<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-SB
General Form For Registration of Securities of Small
Business Issuers Under Section 12 (b) or 12 (g) of
the Securities Act of 1934
Nouveau International, Inc.
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Delaware 23-2932617
- ------------------------------- --------------------------
(State of Other Jurisdiction of (I.RS. Employer
Incorporation or Organization Identification No.)
212 Phillips Road Exton, Pa. 19341
- -------------------------------------- ------
(Address of Principal Executive Offices) ( Zip Code)
(610) 524-8393
--------------
(Issuer's Telephone Number)
Securities to be registered under Section 12 (b) of the Act:
<TABLE>
<CAPTION>
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
-------------------- ------------------------------
<S> <C>
Non Applicable Non Applicable
- ------------------------------------------ -------------------------------------------
- ------------------------------------------ ---------------------------------
</TABLE>
Securities to be registered under Section 12 (g) of the Act:
Common Stock
------------------------
(Title of Class)
<PAGE> 2
Item 1. DESCRIPTION OF BUSINESS.
Incorporated by reference from registrants' Form 10-KSB/A Item 1
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Incorporated by reference from registrants' Form 10-KSB/A Item 6
Item 3. DESCRIPTION OF PROPERTY.
Incorporated by reference from registrants' Form 10-KSB/A Item 2
Item 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Incorporated by reference from registrants' Form 10-KSB/A Item 11
Item 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Incorporated by reference from registrants' Form 10-KSB/A Item 9
Item 6. EXECUTIVE COMPENSATION.
Incorporated by reference from registrants' Form 10-KSB/A Item 10
Item 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Incorporated by reference from registrants' Form 10-KSB/A Item 12
Item 8. LEGAL PROCEEDINGS
None
Item 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Incorporated by reference from registrants' Form 10-KSB/A Item 5
Item 10. RECENT SALES OF UNREGISTERED SECURITIES.
In January 1996, registrant sold seventy units. Each unit consisted
of one share of Series A 4% Cumulative Redeemable Preferred Stock and
1,608 common stock purchase warrants. The name of each purchaser is
set forth below:
Kenneth J. Anderson
Paul J. Loughlin
Road & Show Cellular (East) Inc.
Erba Co., Inc.
Kimberly Braswell
Stuart Gruber
Alletta Orlando
CNCA VCT Brunoy/Account BFP Paris
Gertrude Shear
Dennis Scott Mair
Steven Yablon
Herman Jeffer
Andrew Green
<PAGE> 3
Anthony & Joy Lotito
The total offering price was $3,500,000. Selling commissions and
non-accountable expense allowance totaled $455,000.
The offering was made pursuant to Regulation D promulgated under
the Securities Act of 1933, as amended. All investors represented
that they were "accredited investors" as that term is defined in
Regulation D.
Item 11. DESCRIPTION OF SECURITIES.
The company is authorized to issue up to 25,000,000 shares of
Common Stock, per value $.001 per share. 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 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. As of
April 8,1996, there were 11,249,988 shares of Common Stock issued
and outstanding.
Item 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law permits a corporation through
its Certificate of Incorporation to eliminate or limit its directors'
personal liability to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, with
certain exceptions. The exceptions include a breach of the
director's duty of loyalty, acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law,
improper declarations of dividend, and transactions from which the
directors derived an improper personal benefit. The Company's
Certificate of Incorporation limits its directors' liability to the
extent permitted by this statutory provision. The limitation of
liability provision does not eliminate a stockholder's right to seek
non-monetary, equitable remedies such as injunction or rescission to
redress an action taken by directors. However, as a practical
matter, equitable remedies may not be available in all situations
and there may be instances in which no effective remedy is available.
Item 13. FINANCIAL STATEMENTS.
Incorporated by reference from registrants' Form 10-KSB/A Item 7
Item 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Non-applicable
Item 15 FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
* Health Management, Inc.
Balance Sheet
* Statements of Operations
<PAGE> 4
* Statements of Changes in Capital Deficiency
* Statements of Cash Flow
* Pro Forma Consolidated
Balance Sheet
* Pro Forma Consolidated
Statement of Operations
* Nouveau International, Inc. and Subsidiaries
* Balance Sheet
* Statements of Operations
* Statements of Cash Flow
(b) Exhibits
<TABLE>
<CAPTION>
No. Description
-- -----------
<S> <C> <C>
** 2.0 Agreement and Plan of Merger by and among Health
Management Inc. and Nouveau International, Inc.
