There is no assurance that such financing will be obtained.
[4] In April 1996 the Company entered into an agreement for consulting
services for $12,500 per month through April 1999. Fees paid to the consultant
amounted to approximately $80,000 for the six months ended June 30, 1996.
(NOTE L)--PREFERRED STOCK:
In January 1996, in a private placement offering, the Company sold 70 units,
each unit consisting of 1 share of Series A 4% cumulative redeemable preferred
stock and 1,608 common stock purchase warrants for $3,500,000. The preferred
stock is mandatorily redeemable at a price per share which is equal to the
original issuance price plus accrued dividends on the earlier of the date of a
public offering of its common stock for minimum gross proceeds of $5,000,000 or
January 17, 1997. In the event it is not redeemed through a public offering, the
Company has the right to convert the preferred stock into 1,125,000 shares of
common stock. The preferred stock has a liquidation value equal to the
redemption value. Each common stock purchase warrant entitles the holder to
purchase one share of the Company's common stock at an exercise price of $.50
per share. The warrants expire in January 1999.
(NOTE M)--RELATED PARTY TRANSACTIONS:
[1] In December 1994 the Company entered into a joint venture to distribute
the Company's products in Europe. The joint venture company called Nouveau
Cordon Bleu ("NCB") is incorporated in Ireland. During the time in which the
Company was in bankruptcy proceedings, the parties agreed to suspend all
performance requirements provided for in the joint venture agreement. Sales to
NCB since its inception amount to approximately $137,000. All of these sales
occurred during the quarter ended March 31, 1996. The operations of NCB have
been terminated and the Company will seek direct relationships with distributors
for its products.
[2] In addition, the Company sold certain vending machines to a stockholder
in 1994 for $12,000.
F-13
<PAGE>
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION WITH RESPECT TO THE SIX MONTHS ENDED
JUNE 30, 1996 AND JUNE 30, 1995 IS UNAUDITED)
(NOTE N)--OTHER:
[1] In 1995 and 1994 sales to one customer amounted to $124,638 and
$329,716 which represents 50% and 35% of net sales in each of these years,
respectively. Accounts receivable due from this customer amounted to $21,873 at
December 31, 1995.
During the six months ended June 30, 1996 sales to three customers amounted
to $279,411 representing 86% of net sales and during the six months ended June
30, 1995 sales to one customer amounted to $66,206 representing 82% of net
sales.
[2] The Company has also adopted a stock option plan which provides for the
grant of stock awards, stock appreciation rights ("SARs"), and options to
purchase up to 500,000 shares of common stock to key employees, officers,
directors, and consultants of the Company.
[3] In September 1996 the Chairman of the Board of Directors of the Company
and certain other stockholders contributed 2,000,000 shares of common stock back
to the Company reducing the number of shares of common stock outstanding to
9,249,988. The contribution of common stock is given retroactive effect in the
June 30, 1996 balance sheet.
F-14
<PAGE>
To the Directors
Health Management, Inc.
We have audited the balance sheet of Health Management, Inc. (a Florida
Corporation) as at December 31, 1995 and the related statement of operations,
changes in capital deficiency and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Health Management, Inc. as
of December 31, 1995 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Richard A. Eisner & Company, LLP
New York, New York
March 11, 1996
F-15
<PAGE>
HEALTH MANAGEMENT, INC.
BALANCE SHEET
AS AT DECEMBER 31, 1995
<TABLE>
<S> <C>
Assets........................................................................... $ -0 -
---------
---------
LIABILITIES
Accrued expenses................................................................. $ 5,000
---------
CAPITAL DEFICIENCY
Common stock--authorized 10,000,000 shares of $.001 par value;
issued and outstanding 4,500,000 shares........................................ 2,960
Additional paid-in capital....................................................... 784,705
Accumulated deficit.............................................................. (792,665)
---------
Total capital deficiency................................................... (5,000)
---------
TOTAL...................................................................... $ -0 -
---------
---------
</TABLE>
The accompanying notes are an integral part hereof.
F-16
<PAGE>
HEALTH MANAGEMENT, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER
31,
-----------
<S> <C>
Revenue.............................................................................................. $ -0 -
Operating expenses:
General and administrative......................................................................... (14,022)
-----------
NET LOSS............................................................................................. $ (14,022)
-----------
-----------
Net loss per share................................................................................... $ (.003)
-----------
-----------
Weighted average number of common shares outstanding................................................. 4,500,000
-----------
-----------
</TABLE>
The accompanying notes are an integral part hereof.
F-17
<PAGE>
HEALTH MANAGEMENT, INC.
STATEMENT OF CHANGES IN CAPITAL DEFICIENCY
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED CAPITAL
STOCK CAPITAL DEFICIT DEFICIENCY
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Balance--January 1, 1995......................................... $ 2,960 $ 775,161 $ (778,643) $ (522)
Net loss......................................................... (14,022) (14,022)
Capital contributions............................................ 9,544 9,544
----------- ---------- ------------ ----------
BALANCE--DECEMBER 31, 1995....................................... $ 2,960 $ 784,705 $ (792,665) $ (5,000)
----------- ---------- ------------ ----------
----------- ---------- ------------ ----------
</TABLE>
The accompanying notes are an integral part hereof.
F-18
<PAGE>
HEALTH MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED
DECEMBER 31, 1995
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................................ $ (14,022)
Change in accrued expenses...................................................... 4,478
---------
Net cash used in operating activities......................................... (9,544)
Cash flows from financing activities:
Capital contribution............................................................ 9,544
---------
NET CHANGE IN CASH................................................................ -0 -
Cash--beginning of year........................................................... -0 -
---------
CASH--END OF YEAR................................................................. $ -0 -
---------
---------
</TABLE>
The accompanying notes are an integral part hereof.
F-19
<PAGE>
HEALTH MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(NOTE A)--ORGANIZATION AND BUSINESS:
The Company was incorporated on March 19, 1981 and was engaged in providing
management and consulting services. The Company was inactive since mid 1993.
(NOTE B)--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Net loss per common share is based on the weighted average number of shares
outstanding during the period after giving effect to a stock split of 1.52 for 1
on January 6, 1996.
(NOTE C)--SUBSEQUENT EVENT:
In January 1996, Health Management, Inc. ("HMI") acquired all the
outstanding common stock of Nouveau International, Inc. in exchange for shares
representing 60% of HMI common stock. Concurrent with the transaction, HMI sold
70 units in a private placement, each unit consisting of 1 share of 4%
cumulative redeemable preferred stock and 1,608 common stock purchase warrants,
for $3,500,000. HMI changed its name to Nouveau International, Inc.
The preferred stock is mandatorily redeemable at a price per share which is
equal to the original issuance price plus accrued dividends on the earlier of
the date of a public offering of its common stock for minimum gross proceeds of
$5,000,000 or January 4, 1997 which is the beginning of the 13th month following
the date of the sale of the preferred shares. If not redeemed through the public
offering, the Company may, at its option, convert the preferred stock into
1,125,000 shares of common stock. The preferred stock has a liquidation value
equal to the redemption value.
Each common stock purchase warrant entitles the holder to purchase one share
of the new Company's common stock at an exercise price of $.50 per share. The
warrants expire in January 1996.
F-20
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
The following pro forma consolidated statement of operations gives effect to
the acquisition of Nouveau International, Inc., for 60% of the outstanding stock
of Health Management, Inc. This statement should be read in conjunction with the
financial statements of Nouveau International, Inc. and Health Management, Inc.
appearing elsewhere herein. The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of the operating
results or what would have occurred if the merger had occurred at the beginning
of the year, nor is it indicative of the future operating results or financial
position of the Company.
<TABLE>
<CAPTION>
HISTORICAL
---------------------------
<S> <C> <C> <C> <C>
NOUVEAU HEALTH
INTERNATIONAL, MANAGEMENT, PRO FORMA
INC. INC. ADJUSTMENTS PRO FORMA
------------- ------------ ------------- -------------
Revenues:
Net sales........................................ $ 245,313 $ 245,313
Cost of goods sold............................... 224,282 224,282
------------- -------------
Gross profit................................. 21,031 21,031
------------- -------------
Operating expenses:
General and administrative....................... 618,398 $ 14,022 632,420
Selling.......................................... 34,839 34,839
------------- ------------ -------------
653,237 14,022 667,259
------------- ------------ -------------
Loss from operations............................... (632,206) (14,022) (646,228)
Gain from settlement of lawsuit.................... 5,979,459 $ (5,979,459 (1) -0 -
Interest income.................................... 105,216 105,216
Interest expense................................... (32,352) (32,352)
------------- ------------ ------------- -------------
Income (loss) before extraordinary item............ $ 5,420,117 $ (14,022) $ (5,979,459) $ (573,364)
------------- ------------ ------------- -------------
------------- ------------ ------------- -------------
Pro forma loss per share before extraordinary
item............................................. $ (.05)
-------------
Pro forma weighted average shares outstanding...... 11,249,900
-------------
-------------
</TABLE>
- ------------------------
(1) To adjust for nonrecurring gain on settlement of lawsuit.
F-21
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.................... 9
Risk Factors................................... 10
Use of Proceeds................................ 16
Capitalization................................. 17
Price Range of Common Stock.................... 18
Dividend Policy................................ 18
Selected Financial Data........................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 21
Business....................................... 24
Management..................................... 32
Principal and Selling Stockholders............. 36
Certain Transactions........................... 37
Description of Securities...................... 37
Concurrent Sales by Selling Stockholders....... 39
Underwriting................................... 40
Legal Matters.................................. 42
Experts........................................ 42
Financial Statements........................... F-1
</TABLE>
1,500,000 SHARES
NOUVEAU
INTERNATIONAL, INC.
SERIES B 8% CUMULATIVE
CONVERTIBLE REDEEMABLE
PREFERRED STOCK
---------------------
PROSPECTUS
---------------------
, 1996
AMERICORP
SECURITIES, INC.
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
1,554,225 SHARES
NOUVEAU INTERNATIONAL, INC.
COMMON STOCK, $.001 PAR VALUE PER SHARE
This Prospectus relates to 1,554,225 shares of common stock, $.001 par value
per share (the "Common Stock") of Nouveau International, Inc., a Delaware
corporation (the "Company"), held by 21 holders (the "Selling Stockholders"). As
to the 1,554,225 shares of Common Stock offered hereby, (i) up to an aggregate
of 112,560 shares of Common Stock are issuable upon the exercise of certain
warrants ("Warrants") which entitle the holder thereof to purchase one share of
Common Stock at a price of $.50 per share, (ii) up to an aggregate of 491,665
shares of Common Stock are issuable upon the exercise of Warrants which entitle
the holder thereof to purchase one share of Common Stock at a price of $2.00 per
share, and (iii) 950,000 shares of Common Stock are held by one of the Selling
Stockholders. The Selling Stockholders' Warrants were issued to the Selling
Stockholders in private placements by the Company conducted in January, May, and
July 1996. See "Selling Stockholders" and "Plan of Distribution."
The Common Stock offered by the Selling Stockholders pursuant to this
Prospectus may be sold from time to time by the Selling Stockholders or by their
transferees. The distribution of the Common Stock offered hereby by the Selling
Stockholders may be effected in one or more transactions that may take place on
the over-the-counter market, including ordinary brokers' transactions, privately
negotiated transactions or through sales to one or more dealers for resale of
such securities as principals, at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Usual and customary or specifically negotiated brokerage fees or commissions may
be paid by the Selling Stockholders.
The Selling Stockholders, and intermediaries through whom such securities
are sold, may be deemed underwriters within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered,
and any profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders. See "Selling Stockholders" and "Plan of
Distribution."
On the date of this Prospectus, a registration statement under the
Securities Act with respect to an underwritten public offering by the Company of
1,500,000 shares of Series B 8% Cumulative Convertible Redeemable Preferred
Stock was declared effective by the Securities and Exchange Commission (the
"Commission"). The Company will receive approximately $10,060,000 in net
proceeds from such offering (assuming no exercise of the Underwriter's
overallotment option) after payment of underwriting discounts and commissions
and estimated expenses of such offering.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE
SUBSTANTIAL DILUTION. SEE "RISK FACTORS."
------------------------
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.
------------------------
The date of this Prospectus is , 1996
A-1
<PAGE>
SELLING STOCKHOLDERS
An aggregate of up to 1,554,225 shares of Common Stock may be offered for
resale by the investors listed below.
The following table sets forth certain information with respect to each
Selling Stockholder for whom the Company has registered Common Stock for resale
to the public. The Company will not receive any of the proceeds from the sale of
such shares of Common Stock. There are no material relationships between any of
the Selling Stockholders and the Company or any of its predecessors or
affiliates, nor have any such material relationships existed within the past
three years, except as footnoted below. Except as described below, no Selling
Stockholder will beneficially own any Common Stock of the Company if the Selling
Stockholders' Common Stock is sold.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF NUMBER OF SHARES OF
COMMON STOCK OWNED NUMBER OF SHARES OF COMMON STOCK OWNED
SELLING STOCKHOLDER PRIOR TO OFFERING COMMONS STOCK TO BE SOLD AFTER OFFERING
- ------------------------------------------ --------------------- ------------------------ ---------------------------
<S> <C> <C> <C>
Road & Show Cellular (East), Inc.......... 6,432 6,432 0
Service Central De Titres De
Brunoy--SCT............................. 8,040 8,040 0
Kenneth J. Anderson....................... 4,824 4,824 0
Paul J. Loughlin.......................... 3,216 3,216 0
BRBA Co., Inc............................. 6,432 6,432 0
Kimberly Braswell......................... 16,080 16,080 0
Stuart Gruber............................. 23,098.6 23,098.6 0
Alletta Orlando........................... 25,728 25,728 0
Gertrude Shear............................ 1,608 1,608 0
Denise Torellio........................... 3,216 3,216 0
Steven Yablon............................. 4,824 4,824 0
Herman Jeffer............................. 16,080 16,080 0
Andrew Green.............................. 3,216 3,216 0
Anthony Lotito and Joy Lotito............. 6,432 6,432 0
Albert Darrell Braswell................... 166,666 166,666 0
Craig S. Boyd............................. 83,333 83,333 0
Banque SCS Aliance SA..................... 83,333 83,333 0
Egger & Co................................ 83,333 83,333 0
Melvin Paradise........................... 41,666.5 41,666.5 0
Neil A. Rosenfeld and Martin.............. 16,666.6 16,666.6 0
E. Rosenfeld as Tenants in Common
CSB Financial, LLC (1).................... 950,000 950,000 0
----------- -----------
Total..................................... 1,554,224.7 1,554,224.7 0
Rounded Totals............................ 1,554,225 1,554,225 0
</TABLE>
- ------------------------
(1) Kalman Carmel, a key consultant of the Company, is a member and affiliate of
the referenced entity.
A-2
<PAGE>
PLAN OF DISTRIBUTION
The sale of the shares of Common Stock by the Selling Stockholders may be
effected from time to time in transactions (which may include block
transactions, by or for the account of, the Selling Stockholders) in the
over-the-counter market or in negotiated transactions, through the writing of
options on the securities, a combination of such methods of sale, or otherwise.
Sales may be made at fixed prices which may be changed, at market prices
prevailing at the time of sale, or at negotiated prices.
The Selling Stockholders may effect such transactions by selling their
shares of Common Stock directly to purchasers, through broker-dealers acting as
agents for the Selling Stockholders or to broker-dealers who may purchase Common
Stock as principals and thereafter sell the Common Stock from time to time in
the over-the-counter market in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders or the purchasers for
whom such broker-dealers may act as agents or to whom they may sell as
principals or otherwise (which compensation as to a particular broker-dealer may
exceed customary commissions).
Each Selling Stockholder entitled to shares of Common Stock upon the
exercise of the Warrants has agreed that one-third of such Common Stock may be
sold on each of the dates six months, 12 months, and 18 months from the date of
this Prospectus. The shares of Common Stock held by CSB Financial, LLC may not
be sold for the period of 18 months from the date of this Prospectus. In each
such case, such securities may be sold prior to such dates with the prior
written consent of Americorp Securities, Inc.
Under applicable rules and regulations under the Securities Exchange Act of
1934 ("Exchange Act"), any person engaged in the distribution of the shares of
Common Stock offered hereby may not simultaneously engage in market making
activities with respect to any securities of the Company for a period of at
least two (and possibly nine) business days prior to the commencement of such
distribution. Accordingly, in the event that Americorp Securities, Inc., the
Underwriter of the Company's public offering, is engaged in a distribution of
the Selling Stockholders' shares of Common Stock, it will not be able to make a
market in the Company's Common Stock during the applicable restrictive period.
However, the Underwriter has not agreed to, nor is it obliged to, act as
broker-dealer in the sale of the Selling Stockholders' shares of Common Stock.
The Selling Stockholders may be required, and in the event the Underwriter is a
market maker, will likely be required, to sell such Common Stock through another
broker-dealer. In addition, each Selling Stockholder desiring to sell Common
Stock will be subject to the applicable provisions of the Exchange Act and the
rules and regulations thereunder, including without limitation, Rules 10b-6,
10b-6A, and 10b-7, which provisions may limit the timing of the purchases and
sales of the Common Stock by such Selling Stockholders.
The Selling Stockholders and broker-dealers, if any, acting in connection
with such sale, might be deemed to be underwriters within the meaning of Section
2(11) of the Securities Act and any commission received by them and any profit
on the resale of the securities might be deemed to be underwriting discounts and
commissions under the Securities Act.
A-3
<PAGE>
CONCURRENT PUBLIC OFFERING
On the date of this Prospectus, a Registration Statement was declared
effective under the Securities Act with respect to an underwritten offering by
the Company of 1,500,000 shares of Series B 8% Cumulative Convertible Redeemable
Preferred Stock by the Company and up to 225,000 additional shares of Common
Stock to cover overallotments, if any.
A-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATES AS OF WHICH SUCH INFORMATION IS FURNISHED.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary............................. 3
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends..................... 9
Risk Factors................................... 10
Use of Proceeds................................ 16
Capitalization................................. 17
Price Range of Common Stock.................... 18
Dividend Policy................................ 18
Selected Financial Data........................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 21
Business....................................... 24
Management..................................... 32
Principal and Selling Stockholders............. 35
Certain Transactions........................... 36
Description of Securities...................... 37
Concurrent Public Offering..................... 39
Underwriting................................... 40
Legal Matters.................................. 42
Experts........................................ 42
Financial Statements........................... F-1
</TABLE>
1,554,225 SHARES
NOUVEAU
INTERNATIONAL, INC.
COMMON STOCK
---------------------
PROSPECTUS
---------------------
, 1996
AMERICORP
SECURITIES, INC.
[LOGO]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
A-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemization of all expenses (subject to future
contingencies) incurred or expected to be incurred by the Company in connection
with the issuance and distribution of the securities being offered hereby (items
marked with an asterisk (*) represent estimated expenses);
<TABLE>
<S> <C>
SEC Registration Fee........................................... $11,343.62
Legal Fees and Expenses........................................ 150,000.00*
Blue Sky Fees (including counsel fees)......................... 45,000.00*
NASD Filing Fees............................................... 3,789.64
Accounting Fees and Expenses................................... 75,000.00*
Transfer Agent and Registrar Fees.............................. 5,000.00*
Printing and Engraving Expenses................................ 60,000.00
Representative's Non-Accountable Expense Allowance............. 360,000.00(1)
Miscellaneous.................................................. 29,866.74*
Total.......................................................... $740,000.00*(1)
</TABLE>
- ------------------------
(1) Representative's Non-Accountable Expense Allowance and Total are estimated
to be $414,000 and $794,000 respectively, if the Underwriters'
over-allotment option is exercised in full.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law, Section 102(b)(7), enables a corporation
in its original certificate of incorporation, or an amendment thereto validly
approved by stockholders, to eliminate or limit personal liability of members of
its Board of Directors for violations of a director's fiduciary duty of care.
However, the elimination or limitation shall not apply where there has been a
breach of the duty of loyalty, failure to act in good faith, intentional
misconduct or a knowing violation of a law, the payment of a dividend or
approval of a stock repurchase which is deemed illegal or an improper personal
benefit is obtained. The Company's Certificate of Incorporation includes the
following language:
"No director shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director; provided, however that to the extent required by the provisions of
paragraph 102(b)(7) of the General Corporation Law of the State of Delaware
or any successor statute, or any laws of the State of Delaware, this
provision shall not eliminate or limit the liability of a director (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under paragraph
174 of the General Corporation Law of the State of Delaware, (iv) for any
transaction from which the director derived an improper personal benefit or
(v) for any act or omission occurring prior to the date when the provision
becomes effective. If the General Corporation Law of the State of Delaware
hereafter is amended to authorize the further elimination or limitation on
personal liability provided herein, personal liability shall be limited to
the fullest extent permitted by the amended General Corporation Law of the
State of Delaware. Any repeal or modification of this Article Fifth by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of
the Corporation existing at the time of such repeal or modification."
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Set forth below in chronological order is information regarding the numbers
of shares of Common Stock sold by the Company, the number of options issued by
the Company, and the principal amount of debt instruments issued by the Company
since January 16, 1996 (inception), the consideration received by the Company
for such shares, options and debt instruments and information relating to the
section of the Securities Act of 1933, as amended (the "Securities Act"), or
rule of the Securities and Exchange Commission under which exemption from
registration was claimed. None of these securities was registered under the
Securities Act. Except as otherwise indicated, no sales of securities involved
the use of an underwriter and no commissions were paid in connection with the
sale of any securities.
During January 1996, the Company issued 6,750,000 shares of Common Stock in
a reincorporation merger with Health Management, Inc., a Florida corporation. On
January 17, 1996, the Company issued an aggregate of 70 units, each unit
consisting of one share of Series A 4% Cumulative Preferred Stock and warrants
exercisable for an aggregate of 1,608 shares of Common Stock to accredited
investors for $50,000 per unit.
During May and July 1996, the Company sold an aggregate of 5.9 units, each
unit consisting of $250,000 principal amount of Series A 10% Senior Notes and
83,333 common stock purchase warrants to accredited investors for $250,000 per
unit.
Each of the foregoing transactions was exempt from registration under the
Securities Act by virtue of the provisions of Rule 506 under the Securities Act
and/or Section 4(2) and/or Section 3(b) of the Securities Act. Each purchaser of
the securities described above has represented that he/she/it understands that
the securities acquired may not be sold or otherwise transferred absent
registration under the Securities Act or the availability of an exemption from
the registration requirements of the Securities Act, and each certificate
evidencing the securities owned by each purchaser bears upon issuance a legend
to that effect.
II-2
<PAGE>
ITEM 16. EXHIBITS
(a) The following exhibits are filed herewith:
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<C> <S>
1.1 Form of Underwriting Agreement
3.1** Certificate of Incorporation, as amended
3.2** Bylaws
3.3* Form of Certificate of Amendment to Certificate of Incorporation
3.4* Form of Certificate of Designation
4.1* Form of Representative's Warrant
5.1* Opinion of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC
10.0** Agreement and Plan of Merger By and Among Health Management, Inc. and Nouveau International,
Inc., dated January 18, 1996
10.1** Form of Master Distributorship Agreement
10.2** Omnibus Stock Plan
10.3** Management Incentive Plan
21.0(d)** Subsidiaries of the Registrant
23.1 Consent of Richard A. Eisner & Company, LLP
23.2* Consent of Brock, Fensterstock, Silverstein, McAuliffe & Wade, LLC (contained in the Opinion
filed as Exhibit 5.1).