** 3.1. Certification of Incorporation
** 3.2. By-laws
** 4.0 Subsidiaries of Registrant
** 2.7 Financial Data Schedule
99.0 Registrants Annual Report on Form 10-KSB/A for the
fiscal year ended December 31, 1995
</TABLE>
* Incorporated by reference from registrants' Form 10-KSB/A Item 13
** Incorporated by reference from registrants' Form 10-KSB/A
<PAGE> 5
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized
Nouveau International, Inc.
Date: April 30, 1996 By: /S/ Gary W. Black, Sr.
--------------- ---------------------------------------
Gary W. Black, Sr., Chief Executive Officer
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- --------------
Commission file number 33-00139-A
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Nouveau International, Inc..
----------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2932617
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
212 Phillips Road, Exton, PA 19341
----------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 524-8393
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
----
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter periods
that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X YES NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained herein, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-KSB or any amendment to this Form 10-KSB. /X/
As of April 8 , 1996 the number of shares of Common Stock outstanding
was 11,249,988. The aggregate market value of the Company's Common
Stock held by non-affiliates of the registrant as of April 8 , 1996
was approximately $35,218,681 (based upon 6,124,988 shares at $5.75
per share).
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Certain exhibits are incorporated by reference to the Company's Form
8-K as listed in response to Item 13(a)(2) of Part III.
<PAGE> 2
PART I
ITEM 1. BUSINESS
BACKGROUND
In January 1996, Health Management, Inc. ("HMI"), a Florida
corporation, which at the time had not engaged in any business activity for
over two years and had virtually no assets, reincorporated in the State of
Delaware and exchanged its common stock for all of the outstanding capital
stock of Nouveau International, Inc. ("Nouveau PA"), a Pennsylvania
corporation. Nouveau PA emerged from bankruptcy proceedings in December 1995.
HMI also changed its name to Nouveau International, Inc.following the
acquisition of Nouveau PA.. References herein to the Company's products,
business operations and financial condition refer to the products, business
operations and financial condition of Nouveau PA unless otherwise indicated.
BANKRUPTCY REORGANIZATION
In December 1995, Nouveau PA. emerged from protection under Chapter 11
of the United States Bankruptcy Code of 1986. Nouveau PA. believes that the
following unique confluence of circumstances, outside the control of Nouveau
PA., caused Nouveau PA. to seek bankruptcy protection in October 1994. In
1993, the business and reputation of Nouveau PA. was damaged due to a
fraudulent telemarketing operation owned and operated by, a distributor of
vending machines using Nouveau PA.'s technology. As part of the telemarketing
operation, the distributor accepted deposits for machines and never delivered
orders for such machines to Nouveau PA.. Nouveau PA. was never implicated with
any wrongdoing with respect to the telemarketing fraud and, in fact, requested
and cooperated with a federal investigation of the distributor.
The distributor's aggressive sales techniques caused order
rates to increase at a rate well beyond Nouveau PA.'s manufacturing
capacity, which caused Nouveau PA. to have to rely on a third-party
manufacturer, Rowe, Inc. ("Rowe"), to produce machines for customers
of the distributor. Rowe failed to timely produce machines that had
been ordered, and had failed to adhere to the specifications
established by Nouveau PA. 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
both as a result of cancellations due to the taint of the
telemarketing fraud, as well as Nouveau PA.'s inability to manufacture
an adequate supply of machines and improperly manufactured machines.
By December 1992, Nouveau PA. had received approximately $4.15
million of financing and services from Teleflex, Inc. ("Teleflex").
In the wake of the telemarketing fraud and the problems caused by
Rowe, Teleflex, which was Nouveau PA.'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 to Nouveau PA. The
foreclosure and withdrawal of funding led Nouveau PA. to seek
bankruptcy protection.
By order entered June 7, 1995, the Bankruptcy Court approved
the Settlement Agreement between Nouveau and Rowe, which provided a
resolution of Nouveau PA.'s dispute with Rowe regarding the faulty
manufacture of vending machines by Rowe. The terms of the settlement
include the following: (i) cash payments to Nouveau PA of $4 million;
(ii) the return of 450 completed machines and the parts for an
additional 450 machines to Nouveau PA.; and (iii) the withdrawal of
Rowe's proof of claim in Nouveau PA.'s bankruptcy proceeding in the
aggregate amount of $884,000.