24.1 Power of Attorney (set forth on the signature page hereof)
27.0(d)** Financial Data Schedule
</TABLE>
- ------------------------
* To be filed by amendment.
** Incorporated by reference from registrant's current report on Form
10-KSB/A-1, filed July 1, 1996.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) to include any additional or changed material information on
the plan of distribution;
(2) that, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be treated as a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by 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 Securities Act and will be governed by the final
adjudication of such issue.
(c) The Registrant hereby undertakes that it will:
(1) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus
as a new registration statement relating to the securities offered therein,
and the offering of such securities at that time as the initial bona fide
offering thereof.
(d) The Registrant hereby undertakes that it will provide to the underwriter
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the city of Exton, Pennsylvania on September 30, 1996.
NOUVEAU INTERNATIONAL, INC.
By: /s/ GARY W. BLACK, SR.
-----------------------------------------
Gary W. Black, Sr.
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gary W. Black, Sr. and Robert J. Brock, Sr., or
any one of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place, and
stead, in any and all capacities, to sign any and all pre- or post-effective
amendments to this Registration Statement, and to file the same with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board of
Directors and Chief
/s/ GARY W. BLACK, SR. Executive Officer
- ------------------------------ (Principal Executive, September 30, 1996
Gary W. Black, Sr. Financial, and
Accounting Officer)
/s/ DAVID J. ROTH
- ------------------------------ Director September 30, 1996
David J. Roth
/s/ FREDERICK W. JOHNSON
- ------------------------------ Production Manager, September 30, 1996
Frederick W. Johnson Secretary, and Director
/s/ ROBERT J. BROCK
- ------------------------------ President, Chief Operating September 30, 1996
Robert J. Brock Officer, and Director
</TABLE>
II-5
<PAGE>
Exhibit 1.1
NOUVEAU INTERNATIONAL, INC.
1,500,000 SHARES OF SERIES B 8% CUMULATIVE
CONVERTIBLE REDEEMABLE PREFERRED STOCK
UNDERWRITING AGREEMENT
November , 1996
Americorp Securities, Inc.
One New York Plaza
New York, New York 10004
Gentlemen:
Nouveau International, Inc., a Delaware corporation (the "Company") has
authorized 3,000,000 shares of Preferred Stock, $.001 par value ("Preferred
Stock") and 25,000,000 shares of Common Stock, $.001 par value ("Common Stock")
and has the number of shares of Series A Preferred Stock and Common Stock as set
forth under the heading "Capitalization" in the Prospectus, as hereinafter
defined, adjusted only for any subsequent exercises of outstanding stock options
and warrants. The Company proposes to issue and sell to the underwriters listed
on Schedule I hereto (the "Underwriters"), severally and not jointly, 1,500,000
of its authorized and unissued shares (the "Firm Shares") of Series B 8%
Cumulative Convertible Redeemable Preferred Stock (the "Series B Stock")
containing such terms and conditions including provisions regarding dividends,
conversion and redemption as are contained in the form of Series B stock
certificate which is filed as an exhibit to the registration statement
hereinafter mentioned.
In addition, the Company proposes to grant to you the right to purchase up
to 225,000 additional shares of Series B Stock (the "Optional Shares"), for the
sole purpose of covering over-allotments in the sale of the Firm Shares. Unless
the context otherwise indicates, the Firm Shares and the Optional Shares are
sometimes referred to herein collectively as the "Series B Shares." The Series B
Shares are more fully described in the registration statement, which the Company
has furnished to you, acting as representative (the "Representative") of the
several Underwriters. This is to confirm our agreement with respect to the
purchase of the Series B Shares.
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to, and agrees with each Underwriter that:
(a) A registration statement on Form SB-2 (File No. 333- ), for the
registration of the Series B Shares has been prepared by the Company in
conformity with the applicable provisions of the Securities Act of 1933, as
amended (the "Act"), and the applicable rules,
<PAGE>
regulations, releases and instructions (the "Rules under the Act") of the
Securities and Exchange Commission (the "Commission"), and has been filed with
the Commission; and one or more amendments to said registration statement,
copies of which have heretofore been delivered to the Representative, has or
have been filed by the Company; and the Company may file on or prior to the
effective date an additional amendment to the registration statement. Included
in the registration statement are 150,000 underwriters' warrants ("Underwriters'
Warrants") and an underlying 150,000 shares of Series B Stock (the
"Underwriters' Series B Shares") to be sold by the Company. As used in this
Agreement, the term "Registration Statement" refers to and means the
registration statement, and all amendments thereto, including the prospectus,
documents incorporated by reference therein, exhibits and financial statements,
at the time it becomes effective; and the term "Prospectus" refers to and means
the prospectus included in the Registration Statement at the time it becomes
effective (including documents incorporated by reference therein), except that,
if the prospectus first filed by the Company pursuant to Rule 424(b) of the
Rules under the Act shall differ from the prospectus included in the
Registration Statement, the term Prospectus shall mean the prospectus filed
pursuant to Rule 424(b) (including documents incorporated by reference therein).
The Company will not file at any time any amendment or supplement to the
Registration Statement or the Prospectus without previous advice to the
Representative, nor if the same shall be reasonably objectionable in form or
substance to the Representative or its counsel.
(b) The Commission has not issued any order preventing or suspending the
use of any preliminary prospectus (the "Preliminary Prospectus") with respect to
the Series B Shares and each Preliminary Prospectus conformed in all material
respects with the requirements of the Act and the Rules under the Act and has
not included any untrue statement therein of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except that the foregoing shall not apply to
statements in, or omissions from, any written information furnished to the
Company by the Representative specifically for use in the preparation thereof.
(c) When the Registration Statement shall become effective and at all times
subsequent thereto, up to and including the Closing Date or the Option Closing
Date, as hereinafter defined, and when any post-effective amendment thereof
shall become effective, the Registration Statement and the Prospectus (and any
post-effective amendment thereof or the Registration Statement as supplemented)
will comply in all material respects with the applicable provisions of the Act
and the Rules under the Act with respect thereto and the Registration Statement
and the Prospectus and any further amendments or supplements thereto will
contain all statements which are required to be stated therein in accordance
with the Act and the Rules under the Act and neither the Registration Statement
nor the Prospectus will contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading in light of the circumstances in
which made; and when the Prospectus is filed with the Commission pursuant to
Rule 424(b) of the Rules under the Act and at all times subsequent thereto, up
to and including the Closing Date and the Option Closing Date, the Prospectus
(and the Prospectus as amended or supplemented, if the Company shall have filed
with the Commission any amendment thereof or supplement thereto) will comply
2
<PAGE>
in all material respects with the provisions of the Act and the Rules under the
Act and will not contain any untrue statement of a material fact and will not
omit to state any material fact required to be stated therein or necessary in
order to made the statements therein not misleading in light of the
circumstances in which made; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement or the Prospectus or any amendment thereof or
supplement thereto in reliance upon and in conformity with information furnished
in writing to the Company by the Representative and the only such information is
the last paragraph of the cover page of the Prospectus and the information in
the Prospectus under the caption "Underwriting."
(d) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware. The
Company has no significant subsidiary or subsidiaries and does not control,
directly or indirectly, any significant corporation, partnership, joint venture,
association or other business organization, except for Nouveau Foods
International, Inc., Nouveau Vend International, Inc., Nouveau Equities, Inc.
and Nouveau International (PA), Inc. The foregoing companies are referred to
herein singly as a "Subsidiary" and collectively as the "Subsidiaries" except
where the context otherwise requires. Each Subsidiary has been organized and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation or formation. Each of the Company and each of its
Subsidiaries is duly qualified and in good standing as a foreign corporation in
each jurisdiction in which the character or location of its or any of their
properties (owned, leased or licensed) or the nature of its or any of their
businesses makes such qualification necessary except where the failure to be so
qualified would not have a material adverse effect on the Company and its
Subsidiaries taken as a whole. The Company owns all of the outstanding shares
of capital stock of each of its Subsidiaries free and clear of all liens,
claims, security interests, restrictions, stockholders' agreements, voting
trusts, and any other encumbrances; and all such shares of capital stock have
been duly authorized and are duly and validly issued, fully paid and
nonassessable. Each of the Company and each of the Subsidiaries has full power
and authority (corporate and other) to own or lease its properties and conduct
its business, present and proposed, as described in the Registration Statement
and Prospectus. Each of the Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental authorities (both
domestic and foreign) necessary for the conduct of its or their businesses as
described in the Prospectus and owns, or possesses adequate rights to use all
material rights necessary for the conduct of its or their businesses and has not
received any written notice of conflict with the asserted rights of others in
respect thereof and does not know of any material proceeding pending or
threatened seeking to cancel, terminate, or limit such licenses, certificates or
permits.
(e) The financial statements and schedules (including the related notes)
included in the Registration Statement and the Prospectus present fairly the
financial position, results of operations, stockholders' equity and changes in
financial position of the Company and the Subsidiaries as of the respective
dates and for the respective periods indicated, all in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved.
3
<PAGE>
(f) The accountants who have examined and reported on the audited
financial statements filed with the Commission as parts of the Registration
Statement and the Prospectus are independent public accountants as required by
the Act and the Rules under the Act.
(g) Except as may be reflected in or contemplated by the Registration
Statement or the Prospectus and except for changes resulting from the normal
operation of the Company's and its Subsidiaries' businesses, subsequent to the
dates as of which information is given in the Registration Statement and the
Prospectus (i) there has not been any material adverse change in the financial
condition, in the results of operations or the general affairs of the Company
and its Subsidiaries taken as a whole; (ii) there has not been any material
transaction entered into by the Company or any of the Subsidiaries, other than
transactions in the ordinary course of business; (iii) neither the Company nor
any Subsidiary has incurred any material obligations, contingent or otherwise;
(iv) there has not been any change in the capital stock or long or short term
debt (except current payments) of the Company or the Subsidiaries; (v) there has
not been any issuance of options, warrants, convertible securities or other
rights to purchase the capital stock of the Company or any Subsidiary, and (vi)
there has not been any material adverse change or any development involving a
prospective material adverse change in the condition (financial or other),
business, key personnel, properties, prospective results of operations or net
worth of the Company and the Subsidiaries taken as a whole.
(h) Neither the Company nor any of its Subsidiaries is in violation of its
articles of incorporation or by-laws nor, except as disclosed in the
Registration Statement or Prospectus, in violation of any franchise, license,
permit, judgment, decree, order, statute, rule or regulation, which violation is
material to the Company and the Subsidiaries, taken as a whole, or in material
default in the performance or observance of any obligation, agreement or
condition contained in any note or other evidence of indebtedness or in any
mortgage, indenture or loan agreement or any other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which it or any of
their properties may be bound or affected in any respect which, in any such
case, is material to the Company and the Subsidiaries taken as a whole. The
Company has full right, power and authority to enter into and perform this
Agreement and to issue, sell and deliver the Series B Shares and the
Underwriters' Warrants to be issued and sold by it as provided in this
Agreement. The execution and delivery of this Agreement, the fulfillment of the
terms set forth herein and the consummation of the transactions contemplated
herein will not conflict with or constitute a breach of, or a default under, the
articles of incorporation or by-laws of the Company or any of its Subsidiaries
or any material agreement, or any material indenture or other material
instrument by which the Company or any of its Subsidiaries or any of their
properties may be bound, or any applicable material franchise, license, permit,
judgment, decree, orders, statute, rule or regulation. Except as required by
the Act, the Securities Exchange Act of 1934, as amended, (the "Exchange Act")
and applicable state securities laws, no consent, approval, authorization or
order of any governmental agency or governmental authority (domestic or foreign)
is required in connection with the consummation of the transactions contemplated
by this Agreement on the part of the Company or any Subsidiary where the failure
to obtain such consent, approval or authorization would have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
4
<PAGE>
(i) Each contract to which the Company or any Subsidiary is a party and to
which reference is made in the Registration Statement and Prospectus has been
duly and validly executed by the Company or such Subsidiary, is in full force
and effect in accordance with its terms and none of such contracts has been
assigned by the Company or such Subsidiary, and the Company knows of no present
situation or condition or fact which would prevent compliance with the terms of
such contracts, as amended to date. Neither the Company nor any Subsidiary has
any intention of exercising any right which it may have to cancel any of its
rights or obligations under any of such contracts and has no knowledge that any
other party to any of such contracts has any intention not to render full
performance under such contracts except as contemplated by the Registration
Statement.
(j) Each of the Company and each of its Subsidiaries has filed all
Federal, state and foreign tax returns which are required to be filed by it or
validly filed extensions thereof, and has paid all taxes shown due on such
returns and all assessments received by it to the extent such taxes have become
due. All taxes with respect to which the Company and each of its Subsidiaries
is obligated have been paid or adequate accruals have been set up to cover any
such unpaid taxes which are not yet due. Nether the Company nor any Subsidiary
received any notice or claim indicating any deficiency in the payment of or
failure to pay any taxes.
(k) Each of the Company and each of its Subsidiaries has good and
marketable title, free and clear of all liens, encumbrances and defects, except
liens for current taxes not due and payable, to all of its properties and assets
which are stated to be owned by it in the Registration Statement and the
Prospectus, subject only to such liens and exceptions as are not material and
liens and encumbrances disclosed in the Prospectus. The properties, including
any equipment, stated to be leased by the Company or any Subsidiary in the
Registration Statement and the Prospectus are held under valid, subsisting and
enforceable leases with only such exceptions which collectively are not material
and do not have a material adverse effect on the present or prospective business
of, or the use of such property by the Company or any Subsidiary.
(l) The Company has an authorized outstanding capitalization as set forth
or contemplated in the Prospectus and based on sale of the Firm Shares will
have, on the Closing Date, the adjusted capitalization as set forth or
contemplated in such Prospectus under the caption "Capitalization"; all of the
outstanding shares of Preferred Stock and Common Stock of the Company have been
validly authorized and issued and are fully paid and non-assessable and none of
such outstanding shares of Preferred Stock or Common Stock or outstanding
warrants or options to purchase shares of Common Stock were issued in violation
of the pre-emptive rights of any stockholder of the Company; the Series B Shares
and the Underwriters' Warrants have been duly authorized and, when issued and
paid for pursuant hereto, the shares of Common Stock (the "Underlying Common
Shares") when issued upon conversion of the Series B Shares in accordance with
their terms, the Underlying Underwriters' Series B Shares when issued and paid
for upon exercise of the Underwriters' Warrants in accordance with their terms,
and the shares of Common Stock (the "Underlying Underwriters' Common Shares")
when issued upon conversion of the Underwriters' Series B Shares, will be
validly issued, fully paid and non-assessable, will pass valid title to the
holders thereof, free and clear of any lien, encumbrance or
5
<PAGE>
claim and all corporate action required to be taken for the authorization,
issuance and sale of the Series B Shares and the Underwriters' Warrants has been
validly and sufficiently taken; the holders of the outstanding shares of Common
Stock and Preferred Stock and the holders of the Series B Shares, the
Underwriters' Series B Shares and the Underlying Common Shares and the
Underlying Underwriters' Common Shares (collectively at times, the "Underlying
Securities") are not and will not be subject to any liability as shareholders.
Except as set forth in the Registration Statement or in the Prospectus, on the
effective date of the Registration Statement, the Closing Date and the Option
Closing Date there will be no pre-emptive or other rights to subscribe for or
purchase any of the shares of Preferred Stock, Common Stock, Series B Shares,
Underwriters' Warrants, Underwriters' Series B Shares or Underlying Securities,
or any options, warrants, agreements or similar rights calling for the issuance
by the Company of any of its securities.
(m) The Preferred Stock, Common Stock, Series B Stock, Underwriters'
Warrants, Underwriters' Series B Shares and the Underlying Securities conform to
the description thereof in the Prospectus and such description conforms with the
rights set forth in the instruments defining the same.
(n) Except as described in the Prospectus, there is no action, suit or
proceeding before any court or governmental agency, authority or body (domestic
or foreign) pending, or, to the knowledge of the Company, threatened, which
might result in judgments against the Company or any Subsidiary not adequately
covered by insurance and which collectively might result in any material adverse
change in the condition (financial or otherwise), business or prospects of the
Company and the Subsidiaries taken as a whole or materially affect their
properties or assets.
(o) The delivery upon payment for the Underwriters' Warrants to be sold by
the Company as set forth in Paragraph 11 of this Agreement will pass good and
marketable title thereto free and clear of any and all liens, encumbrances,
charges and claims whatsoever to the Underwriters, and their designees; and the
Company will have, on the effective date of the Registration Statement and at
the time of delivery of the Underwriters' Warrants, full legal right and power
and all authorization and approval required by law to sell, transfer and deliver
the Underwriters' Warrants in the manner provided hereunder.
(p) The Company does not know of any outstanding claim for services in the
nature of a finder's fee or origination fee with respect to the sale of the
Series B Shares hereunder resulting from its acts for which any Underwriter or
the Company may be responsible.
(q) There are no contracts or other documents which are required by the
Act to be filed as exhibits to the Registration Statement which have not been so
filed; and the exhibits which have been filed are complete and correct copies of
the documents of which they purport to be copies, and all agreements referred to
in the Registration Statement or filed as exhibits to the Registration Statement
to which the Company or any Subsidiary is a party or by which it is or may be
bound or to which any of its assets, properties or businesses is or may be
subject have been duly and validly authorized, executed and delivered by the
Company and constitute the legal, valid and binding agreements of the Company in
accordance with their respective terms
6
<PAGE>
and no default by the Company or to the knowledge of the Company of any other
party to said agreements or, any event which with the giving of notice or
passage of time would constitute a default, has occurred under any such
agreement.
(r) Each of the Company and each of the Subsidiaries makes and keeps
accurate books and records reflecting its assets and maintains internal
accounting controls which provide reasonable assurance that (i) transactions are
executed in accordance with management's authorization, (ii) transactions are
recorded as necessary to permit preparation of the Company's and the
Subsidiary's financial statements and to maintain accountability for the assets
of the Company and each Subsidiary, (iii) access to the assets of the Company
and each Subsidiary is permitted only in accordance with management's
authorization, and (iv) the recorded accountability of the assets of the Company
and each Subsidiary is compared with existing assets at reasonable intervals.
(s) The Company has the full right, power and authority to enter into this
Agreement and this Agreement has been duly and validly authorized, executed and
delivered by the Company and is a validly binding agreement enforceable in
accordance with its terms.
(t) Neither the Company, nor any Subsidiary, nor any Company predecessor
entity has at any time during the past five years; (i) made any unlawful
contributions to any candidate for political office, or failed to disclose fully
any contribution in violation of law, or (ii) made any payment to any state,
Federal or foreign government officer or official, or other person charged with
similar public or quasi-public duties (other than payments required or permitted
by applicable law).
(u) Except as set forth in the Prospectus, neither the Company nor any
Subsidiary maintains any "employee benefit plan" as defined in Section 3(3) of
the Employment Retirement Income Security Act of 1974, as amended, ("ERISA") and
to the best of the Company's knowledge and belief, after diligent investigation
and inquiry (A) there is no material liability of the Company or any Subsidiary
as a result thereof and (B) no "accumulated funding deficiency" (as defined in
Section 302 of ERISA) whether or not waived, exists with respect to any such
plan.
(v) The Company and its Subsidiaries have their properties adequately
insured.
(w) Except as set forth in the Prospectus, there are no actions, suits or
proceedings pending before or by any court or governmental agency, authority or
body, or any arbitrator, which is reasonably likely to result in any material
adverse change in the condition (financial or other), business prospects, net
worth or results of operations of the Company and the Subsidiaries, taken as a
whole and, to the best of the Company's knowledge, no such action, suit or
proceeding is contemplated or threatened.
(x) The Company has not taken and will not take, directly or indirectly,
any action designed to cause or result in, or which has constituted, the
stabilization or manipulation of the
7
<PAGE>
price of the Common Stock, the Series B Stock or any other outstanding security
to facilitate the sale or resale of the Series B Stock, the Underwriters'
Warrants or any underlying security, provided; however, that nothing herein
shall be construed as extending to any action of the Underwriters or Selected
Dealers.
(y) Except as set forth in the Prospectus, the Company and each Subsidiary
has all government approvals, grants or licenses (domestic and foreign)
necessary for the conduct of its business as described in the Prospectus and is
in compliance with all regulations relating to the same.
2. PURCHASE AND SALE OF THE SERIES B SHARES. (a) The Company agrees to
issue and sell to the several Underwriters listed on Schedule I hereto, and
subject to the terms and conditions set forth herein and, in reliance upon the
representations and warranties herein set forth, the several Underwriters agree
to purchase from the Company, the Firm Shares at a purchase price of $_.__ per
Firm Share.
(b) The Company further agrees that on the Closing Date, as hereinafter
defined, it will sell to the Representative and to such other persons designated
by it, the Underwriters' Warrants more particularly described in Paragraph 12 of
this Agreement.
3. DELIVERY AND PAYMENT. Delivery and payment for the Firm Shares shall
be made at the offices of Americorp Securities, Inc. or at the offices of its
Clearing Agent, in New York, New York on such date and at such time (such date
and time being herein sometimes referred to as the "Closing Date"), as the
Representative may specify in writing, but such date shall not be later than
seven (7) business days after the date on which the Registration Statement
becomes effective; provided, however, that if counsel for the Company or for the
Representative deems it necessary that either a further amendment to the
Registration Statement or supplement to the Prospectus be filed prior to the
Closing Date, the Closing Date shall be on a date to be thereafter fixed by the
Representatives on notice to the Company, such date to be not earlier than the
third business day, nor later than the tenth business day, after the effective
date of such amendment or the date of filing with respect to such supplemented
Prospectus. The Closing Date and the place of delivery may be changed by
written agreement between the Company and the Representative. Delivery of the
Firm Shares shall be made to the Representative against payment by the several
Underwriters of the purchase price for the Firm Shares to or upon the order of
the Company by certified or official bank check or checks payable in New York
Clearing House funds or by wire transfer of funds to the Company's designated
account.
The certificates for the Firm Shares to be delivered by the Company will be
in definitive, fully registered form, will bear no restrictive legends and will
be in such denominations and registered in such names as the Representative
shall request not less than two full business days prior to the Closing Date
(or, if no such request is made, in the names of the respective Underwriters in
the amount set forth opposite their respective names on Schedule I hereto), and
the certificates for the Firm Shares purchased hereunder will be made available
to the
8
<PAGE>
8Representatives or its clearing agents for inspection, checking and packaging
not later than one full business day prior to the Closing Date.
4. OPTION TO PURCHASE OPTIONAL SHARES. (a) For the purposes of covering
any over-allotments in connection with the distribution and sale of the Firm
Shares as contemplated by the Prospectus, you are hereby granted an option to
purchase all or any part of the Optional Shares from the Company. The purchase
price to be paid for the Optional Shares shall be the same price per Optional
Share as the price per Firm Share set forth in Paragraph 2 hereof. The option
granted hereby may be exercised as to all or any part of the Optional Shares at
any time, and from time to time, within 45 days after the date of the
Prospectus. You shall be under no obligation to purchase any or all of the
Optional Shares unless and to the extent such option is exercised.