The major portion of the cash part of the settlement has been
used for payments to creditors in Nouveau PA.'s bankruptcy proceeding,
including Teleflex.
The Reorganization Plan, was approved by the Bankruptcy Court
on or about December 8, 1995, and such approval became a final order
on December 18, 1995.
<PAGE> 3
Under the Reorganization Plan, the claims of the principal creditors
of Nouveau PA. will be satisfied as follows:
(i) The Reorganization Plan provides for cash payments to
Teleflex totaling $3,444,708. Of this amount, in June 1995,
Nouveau PA. paid Teleflex $1.2 million. Teleflex has an
allowed unsecured claim of approximately $937,000, of which it
will be paid 5% on the first anniversary of the final order,
and 5% on the second anniversary of the final order;
(ii) National Penn Bank, which has already received
payment of $175,000 out of proceeds from the settlement with
Rowe, will receive $5,000 to discharge its secured claim; and
(iii) Unsecured creditors will receive 10% of the amount of
their allowed claims, payable 5% 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
$1,100,000, and will include the aforementioned Teleflex
unsecured debt in the amount of $937,000.
The Company repurchased it's technology from Teleflex in the first
quarter of 1996 and paid the remaining balance owed.
THE COMPANY
The Company has developed a series of vending machines which are
capable of storing, cooking, and serving specialty foods using
proprietary formulations and packaging. The combination of vending
machines, specialty food formulations and unique food packaging offer
a complete system for automated hot food vending. The combination of
technologies developed by the Company which comprise the Food System
currently consists of:
(1) a patented fully-robotic, coin-operated hot food vending
machine;
(2) a patented and proprietary, cost-effective packaging system
utilizing a unique shape and construction 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 opened or removed
from the box;
(3) a patent pending proprietary formulation for dough-based
products which have unique features that allow the products
made from these formulations such as pizzas and breads to be
baked, frozen, stored frozen, and rapidly reheated by
microwave, infrared, or impingement hot air, without adversely
affecting the taste, consistency, or desired features of the
dough-based food product; and
(4) a microwave oven which is modified to proprietary
specifications which allows for complete and consistent
cooking throughout the food item.
The Company markets its pizza products under the registered trademark
"Pizza Chef(R)" and markets various other products using the technologies
described above under non-registered marks.
In addition to the fully-automated vending machines which both store
and cook the food product, the Company also offers semi-robotic and non-robotic
machines. The semi-robotic machines store frozen food in the Company's food
packaging system and take money automatically, but require the user to manually
deliver the frozen product to the machines' microwave. The non-robotic
machines, which were designed for use mainly in convenience stores, store food
in the Company's food packaging, but do not cook or serve food or take money
automatically.
The Company's products are unique in the following two respects: (i)
the packaging system and
<PAGE> 4
dough formulation allow dough-based products to be microwave cooked without
damaging the taste and quality of such products and (ii) the vending machine
operates as a turn-key system which takes money, cooks, and serves hot food
products in times as short as 60 seconds. Thus, management believes that it
can take advantage of a relatively unpenetrated niche of the market for vended
products.
The Company's operating strategy is to (i) secure strategic licensing
and distribution agreements for the manufacture and distribution of its vending
machine products on a global basis and (ii) develop a network of licensees and
distributors for the supply of food products to owner/operators of the vending
machines.
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 machines. Currently, the Company has, among other
agreements: (i) a technology license and distribution agreement with a
distributor in the Pacific Rim which has, with the Company's approval,
sublicensed the manufacture of the fully-robotic vending machine to Daewoo,
Inc. a major Korean manufacturing company; (ii) a joint venture agreement for
European distribution of machines and food products; and (iii) a memorandum of
understanding for a license to manufacture and/or joint venture in the Czech
Republic to be formed for the manufacture and distribution of vending machines
and the distribution of food products. Recently the Company has signed Master
Distributor Agreements and contracts in Russia, Germany and Italy and
Memorandum of Understandings signed in France, Spain and Portugal.
The Company has a co-pack agreement with Crestar Foods, Inc. who
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. The
Company plans to license the production of its food products on a global basis.