(b) The option granted hereby may be exercised by you by giving
telegraphic notice to the Company setting forth the number of Optional Shares to
be purchased and the date and time for delivery of any payment for the Optional
Shares and stating that the Optional Shares referred to therein are to be used
for the purpose of covering over-allotments in connection with the distribution
and sale of the Firm Shares. If such notice is given prior to the Closing Date,
the date set forth therein for such delivery and payment may, at your option be
either the Closing Date or two full business days after such notice, whichever
occurs later. If such notice is given on or after the Closing Date, the date
set forth therein for such delivery and payment shall not be earlier than five
business days after the date of such notice. In either event, the date so set
forth shall not be more than ten full business days after the date of such
notice. The date and time set forth in such notice is herein sometimes referred
to as the "Option Closing Date." Upon exercise of the option, the Company shall
become obligated to deliver to you, and subject to the terms and conditions set
forth in Paragraph 4 (d) hereof, you shall become obligated to purchase the
respective number of Optional Shares set forth in the notice of exercise.
Payment for the Optional Shares shall be made to the Company by certified
or official bank check or checks payable in New York Clearing House funds, at
your offices, or at the offices of your clearing agent in New York City as set
forth in a notice delivered to the Company, or by wire transfer to an account
designated by the Company, against delivery of the Optional Shares to you. The
certificates representing the Optional Shares to be delivered will be in such
denominations and registered in such names as you shall request not less than
two full business days prior to the Option Closing Date, and will be made
available to you or your clearing agent for inspection, checking and packaging
at your aforesaid office, or at the offices of your clearing agent in New York
City not less than one full business day prior to the Option Closing Date.
(d) Your obligation to purchase and pay for any of the Optional Shares is
subject to the accuracy in all material respects of (as of the date hereof and
the applicable Option Closing Date) and compliance by the Company with the
representations and warranties herein, to the accuracy of the statements of the
officers of the Company made pursuant to the provisions hereof, to the
performance in all material respects by the Company of its obligations
hereunder, to the
9
<PAGE>
satisfaction by the Company of the conditions as of the Closing Date and of the
Option Closing Date set forth in Paragraph 7 hereof, and to the delivery to you
of opinions, certificates and letters dated the Option Closing Date
substantially the same in scope and substance to those specified in
subparagraphs (e), (f) and (g) of Paragraph 7 hereof, but with each reference to
"Firm Shares," "Series B Stock," and "Closing Date" to be, respectively, to the
Optional Shares and the Series B Stock included therein being sold and the
Option Closing Date.
5. OFFERING BY UNDERWRITERS. (a) After the Registration Statement
becomes effective the several Underwriters will offer the Series B Shares for
sale to the public upon the terms set forth in the Prospectus.
(b) The Representative is authorized to change the public offering price
and concessions and discounts to dealers, provided that no such change requiring
an amendment to the Prospectus will be made unless the Prospectus shall first
have been amended and such amendment declared effective.
6. COVENANTS OF THE COMPANY. The Company covenants and agrees with each
Underwriter that:
(a) The Company will use its best efforts to cause the Registration
Statement and any amendments thereto to become effective and will advise the
Representative immediately and, if requested by the Representative, will confirm
such advice in writing (i) when the Registration Statement has become effective
and when any post-effective amendment thereto becomes effective, or when any
supplement to the Prospectus or any amended Prospectus has been filed, (ii) of
any request by the Commission for any amendments or supplements to the
Registration Statement or the Prospectus or for any additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of any order preventing or
suspending the use of any Preliminary Prospectus or the institution or threat of
any proceedings for that purpose, (iv) of the happening of any event which in
the judgment of the Company makes any material statement in the Registration
Statement or the Prospectus untrue or which requires any changes to be made in
the Registration Statement or the Prospectus in order to make any material
statements therein not misleading, and (v) of the suspension of the
qualification of the Firm Shares for offering or sale in any jurisdiction, or
the institution or threatening of any proceeding for that purpose. The Company
will use its best efforts (i) to prevent the issuance of any such stop order or
of any order preventing or suspending the use of the Registration Statement or
Prospectus and (ii) if issued, to obtain the lifting or removal of such order as
soon as possible.
(b) The Company will not at any time, whether before, on, or after the
effective date of the Registration Statement, file any amendment to the
Registration Statement or supplement to a Preliminary Prospectus or to the
Prospectus of which the Representative shall not previously have been advised
and furnished with copies, or to which the Representative shall have reasonably
objected in writing or which is not in compliance with the Act and the Rules
under the Act.
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(c) The Company will deliver to the Representative, without charge, a
reasonable number of copies of the Registration Statement, including all
financial statements and exhibits (four of which shall be signed) and include
all exhibits filed therewith and any amendments or supplements thereto. Two
conformed copies of the Registration Statement, including all financial
statements and exhibits filed therewith shall also be delivered to each
Underwriter.
(d) Prior to the effective date of the Registration Statement, the Company
will have delivered to each Underwriter, without charge, in such quantities as
the Representative may have requested, copies of each form of Preliminary
Prospectus. The Company consents to the use of each form of Preliminary
Prospectus by the Underwriters, and by dealers prior to the effective date of
the Registration Statement in conformity with the Act and State Blue Sky Laws.
(e) The Company will deliver to each Underwriter and each Selected Dealer,
without charge, immediately after the effective date of the Registration
Statement and thereafter from time to time as many copies as they may reasonably
request of the Prospectus and of any amended or supplemented Prospectus.
(f) If during such period of time as in the opinion of the Representative
or its counsel a prospectus relating to this financing is required to be
delivered under the Act, due to the occurrence of any event as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading or if it shall be necessary during any time after the
effective date of the Registration Statement to amend or supplement the
Prospectus to comply with the Act or the Rules under the Act, the Company will
forthwith notify the Representatives and their counsel thereof and prepare and
file with the Commission and furnish and deliver to each Underwriter and to
others whose names and addresses are designated by the Representative, all at
the cost of the Company, reasonable quantities of the amended or supplemented
Prospectus which as so amended or supplemented will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the Prospectus as amended or supplemented not misleading in the
light of the circumstances when it is delivered to a purchaser or prospective
purchaser, and which will comply in all respects with the Act and the Rules
under the Act, and cause any amendment of the Registration Statement containing
an amended Prospectus to be made effective as soon as possible.
(g) For a period of five years from the effective date of the Registration
Statement, the Company will deliver to the Representative (i) after each fiscal
year, the Company's Form 10-K with respect to such year at the time such Form
10-K is filed with the Commission and, if no Form 10-K is required to be filed,
such financial data with respect to such year as would be required to be filed
by the Company with the Commission pursuant to the instructions to Form 10-K
under the Exchange Act, prepared in accordance with generally accepted
accounting principles and practices as at the end of such fiscal year and for
the twelve months then ended, and covered by a report of independent certified
public accountants; (ii) after each of the first three fiscal quarters of the
Company, the Company's Form 10-Q with respect to such quarter at
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the time such form 10-Q is filed with the Commission and, if no Form 10-Q is
required to be filed, such financial data with respect to such quarter as would
be required to be filed by the Company with the Commission pursuant to the
instructions to Form 10-Q under the Exchange Act, all in reasonable detail and
certified by the Company's principal financial or accounting officer; (iii)
copies of its annual report and any other reports or communications (financial
or other) of the Company at the time it is mailed to its stockholders or filed
with the Commission; (iv) two copies of every press release and every material
news item and article in respect of the Company and its affairs at the time it
is released by the Company; (v) copies of transfer reports from its transfer
agent; and (vi) such additional documents and information with respect to the
Company and its affairs as the Representative may from time to time reasonably
request.
(h) The Company will make generally available to its stockholders, in the
manner specified in Rule 158(b) under the Act, and deliver to the Representative
as soon as practicable, but in no event later than 45 days after the end of its
first fiscal quarter ending 12 months after the effective date of the
Registration Statement, a consolidated earnings statement (which need not be
audited) meeting the requirements of said Rule 158(b) covering a period of at
least twelve months beginning not earlier than the effective date of the
Registration Statement.
(i) The Company will use the net proceeds to be received by it from the
sale of the Firm Shares in the manner and for the purposes set forth in the
Prospectus.
(j) The Company will deliver to the Representative true and correct copies
of the Company's articles of incorporation and all amendments thereto, such
copies to be certified by the secretary of the Company; true and correct copies
of the By-Laws of the Company and of the minutes of all meetings of the
directors and stockholders of the Company held prior to the Closing Date; and
true and correct copies of all material contracts to which the Company is a
party.
(k) Prior to the public offering of the Firm Shares the Company will
cooperate with the Representative and its counsel in connection with the
registration or qualification of the Firm Shares, Optional Shares, the
Underwriters' Warrants, the Underwriters' Series B Shares, and the Underlying
Securities for offering and sale by the Underwriters and dealers under the
securities or Blue Sky laws of such states as the Representative may designate
and will file such consents to service of process or other documents as may be
necessary in order to effect such registration or qualification. The Company
shall bear the expenses incurred in filing for qualification and in qualifying
the Firm Shares, Optional Shares, the Underwriters' Warrants, the Underwriters'
Series B Shares and the Underlying Securities under the securities or Blue Sky
laws of such states, including the fees and charges of the various states, the
cost of printed preliminary, supplementary and final memoranda or surveys with
respect thereto, and the reasonable fees and expenses of the Underwriters'
counsel incurred in connection therewith. The Company shall not be required
however, to qualify as a foreign corporation or sign a general consent to
service of process in any jurisdiction where it is not now subject. In each
jurisdiction where any of its securities shall have been qualified, the Company
will file such reports and statements with respect thereto as may be required by
the applicable governmental or administrative body.
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(l) During the period from the Closing Date to the Date the exercise
rights represented by the Underwriters' Warrants or the conversion rights of the
underlying Underwriters' Series B Shares either have been fully exercised or
have lapsed, the Company will at all times have authorized and reserved a
sufficient number of shares of its Series B Stock and underlying Common Stock to
provide for the exercise of the Underwriters' Warrants and the conversion of the
Underwriters' Series B Shares.
(m) The Company will pay and bear, whether or not the transactions
contemplated hereunder are consummated or this Agreement is prevented from
becoming effective, or is terminated, all costs and expenses incident to the
performance of its obligations under this Agreement, including all expenses
incident to the authorization of the Series B Shares and their issuance and
delivery to the Underwriters, the authorization of the Underwriters' Warrants
and their sale to the Representative, any original issue taxes in connection
therewith, all transfer taxes, if any, incident to the initial sale of the
Series B Shares to the several Underwriters and to the initial sale of the
Series B Shares by the Underwriters to the public and to Selected Dealers, the
fees and expenses of the Company's counsel and accountants (but excluding fees
and expenses of Counsel to the Underwriters, except where such Counsel shall
have acted as "blue sky" Counsel to the Company), the costs and expenses
incident to the issuance, sale and delivery of the Series B Shares, the
Underwriters' Warrants and the underlying shares, the costs and expenses
incident to the preparation, printing and filing under the Act of the
Registration Statement (including financial statements), any Preliminary
Prospectus and the Prospectus and any amendments or supplements thereto; the
printing and distribution of this Agreement, the Agreement Among Underwriters,
the Selected Dealer Agreement, the Blue Sky survey, the Underwriters' Warrant
Agreement, the certificates for the Series B Shares and the Underwriters'
Warrants, the filing fees of the Securities and Exchange Commission and the
National Association of Securities Dealers, Inc. and any state regulatory
agencies, the cost of preparing and filing all exhibits to the Registration
Statement and the cost of furnishing to the Underwriters copies of the
Registration Statement and Prospectus.
(n) The Company will pay to the Representative a non-accountable expense
allowance equal to $_.__ per share for each Series B Share (Firm Share and
Optional Share) sold to the Underwriters pursuant to this Agreement. The
expense allowance is to be paid out of the proceeds of the sale of the Series B
Shares and may be deducted by the Representative on the Closing Date, and the
Optional Closing Date from the amount due to the Company.