The Company owns its own baking equipment and operated its own bakeries until
October 1994, however, it was decided to discontinue baking operations as a
result of its bankruptcy filing in October 1994, and 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 that is capable of housing the Company's baking equipment and which
will allow the Company to embark on its own food preparation and development
operations. The Company is presently leasing the facility. Closing on the
agreement is scheduled for June 1996 subject to the Company obtaining
sufficient financing. The Company estimates that approximately 600 robotic
machines have been delivered through December 31, 1995. The Company shipped
approximately 24 machines in 1995 as it essentialy suspend operations during
the period of time it was in bankruptcy proceedings. While the Company
continues to supply food products to some purchasers of these machines it
cannot determine how many machines are in actual use. Since December 31, 1995
through March 31, 1996 the Company has shipped 38 robotic machines which vend
pizzas.
The Company currently has commitments from distributors to place orders
pursuant to the various distribution agreements for 1,637 vending machines,
during 1996. No assurance can be given that such distributors will place
orders as required under their respective agreements. Presently, all of the
distributors are located in foreign jurisdictions. In the event the Company
would be required to seek legal redress against any of the distributors it may
be difficult to obtain jurisdiction and/or collect any judgments.
THE VENDING MARKET
Management believes that a sizable and untapped global market
opportunity exists for a company able to develop and reliably deliver machines
which address hot food vending.
In addition to the domestic market, there is also a mature vending
market in Japan. In addition to the large number of vending machines, the
cultural habits of the Japanese support higher value vended products such as
those offered by the Company. Vending is also beginning to emerge as a growth
industry in countries such as the United Kingdom, Germany, France, Italy,
Spain, Russia, Korea, and Australia.
Much of Europe does not have an established vending machine market.
Management views this
<PAGE> 5
as an opportunity to enter into a relatively untapped market; however,
there can be no assurance that such market will in fact develop.
MANUFACTURING AND DISTRIBUTION
The Company plans to achieve its manufacturing goals through a system
of joint ventures and licensing of its technology to manufacturers located in
strategic geographical areas. In a typical licensing agreement, the licensee
will agree to incur all costs related to obtaining sufficient equipment so that
the machines can be manufactured in accordance with the specifications and
technology transferred by the Company. In order to maintain a license, the
licensees will be required to meet the quality control and production
standards of the Company. The Company plans to have a representative present
at each licensee on a regular basis to monitor quality control with reporting
documentation. Each licensee is generally required to produce a predetermined
minimum number of machines. Manufacturing licenses are often signed in
connection with master distribution agreements, so that the licensees may also
act as exclusive distributors in designated regions.
Distribution will be accomplished through a system of designating
master distributors who will have the exclusive right to distribute products
and machines 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.
The Company's manufacturing strategy provides five primary
manufacturing areas which will supply economic trade regions that are, or will
be, encompassed by specific distribution agreements. They are expected to be
organized as follows:
<TABLE>
<CAPTION>
Manufacturing Principal Areas of Distribution
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<S> <C>
Czech Republic Northern, Western & Eastern Europe & USA backup
Mexico North America, Central America and South America
Italy Southern Europe
Korea/Malaysia Pacific Rim (except Australia)
South Africa Africa and certain Middle Eastern Countries
</TABLE>
It is the intention of the Company to manufacture certain of its
proprietary specialty vending machines primarily through offshore outsourcing
agreements. These licensing agreements, together with the Company's on-site
representatives, will be designed to allow the Company to maintain satisfactory
production standards and effectively ship its product in an efficient,
cost-effective manner. The Company intends to establish manufacturing
operations in the United States in the future for certain of its products,
however, there can no assurance thereof.
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 manufacturer of consumer products. Subsequently, the
Company and Woneel contracted with Daewoo, Ltd., a major Korean manufacturing
company, to manufacture the Company's machines at a fixed priced to the
Company, which Woneel will purchase from the Company for distribution. In
order to maintain its exclusive rights, the agreement calls for minimum
purchases by Woneel of 1,000 machines per year over the first 5 years of the
licensing agreement all of which will be used in Korea. This program is just
beginning for delivery of production quantities of machines in April/May 1996.
During the time the Company was in bankruptcy proceedings the parties to the
agreement informally suspended any performance.
In December 1994, the Company formed a joint venture in Italy. The
joint venture company,
<PAGE> 6
called Nouveau Cordon Bleu and incorporated as an Irish company, is the
European licensee for the Company. The Company provided the license to its
proprietary technology and other parties provided capital and ongoing management
with each becoming a 50% owner of the joint venture. The license agreement
provides that Nouveau Cordon Bleu will purchase a minimum of 1,000 machines per
year. As the European licensee, Nouveau Cordon Bleu will also assist the Company
in selling master distributorships, each of which will act as the exclusive
distributor of the Company's products in their respective designated regions.
The distributors will be required to purchase a minimum number of machines
annually in order to maintain regional exclusivity. The Company does not
believe that this joint venture generated any profits during 1995. During the
time the Company was in bankruptcy proceedings the parties to the joint venture
agreement informally suspended any performance guarantees provided for in the
agreements.
In February 1996, the Company entered into two agreements with
CONTITRADE GmbH of Munich, Germany establishing CONTITRADE as a Master
Distributor of the Company's proprietary hot food vending machines and
specialty ready-to-eat food products.
Under the terms of the first agreement, CONTITRADE will be granted the
exclusive marketing, distribution and equipment service rights covering Munich
as a separate territory. The second agreement provides the same exclusivity
for the rest of Germany.
In order to maintain its exclusive distributor rights for Munich,
CONTITRADE must purchase from the Company a minimum of 600 vending machines per
year for five years. Additionally, it is committed to purchase 2,000 machines
per year for five years in order to maintain its exclusivity for the rest of
the German market.
In December 1995, the Company entered into an agreement with
Zernostandart, a Russian corporation headquartered in Moscow which established
Zernostandart as a Master Distributor for all of Russia. In order to maintain
its exclusive rights for Russia, Zernostandart must purchase 26 units a month
over the next year.
In November of 1995, the Company entered into an agreement with Kwang
Hap Siang (S) Pte Ltd., a Singapore corporation. In order to maintain it's
exclusive rights, the agreement calls for Kwang Hap Siang to purchase a minimum
of 650 units over five years. The distributor also has first rights of refusal
for Malaysia and Indonesia for a period of 12 months from receipt of first
containers in Singapore. The agreement may be terminated by Kwang Hap Siang
(S) Pte Ltd. upon ninety days notice.
MACHINE PRODUCT LINE
The Company's current product line includes machines dedicated to
pizza, sandwiches and other types of foods. The machines are available in
various technological categories, including fully-robotic machines (the "200
series"), semi-robotic machines (the "100 series") and non-robotic machines
(the "80 series").
The robotic machines are fully-automatic in all respects. They are
able to store, cook and serve food, as well as take money, in a fully-automated
fashion. The three fully-robotic machines include the following:
PVM-220: a pizza vending machine capable of storing up to 220 pizzas
SVM-110: a sandwich vending machine capable of storing up to 110
sandwiches.
MVM-110: a multi-food vending machine capable of storing up to 110
items.
The semi-robotic machines are able to store food and take money
automatically, but a user will have to deliver the frozen product manually to
the machine's microwave. The semi-robotic machines include:
<PAGE> 7
PEM-120: a pizza vending machine capable of storing up to 120 pizzas.
SEM-60: a sandwich vending machine capable of storing up to 60
sandwiches.
MEM-60: a multi-food vending machine capable of storing up to 60
items.
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 have to deliver the frozen product manually to the machine's
exclusive microwave and pay a cashier. Accordingly, they are designed
primarily for use in convenience stores, of which there are estimated to be
140,000 nationwide. The three non-robotic machines include the following:
PME-80: a pizza vending machine capable of storing up to 80 pizzas
SME-40: a sandwich vending machine capable of storing up to 40
sandwiches.
MME-40: a multi-food vending machine capable of storing up to 40
items.
Management believes that the product which offers the largest
potential for unit sales in the United States and Canada, both of which
management views as mature markets, is its multi-food machine. The multi-food
machine offers up to seven different selections within the machine at a given
time. These seven selections can be changed using a variety of product mixes
and cuisine which range from simple finger food to hot snacks and full meals.
The multi-food machine, which is not yet available for sale, will be
for use with other food companies' food formulas and combinations, although
they will still be required to utilize the Company's patented box/packaging
system. Accordingly, the Company will participate in the vend unit sale
through the value offered by this technology. This arrangement will require
strategic alliances with prime food/meal producers.