(o) Prior to the Closing Date, the Company will cooperate with the
Representative in such investigation as the Representative may make or cause to
be made of the properties, business and operations of the Company in connection
with the purchase and public offering of the Series B Shares and will make
available to the Representative in connection therewith such information as the
Representative may request in connection with the business or properties of the
Company.
(p) The Company has appointed Continental Stock Transfer and Trust Company
as Transfer Agent for the Series B Stock. Such appointment may be changed only
if the proposed new appointee is reasonably acceptable to the Representative.
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(q) Except as set forth in the Prospectus, during a period of 180 days
from the effective date of the Registration Statement, the Company will not
issue, sell or otherwise dispose of, directly or indirectly, any Common Stock,
Preferred Stock, Series B Stock (or any securities convertible into or
exercisable to purchase Common Stock, Preferred Stock and/or Series B Stock)
other than the Series B Stock and Underwriters' Warrants and underlying shares
being sold by the Company hereunder or securities issued pursuant to outstanding
options or warrants, without the Representative's prior written consent.
(r) The Company will deliver to the Representative on the Closing Date,
the agreement of the persons set forth on Schedule II to this agreement not to
sell securities of the Company for the period set forth on Schedule II hereto.
(s) The Company will comply with the Act, Rules under the Act and the
Exchange Act and the rules and regulations of the Commission promulgated under
the Exchange Act so as to permit the continuance of sales of, and dealings in,
the Series B Stock, Underwriters' Warrants and Underlying Securities under the
Act and under the Exchange Act.
(t) The Company will use its best efforts to cause the Series B Stock and
the Common Stock to be admitted for separate listing on NASDAQ upon or prior to
the effective date of the Registration Statement, and to maintain the listings
on NASDAQ during the period the respective securities are outstanding or for a
period of five years, whichever first occurs.
(u) The Company will deliver to the Representative and its counsel named
on the cover page of the Registration Statement bound volumes of copies of all
documents and appropriate correspondence filed or received from the Commission
and all closing documents.
(v) The Company agrees, that for a period of three years following the
Closing it will engage a single designee selected by the Representative as an
advisor to its Board of Directors and such advisor shall be entitled to the same
notice as members of the Board of Directors or any committee of the Board of
Directors of the Company of any meetings thereof, and to attend all meetings of
such Board of Directors and/or committees and shall be reimbursed for all
reasonable costs in attending such meetings including, but not limited to, food,
lodging and transportation. Such advisor shall also be entitled to receive all
memoranda, reports and other documents distributed to members of the Board or
such committees subject to the execution by the advisor of reasonable non-
disclosure agreements, and to be indemnified to the same extent as the Company's
directors.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of each
Underwriter to purchase and pay for the Series B Stock set forth opposite its
name on Schedule I hereto is subject to the continuing accuracy of and
compliance with the representations and warranties on the part of the Company
contained herein as of the date hereof and as of the Closing Date, to the
performance by the Company of its obligations and covenants hereunder, to the
absence from any certificates, opinions, written statements or letters furnished
to the Representative or to its counsel
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<PAGE>
of any misstatement or omission that is material to the purchase of the Series B
Stock by the several Underwriters and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
9:30 P.M., New York time, on the day after the date of this Agreement, or such
later date or time as shall have been consented to by the Representative; no
stop order suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been instituted or
shall be pending, threatened or contemplated by the Commission; and any request
for additional information on the part of the Commission (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with, and no amendments or supplements to the Registration Statement or
Prospectus shall have been filed to which the Representative and its counsel
have not given their consent.
(b) All corporate action taken and all legal opinions and proceedings
relating to the Series B Shares, the Underwriters' Warrants, the Underwriters'
Series B Shares and the Underlying Securities, the Registration Statement and
the Prospectus and all other matters incident thereto and to the transactions to
which this Agreement relate shall be reasonably satisfactory to Underwriters'
counsel and they shall have been furnished with such certificates, documents and
information as they may request in this connection.
(c) The Company shall have performed each of the agreements herein
contained and required to be performed by it at or prior to the Closing Date and
the Option Closing Date.
(d) On the Closing Date and Option Closing Date (i) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules under the Act and shall in all material respects
conform to the requirements of the Act and the Rules under the Act and neither
the Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) since the respective dates as of which
information is given in the Registration Statement and the Prospectus there
shall have been no material adverse changes in the business, property or
financial condition of the Company and its Subsidiaries from that set forth in
the Registration Statement and the Prospectus other than changes occurring in
the ordinary course of business, and there shall have been no material
transaction, contract or agreement entered into by the Company or any Subsidiary
which is not referred to in the Registration Statement and the Prospectus, (iii)
no action, suit or proceeding at law or in equity shall be pending or, to the
knowledge of the Company, threatened against the Company or any Subsidiary which
would be required to be set forth in the Registration Statement and the
Prospectus other than as set forth therein, and no proceedings shall be pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary before or by any Federal, state or other (including foreign)
commission, board or administrative agency wherein an unfavorable decision,
ruling or finding would have a material adverse effect upon the business,
property, financial condition or income of the Company and the Subsidiaries
taken as a whole except as disclosed in the Prospectus and
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<PAGE>
(iv) neither the Company nor any Subsidiary shall have declared or made any
payments of dividends or made any acquisitions of capital stock or made any
other distribution on outstanding shares of capital stock other than as set
forth in the Registration Statement (except for distributions made to the
Company by a Subsidiary).
(e) The Representative shall receive on, and as of the Closing Date and
the Option Closing Date, the favorable opinion of Brock, Fensterstock,
Silverstein, McAuliffe & Wade, LLC, counsel for the Company, to the
Representative in form and substance satisfactory to counsel to the
Underwriters, to the effect that:
(i) the Company is a corporation in good standing, duly organized and
validly existing under the laws of the state of its incorporation, and is
authorized by its Certificate of incorporation and by-laws to own its
properties and to conduct its business, as set forth in the Prospectus;
(ii) to the best of such counsel's knowledge, the sole subsidiaries of
the Company are Nouveau Foods International, Inc., Nouveau Vend
International, Inc., Nouveau Equities, Inc. and Nouveau International (PA),
Inc., all of the outstanding capital stock of which are wholly owned by the
Company, and each such Subsidiary is a corporation in good standing, duly
organized and validly existing under the laws of the state of its
incorporation, and is authorized by its Certificate of Incorporation and
by-laws to own its properties and to conduct its business as set forth in
the Prospectus;
(iii) to the best of such counsel's knowledge, the Company and each of
its Subsidiaries is duly qualified to transact the business in which it is
engaged and is in good standing in each jurisdiction in which its ownership
or lease of property requires such qualification or registration, except in
those jurisdictions where the failure to be so qualified would not, taken
in the aggregate, have a material adverse effect on the business, financial
condition or results of the Company and the Subsidiaries taken as a whole;
(iv) the Company has an authorized capitalization as set forth in the
Registration Statement; all of the outstanding shares of Preferred Stock
and Common Stock of the Company have been duly and validly authorized and
issued and all of the outstanding shares of Preferred Stock and Common
Stock are fully paid and non-assessable. The outstanding shares of
Preferred Stock and Common Stock are not, and the Series B Shares and
Underwriters' Warrants (including the underlying securities) to be sold by
the Company hereunder are not subject to the preemptive right of any
shareholder of the Company. The Series B Shares to be sold by the Company
have been validly authorized and, when issued and delivered by the Company
pursuant to this Agreement against payment of the consideration set forth
herein, will be fully paid and non-assessable; the Underwriters' Warrants
to be sold by the Company have been validly authorized and issued and
represent the valid and binding obligations of the Company enforceable in
accordance with their terms, subject as to enforcement of remedies to the
discretion of a court with respect to the granting of equitable relief and
to applicable bankruptcy,
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insolvency, moratorium and other laws now or hereafter in effect affecting
the rights of creditors generally; and the Underwriters' Series B Shares
underlying the Underwriters' Warrants and the shares of Common Stock
issuable upon conversion of the Series B Shares and the Underwriters'
Series B Shares have been validly authorized and reserved for issuance and
when issued upon exercise of the Underwriters' Warrants or upon conversion
of the Series B Shares or the Underwriters' Series B Shares, as the case
may be, will be validly issued and will be fully paid and non-assessable;
(v) the Preferred Stock, Series B Shares, Common Stock and Warrants
(including Underwriters' Warrants) of the Company conform as to legal
matters to the description thereof contained in the Prospectus and such
description conforms to the rights set forth in the instruments defining
the same, and the certificates for the Series B Shares and Underwriters'
Warrants delivered at the Closing are in due and proper form;
(vi) this Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding agreement of the
Company enforceable in accordance with its terms, subject as to enforcement
of remedies, to the discretion of a court with respect to the application
of equitable principles and to applicable bankruptcy, insolvency,
moratorium and other laws now or hereafter in effect affecting the rights
of creditors generally and except that such counsel need not express an
opinion with respect to the indemnification and contribution provisions set
forth in Paragraphs 8 and 9 of this Agreement; the Company has the legal
power to sell and deliver the Series B Shares and Underwriters' Warrants
pursuant to the provisions of this Agreement; the execution, performance
and delivery of this Agreement and the consummation of the transactions
contemplated in this Agreement to be performed by the Company do not
conflict with, result in a breach of, or constitute a default under the
Company's certificate of incorporation, by-laws, or to the best of such
counsel's knowledge a breach or default under any material indenture,
mortgage, deed of trust, voting trust agreement, note agreement or other
agreement or instrument to which the Company or any Subsidiary is a party
or, to the best of such counsel's knowledge, any statute, order, rule or
regulation of any court, regulatory body, administrative agency or
governmental body having jurisdiction over the Company other than "blue
sky" or state securities laws as to which counsel need not express an
opinion;
(vii) no consent, approval, authorization or order of any court or
governmental agency or body is required for the performance by the Company
of the transactions contemplated in this Agreement to be performed by it
except for such consents, approvals, authorizations or orders as need be
obtained under the Act and such as may be required under the securities
laws of any jurisdiction in connection with the purchase and distribution
of the Series B Shares by the Underwriters;
(viii) the Registration Statement has become effective under the Act,
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been
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instituted or are pending or threatened; and to the best of such counsel's
knowledge, the Registration Statement, the Prospectus and each amendment
thereof or supplement thereto (except for the financial statements and
notes thereto and other financial and statistical information included
therein as to which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and the Rules
under the Act;
(ix) (A) such statutes, contracts and documents as are summarized in
the Registration Statement fairly present the information required to be
shown with respect thereto (other than in the financial statements and
notes thereto and other financial and statistical information included
therein as to which such counsel need express no opinion); and (B) such
counsel does not know of (x) any contracts or documents required to be
summarized or disclosed in the Registration Statement (with the same
exception as in subclause (A)); or required to be filed as exhibits to the
Registration Statement which have not been so summarized, disclosed or
filed, or (y) any legal or governmental proceedings pending or, to the best
of such counsel's knowledge, threatened against or involving the properties
or the business of the Company or the Subsidiaries of a character required
to be disclosed in the Registration Statement and the Prospectus which have
not been so disclosed.