The multi-food machine is the same size as the specialty product
machines built by the Company (Pizza Chef(R), Nouveau Hot Sandwiches and Pasta
Chef) and differs only in its selector and cooking device. Although the
multi-food machine will sell food products other than those manufactured by the
Company, the Company will still provide the pizzas, sandwiches, and pasta where
the owner/operator wants those items in the machine. The Company will control
this by signing agreements with other food producers who have no pizza,
sandwiches and pasta that can compete with the Company's technology and
therefore, present no conflicts.
Management expects that while the mature markets of the United States
and Canada both represent opportunities for immediate unit sales, global
penetration for the multi-food machine will require a longer lead time. The
international vending machine market, as a whole, is considered to be an
emerging market and, accordingly, rapid penetration would not be expected.
However, management believes that the increasing global awareness of vending
machines will afford the Company an excellent opportunity for a well-planned,
phased program.
The Company currently offers the Series 220, 110 and 80 machines and
anticipates that these machines will comprise its machine sales during 1996.
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 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 Pizzas, Pasta Chef products, Li'l Bite Sandwiches
(which come three to a pack) and Pocket Snacks. The Company expects that its
food product offerings will consist primarily of its Pizza Chef(R) pizza
product line through 1996 with aggressive marketing beginning in June of 1996
for its sandwich line.
In August 1994, the Company established a five year co-packer supply
agreement with Crestar Foods Products, Inc. ,a division of H.J. Heinz,
pursuant to which Crestar produces pizzas for the Company at a fixed price
adjusted annually on an exclusive basis, thereby providing the Company with
predictable
<PAGE> 8
product costs on an annual basis. The supply agreement may be terminated by
Crestar Food Products, Inc. at any time upon ninety days notice.
GOVERNMENT REGULATIONS
The Company is required to comply with certain rules and regulations
of the U.S. Food and Drug Administration. Compliance is mandated because the
Company's vending machines contain a robotically operated microwave oven. The
Company is in compliance with all applicable FDA rules and regulations.
The Company's vending machines to be used in the United States must
also be in compliance with Underwriters Laboratories standards.
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 as outline by the National Automatic Merchandising Association.
PATENTS, TRADEMARKS AND PROPRIETARY PROTECTION
The Company holds design and utility patents on the delivery system
for its vending machines and its packaging system. The Company also holds
patents 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 Japan, Israel, United Kingdom, Korea, Italy and France. 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(R)" 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(R) name in their businesses. The Company has retained special trademark
counsel to prosecute any party that is using the Pizza Chef(R) name in
violation of the Company's registration.
The Company enters into confidentially 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 sufficient
resources to either institute or defend any action, suit or other proceeding by
or against the Company will respect to any claimed infringement of patent or
other proprietary rights.
COMPETITION
The Company's unique systems approach combines the custom designed
food, package, and oven into a fully-robotic self-contained 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 approximately two minutes.
To date, to the knowledge of the Company, there are no commercially
available machines that have successfully demonstrated the ability to reliably
deliver a food product from frozen storage to a cooked, ready-to-eat state
entirely within the confines of a single machine, and without user interface.
Thus, to the knowledge of management, there are no direct comparisons
available.
<PAGE> 9
Management is aware of a number of attempts to design and build
machines which mimic, and would compete with, Pizza Chef(R). Some of the more
notable efforts have been made by the American Pizza Company (Vancouver, B.C.),
Cafe Quik, (Dallas, TX) and Edgewater Foods/Presto Pizzeria (Washington D.C.).
The failure of competitors to successfully address this market demonstrates the
technological barriers to entry which exist. There can be no assurance that
additional entrants into the hot food vending machine industry will not be
forthcoming nor can the Company know all of the developments being made by
others.
Some similar, although less-advanced, competitive offerings do exist.
Little Charlie's' as well as other pizza brands sell a pizza product from
refrigerated machines its pizza offering is smaller both in weight and
diameter, is built upon a pastry crust and must be manually transferred to a
cooking device and removed from its package before cooking. Vend prices for
this product generally exceed $2.50. Company officials report sales in excess
of three million units per year.
Toppers has produced machines which resemble automated production
lines, with a pre-prepared crust, indexing from one station (sauce, cheese,
toppings, etc.) to the next and , finally, into a cooking unit. However, the
machine differs from Pizza Chef (R) insofar as it has a greater cycle time
(five minutes versus Pizza