Such opinion shall also include a statement of such counsel that nothing
has come to their attention to cause them to believe that (except for (i) the
financial statements, and (ii) matters set forth under the caption
"Underwriting" as to which such counsel need not express any belief) the
Registration Statement and the Prospectus included therein at the time the
Registration Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus, as amended or supplemented, if applicable, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
In rendering the foregoing opinion, such counsel may rely, as to any
matters of fact upon which such opinion is predicated, on certificates and
written statements of state officials and certificates and written statements of
officers and representatives of the Company and other responsible persons, in
each case to the extent deemed appropriate by such counsel. Copies of all such
certificates shall be furnished to counsel for the Underwriters on the Closing
Date. Such counsel may also rely, as to matters involving the laws of any
jurisdictions other than the States of Delaware or New York or the United States
of America, upon opinions of local counsel whom they believe to be reliable and
who are satisfactory to Underwriters' Counsel. The opinion of such counsel for
the Company shall state that the opinion of any such other counsel (whose
opinion shall be annexed to Company counsel's opinion) is in form satisfactory
to such counsel and, in their opinion, the Underwriters are justified in relying
thereon.
(f) At the time this Agreement is executed and at the Closing Date and the
Option Closing Date, Richard A. Eisner & Company, LLP shall have furnished to
the Underwriters
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letters dated respectively as of the date of this Agreement and as of the
Closing Date and Option Closing Date in form and substance satisfactory to the
Representative, confirming that they are independent public accountants within
the meaning of the Act and the Rules under the Act, and stating in effect that:
(i) in their opinion, the audited consolidated financial statements
and related financial statement schedules examined by them included or
incorporated by reference in the Registration Statement comply as to form
in all material respects with the applicable accounting requirements of the
Act and the Rules under the Act;
(ii) on the basis of a reading of and a review of as set forth above
of the latest available interim consolidated financial statements of the
Company subsequent to the date of their audit, inspection of the minute
books of the Company since the date of audit and consultations with and
inquiries of officers or other persons responsible for financial and
accounting matters of the Company as to transactions and events since
September 30, 1996 nothing has come to their attention which would cause
them to believe that during the period from September 30, 1996 to a
specified date not more than three business days prior to the date of this
Agreement and each of the Closing Date and Option Closing Date,
respectively, there has been any change in the capital stock or
consolidated long term debt of the Company, or decreases in consolidated
net current assets or net assets compared with the amounts shown in the
September 30, 1996 audited consolidated balance sheet included in the
Registration Statement, except in all instances as set forth in or
contemplated by the Registration Statement; and
(iii) in addition to their examinations referred to in their report
included in the Prospectus and the procedures, consultations and inquiries
referred to above, they have carried out certain specified procedures, not
constituting an audit, with respect to certain dollar amounts, numbers of
shares and percentages, which are derived from the accounting records of
the Company and are subject to the internal controls of the Company's
accounting system, and which appear in the Prospectus under the captions
"Prospectus Summary," "Summary Financial Information," "Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends," "Risk Factors," "Use of
Proceeds," "Dilution," "Capitalization," "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," "Management - Executive Compensation," "Principal
and Selling Stockholders," "Certain Transactions" and "Concurrent Sales by
Selling Stockholders," and they have compared such dollar amounts, number
of shares, and percentages with such accounting records, and have found
them to be in agreement therewith;
(g) The Representative shall have received on the Closing Date and Option
Closing Date certificates, dated as of the Closing Date and the Option Closing
Date signed by the Chairman of the Board and the President of the Company
certifying that:
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(i) No stop order suspending the effectiveness of the Registration
Statement is in effect and no proceedings for such purpose are pending or
are, to their knowledge, threatened by the Commission;
(ii) They do not know of any litigation instituted or threatened
against the Company or any Subsidiary of a character required to be
disclosed in the Registration Statement which is not disclosed therein;
they do not know of any contracts which are required to be summarized in
the Prospectus which are not so summarized; and they do not know of any
material contracts required to be filed as exhibits to the Registration
Statement which are not so filed;
(iii) Neither the Registration Statement nor the Prospectus as amended
or supplemented, if amended or supplemented, contains an untrue statement
of any material fact required to be stated therein or necessary to make the
statements therein not misleading; and, since the effective date of the
Registration Statement, to the best of their knowledge, there has occurred
no event required to be set forth in an amended or supplemented Prospectus
which has not been so set forth;
(iv) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change in the condition of the Company or any Subsidiary,
financial or otherwise, or in the results of its operations, except as
reflected in or contemplated by the Registration Statement and the
Prospectus, and except as so reflected or contemplated since such date
there has not been any material transaction entered into by the Company or
any Subsidiary;
(v) Neither the Company nor any Subsidiary is delinquent in the filing
of any federal, state and municipal or other jurisdiction (domestic or
foreign) tax return or in the payment of any federal, state or municipal or
other jurisdiction (domestic or foreign) taxes; they know of no proposed
redetermination or re-assessment of taxes, adverse to the Company and its
Subsidiaries; and the Company and each of its Subsidiaries has paid or
provided by adequate reserves for all known tax liabilities;
(vi) They know of no material obligation or liability of the Company
or any of its Subsidiaries, contingent or otherwise, not disclosed in the
Registration Statement and Prospectus;
(vii) This Agreement, the consummation of the transactions herein
contemplated, and the fulfillment of the terms hereof, will not result in a
material breach by the Company or any Subsidiary of any terms of, or
constitute a material default under, the Company's Certificate of
Incorporation or By-Laws, or any material indenture, mortgage, lease, deed
of trust, bank loan or credit agreement or any other agreement or
undertaking of the Company or any Subsidiary;
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(viii) The financial statements and schedules filed with and as part
of the Registration Statement present fairly the financial position of the
Company and its Subsidiaries as of the dates thereof, all in conformity
with generally accepted principles of accounting applied on a consistent
basis throughout the periods involved;
(ix) Except as otherwise set forth in the Registration Statement and
the Prospectus, all material licenses, approvals or permits from Federal,
state, local and/or foreign governmental agencies having jurisdiction over
the Company and its Subsidiaries required for the conduct or any material
aspect of the business or operations of the Company and its Subsidiaries
have been obtained and are outstanding and there are no proceedings pending
or to their knowledge, threatened, to seek to compel, terminate or limit
such licenses, approvals or permits;
(x) Neither the Company nor any Subsidiary has sustained an insured or
uninsured loss on account of fire, flood, accident or other calamity;
(xi) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, except as may otherwise
be referred to therein, neither the Company nor any Subsidiary has prior to
the Closing Date, either (i) issued any securities or incurred any
liability or obligation, direct or contingent, for borrowed money, (ii)
entered into any material transaction other than in the ordinary course of
business, or (iii) declared, paid or made any dividend or distribution of
any kind on its capital stock;
(xii) All representations and warranties set forth in this Agreement
are true and correct as of the date hereof and the Company has complied
with all of its agreements herein contained to be performed on its part on
or before the Closing Date; and
(xiii) No order suspending the sale of the Series B Shares prior to
the Closing Date in any jurisdiction designated to the Company pursuant to
Paragraph 6(k) hereof has been issued on or prior to the Closing Date and
no proceedings for that purpose have been instituted or, to the knowledge
of such officers, shall have been or shall be threatened.
(h) The Company shall have performed each of the agreements herein
contained and required to be performed by it at or prior to the Closing Date.
The Company shall have furnished to the Representative such other and
further certificates, documents, and opinions as the Representative may
reasonably request (including certificates of officers) as to the accuracy, at
and as of the Closing Date and the Option Closing Date, of the representations
and warranties of the Company herein, as to the performance by the Company of
its obligations hereunder, and as to other conditions concurrent and precedent
to the Underwriters' obligations hereunder.
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Any certificate signed by an officer of the Company and delivered to the
Representative or its counsel will also be deemed a representation and warranty
by the Company to each of the several Underwriters as to the statements made
therein.
If any of the conditions specified in this Paragraph 7 shall not have been
fulfilled when and as required by this Agreement, or if any of the certificates,
opinions, written statements or letters furnished to the Representatives or to
their counsel pursuant to this Paragraph 7 shall not be in all material respects
reasonably satisfactory in form, and substance to the Representative and to its
counsel, this Agreement and all obligations of the Underwriters hereunder may be
cancelled at, or at any time prior to, the consummation of the Closing by the
Representative. Notice of such cancellation shall be given to the Company in
writing, or by telegraph confirmed in writing.
8. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless
each Underwriter, its officers, directors, employees and agents and each person,
if any who controls any Underwriter within the meaning of Section 15 of the Act
or Section 20(a) of the Exchange Act (the "Exchange Act"), against any all loss,
liability, claim, damage and expense whatsoever (including but not limited to
attorneys' fees and any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) caused by any untrue or alleged untrue
statement of a material fact contained (i) in any Preliminary Prospectus, the
Registration Statement or the Prospectus (as from time to time amended or
supplemented) or (ii) in any application or other document or communication (in
this Paragraph 8 collectively called "application") executed by or on behalf of
the Company or based upon written information furnished by or on behalf of the
Company filed in any jurisdiction in order to qualify the Series B Shares or the
Underwriters' Warrants or the component or underlying securities thereof under
the securities laws thereof or filed with the Commission or any securities
exchange; or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company by the
Representatives expressly for use in any Preliminary Prospectus, the
Registration Statement or Prospectus, or any amendment or supplement thereof or
in any communication to the Commission, any jurisdiction or any securities
exchange, as the case may be.
If any action is commenced against any Underwriter or any of its officers,
directors, employees, agents or controlling persons (an indemnified party) in
respect of which indemnity may be sought against the Company pursuant to the
foregoing paragraph, such indemnified party or parties shall promptly notify the
indemnifying party in writing of the commencement of such action and the
indemnifying party shall assume the defense of such action, including the
employment of counsel (satisfactory to such indemnified party or parties) and
payment of expenses. Such indemnified party or parties shall have the right to
employ its or their own counsel in any such case but the fees and expenses of
such counsel shall be borne by such indemnified party or parties unless the
employment of such counsel shall have been authorized in writing by the
indemnifying party in connection with the defense of such action or the
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indemnifying party shall not have employed counsel to take charge of the defense
of such indemnified party or parties or such indemnified party or parties shall
have reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties), in
any of which events such fees and expenses shall be borne by the indemnifying
party. Anything in this paragraph to the contrary notwithstanding, the Company
shall not be liable for any settlement of any such claim or action effected
without its written consent. The Company agrees promptly to notify the
Underwriters of the commencement of any litigation or proceeding against the
Company or any of its officers or directors in connection with the sale of the
Series B Shares or in connection with such Registration Statement or Prospectus.
With respect to any untrue statement or alleged untrue statement made in, or
omission or alleged omission from, any Preliminary Prospectus, the indemnity
agreement contained in this Paragraph 8 (a) with respect to such Preliminary
Prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting the claim with respect to which such indemnification is sought
hereunder purchased Series B Shares if the Prospectus (or the Prospectus as
amended or supplemented if the Company shall have made any amendments thereof or
supplements thereto which shall have been furnished to such underwriter prior to
the time of the confirmation of such sale) does not contain such statement,
alleged statement, omission or alleged omission and a copy of such Prospectus
shall not have been sent or given to such person at or prior to the written
confirmation of such sale to such person.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of the directors of the Company, each of the officers of the
Company who shall have signed the Registration Statement and each other person,
if any, who controls the Company within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the several Underwriters, but only with respect to
statements or omissions if any, made, in any preliminary prospectus, the
Registration Statement or Prospectus or any amendment or supplement thereof or
in any application in reliance upon and in conformity with, written information
furnished to the Company with respect to any Underwriter by or on behalf of such
Underwriter expressly for use in any preliminary prospectus, the Registration
Statement or Prospectus or any amendment or supplement thereof or in any
application, as the case may be. The statements set forth in the last paragraph
of the cover page and under the caption "Underwriting" in the Prospectus
constitute the only information furnished in writing by or on behalf of the
several Underwriters expressly for use in any preliminary prospectus, the
Registration Statement or the Prospectus, as the case may be. In case any action
shall be brought against the Company, or any other person so indemnified based
on any preliminary prospectus, the Registration Statement or Prospectus or any
amendment or supplement thereof or any application, and in respect of which
indemnity may be sought against any Underwriter, such Underwriter shall have the
rights and duties given to the Company, and the Company, and each other person
so indemnified shall have the rights and duties given to the several
Underwriters by the provisions of subsection (a) above.
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9. CONTRIBUTION. (a) In order to provide for just and equitable
contribution under the Act in any case in which (i) a party to this Agreement,
its officers, directors, employees and agents and each person who controls the
party within the meaning of the Act or the Exchange Act makes claim for
indemnification pursuant to Paragraph 8 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent jurisdiction
and the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not -be enforced in such case notwithstanding the
fact that Paragraph 8 provides for indemnification in such case or (ii)
contribution under the Act may be required on the part of such Underwriter or
any such controlling person in circumstances for which indemnification is
provided under Paragraph 8, then, in each such case, the Company and the
Underwriter shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Underwriter is responsible for an aggregate of _%
(being the percentage of the initial public offering price of the Series B
Shares represented by such Underwriter's commission and discount) and the
Company is responsible for the remaining portion; provided, however, that, in
any such case, no person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation.
(b) Promptly after receipt by any party to this Agreement of notice of the
commencement of any action, suit or proceeding, such party will, if a claim for
contribution in respect thereof is to be made against another party
("contributing party"), notify the contributing party of the commencement
thereof; but the omission to so notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution under the Act. In case any such action, suit or proceeding is
brought against any party, and such party notifies a contributing party of the
commencement thereof, the contributing party will be entitled to participate in
the defense thereof with the notifying party and any other contributing party
similarly notified.
10. DEFAULT BY AN UNDERWRITER. If any one or more underwriters shall fail
to purchase and pay for all of the Series B Shares agreed to be purchased by
such Underwriter or Underwriters at the Closing Date and such failure shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Underwriters shall be obligated severally to take up
and pay for (in the respective proportions which the number of Series B Shares
to be purchased from the Company set forth opposite the names of the remaining
Underwriters in Schedule I hereto bear to the aggregate number of such Series B
Shares set opposite the names of the remaining Underwriters) the Series B Shares
set forth in Schedule I opposite the names of the defaulting Underwriter or
Underwriters; provided, however, that in the event that the aggregate number of
Series B Shares which the defaulting Underwriter or Underwriters agreed but then
failed to purchase shall exceed 10% of the aggregate number of the Series B
Shares to be purchased at the Closing Date, the remaining Underwriters shall
have the right to purchase all, but shall not be under any obligation to
purchase any, of such Series B Shares, and if such non-defaulting Underwriters
do not purchase all such Series B Shares, this Agreement will terminate without
liability on the part of any non-defaulting Underwriter or the Company except as
provided in Paragraphs 8 and 9 hereof. In the event of a default by any
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Underwriter as set forth in this Paragraph 10, the Closing Date shall be
postponed for such period, not exceeding seven business days as the
Representatives shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing herein contained shall relieve any
defaulting Underwriter of its liabilities, if any, to the Company and to any
non-defaulting Underwriter for damages occasioned by its default hereunder.
11. TERMINATION. (a) This Agreement shall become effective at 9:30 A.M.,
New York time, on the first full business day following the day on which the
Registration statement becomes effective or at the time of the initial public
offering by the several Underwriters of, the Series B Shares, whichever is
earlier. The time of the initial public offering, for the purpose of this
Paragraph 11, shall mean the time, after the Registration Statement becomes
effective, or the release by the Representative for publication of the first
newspaper advertisement which is subsequently, published relating to the Series
B Shares or the time, after the Registration Statement becomes effective, when
the Series B Shares are first released by the Representative for offering by the
Underwriters or Selected Dealers by letter or telegram, whichever shall first
occur. The Representative, or the Company may prevent this Agreement from
becoming effective by giving the notice indicated below in this Paragraph 11
before the time this Agreement becomes effective.
(b) In addition to the provisions of Paragraph 7, 10 and 11 hereof, this
Agreement shall be subject to termination in the absolute discretion of the
Representative, by notice given to the Company prior to the Closing Date and the
Option Closing rate, if prior to such time, (i) the Company or any Subsidiary
sustains a material loss, whether or not insured, by reason of fire, flood,
accident or other calamity, which, in the opinion of the Representative,
substantially affects the value of the property of, or materially interferes
with the operation of the business of the Company and the Subsidiaries, taken as
a whole, (ii)trading in securities on the New York Stock Exchange, Inc. or the
American Stock Exchange, Inc. has been suspended or limited or minimum prices
have been established on either such exchange other than normal limitations,
(iii) a banking moratorium shall have been declared, either by Federal or state
authorities, (iv) any new enactment, publication decree, other promulgation, or
other restriction of or imposed by any federal, state, regulatory or self
regulatory body or order of any court or any other governmental authority
whether United States or foreign which in the judgment of the Representative
materially adversely affects the business or operations of the Company and the
Subsidiaries taken as a whole, or materially adversely affects the distribution
of the Series B Shares shall have become effective, (v) trading in any
securities of the Company shall have been suspended or halted by any national
securities exchange or the Commission, (vi) the market value of securities in
general or political financial or economic conditions shall have so materially
changed as, in the judgment of the Representative, shall render it impracticable
to offer for sale or to enforce contracts made by the Underwriters for the
resale of the Series B Shares agreed to be purchased hereunder, (vii) in the
reasonable opinion of the Representative, there exists materially adverse market
conditions in the over-the-counter market as in the judgment of the
Representative, makes it unadvisable to proceed with the delivery of the Series
B Shares or (viii) in the sole discretion of the Representative, any material
adverse change has occurred since the dates as of which information
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is given in the Registration Statement or Prospectus, in the earnings, business,
condition of the Company or any Subsidiary (financial or otherwise) net worth,
results of operations, key personnel or assets of the Company or any Subsidiary,
whether or not arising in the ordinary course of business; provided, however,
that the provisions of Paragraphs 6(m), 8 and 9 hereof shall survive such
termination. However, in the event that the offering is terminated hereunder,
for any reason in the willful control of the Company, the Company shall be
responsible for the payment to the Representative, of $___,___ in lieu of the
non-accountable expense allowance in Section 6(n) hereof.
(c) If the Representative elects to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Paragraph 11, the
Company shall be notified promptly by the Representative by telephone or
telegram, confirmed by letter. If the Company elects to prevent this Agreement
from becoming effective the Representative shall be notified promptly by the
Company by telephone or telegram, confirmed by letter.
12. UNDERWRITERS' WARRANTS. The Company agrees to sell to the
Representative, its officers and/or any underwriter or its officers, and
partners which participate in the public distribution of the Series B Shares at
the Closing Date, an aggregate of 150,000 Underwriters' Warrants at a price of
$.0001 per Underwriters' Warrant. Each Underwriters' Warrant shall represent
the right to purchase one Underwriters' Series B Share during the four year
period commencing one year from the effective date of the Registration Statement
and ending five years after the effective date, at $_.__ per Underwriters'
Series B Share.
The Underwriters' Warrants shall be evidenced by certificates in the form
and contain the terms and conditions as set forth in the exhibit to the
Registration Statement. The Underwriters' Warrant certificates shall be
delivered in such denominations and in such names as may be requested by the
Representative or in the absence of such request, then in denominations of
25,000 Series B Share certificates, registered in the name of the
Representative. In addition, the Company agrees to reserve against the exercise
of the Underwriters' Warrants the number of shares of its authorized but
unissued shares of Series B Stock equal to the number of shares purchasable upon
the exercise of the Underwriters' Warrants as well as the number of shares of
its authorized but unissued shares of Common Stock issuable upon conversion of
such Series B Stock. The certificates representing the Underwriters' Warrants
shall contain typical anti-dilution provisions. The Underwriters' Warrants will
not be redeemable by the Company.
13. FINDERS. (a) The Company knows of no claims for services in the nature
of a finder's fee or origination fee with respect to this financing resulting
from the respective acts of its officers, directors or employees, or any other
party acting in its behalf, for which any Underwriter may be responsible, and
the Company, agrees to indemnify and hold each Underwriter free and harmless
from any claims for any services of such nature arising from any act of the
Company or its officers, directors, employees, or any such other person acting
in its behalf, and will reimburse any Underwriter for any counsel fees, legal or
other expenses reasonably incurred by an Underwriter in investigating or
defending against any such claim.
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(b) The Underwriters know of no claims for services in the nature of a
finder's fee or origination fee with respect to this financing resulting from
the respective acts of their officers, directors, or employees, or any other
party acting in their behalf for which the Company may be responsible, and each
Underwriter agrees to indemnify and hold the Company free and harmless from any
claims for any services of such nature arising from any act of such Underwriter
or its officers, directors or employees, or any such other person acting in its
behalf and will reimburse the Company for any legal or other expenses reasonably
incurred by the Company in investigating or defending against any such claim.
14. REPRESENTATIONS, ETC. TO SURVIVE DELIVERY. The respective
representations, warranties, agreements, covenants, indemnities and statements
of, and on behalf of, the Company and its officers, and the several
Underwriters, respectively, set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of the Underwriters, and will survive delivery of and payment for the
Series B Shares. A successor to any Underwriter shall be entitled to the
indemnity, contribution and reimbursement agreements contained in this
Agreement.
15. BENEFIT. This Agreement has been and is made solely for the benefit
of and shall be binding upon the Representative, the several Underwriters, the
Company and, to the extent expressed, any person controlling the Company, the
Representative, the several Underwriters and the officers and directors of the
Company, and their respective legal representative successors and assigns, all
as and to the extent provided herein, and no other person shall acquire or have
any right under or by virtue of this Agreement. The term "legal
representatives, successors and assigns" shall not include any purchaser of any
of the Series B Shares from the Underwriters merely because of such purchase,
and except further that in the event that any of the persons who shall have
purchased any of the Underwriters' Warrants hereof which are registered in the
Registration Statement shall be alleged to be or held to be, an Underwriter, as
that term is defined in the Act, with respect to any part of any of the
securities registered in the Registration Statement; then and in such event the
warranties, indemnities and agreement of the Company contained in this Agreement
shall also be for the benefit of any person or persons, if any, who control such
persons within the meaning of Section 15 of the Act. All of the obligations of
the Underwriters hereunder are several and not joint.
16. NEW YORK LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to principles
of conflict of laws.
17. NOTICES. All communications hereunder shall be in writing and, if to
the Representative, will be mailed, delivered, telegraphed or telexed to
Americorp Securities, Inc., One New York Plaza. New York, New York 10004,
Attention: Drew Schaefer, President; or if sent to the Company will be mailed,
delivered, telegraphed or telexed to Nouveau International, Inc., 212 Phillips
Road, Exton, Pennsylvania 19341, Attention: Robert J. Brock, Sr., President.
Copies of such notice should also be sent to counsel to such parties named in
the Prospectus.
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If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicate hereof, whereupon this
letter and your acceptance shall represent a binding agreement, among the
Company and the several Underwriters.
Very truly yours,
NOUVEAU INTERNATIONAL, INC.
By_____________________________
Robert J. Brock, Sr., President
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written by
AMERICORP SECURITIES, INC.
for itself and the several Underwriters
named on Schedule I hereto
AMERICORP SECURITIES, INC.
By:_________________________
Drew Schaefer, President
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SCHEDULE I
Number of
UNDERWRITER SERIES B SHARES PURCHASED
____________
TOTAL
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SCHEDULE II
NAME DATE "LOCK-UP" EXPIRES
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CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this Registration Statement on Form SB-2 of
our reports dated February 7, 1996 and March 11, 1996 on our audits of the
financial statements of Nouveau International, Inc. and subsidiaries and
Health Management, Inc., respectively. We also consent to the reference to
our firm under the captions "Summary Financial Information", "Selected
Financial Data" and "Experts".
Richard A. Eisner & Co., LLP
New York, New York
September 27, 1996
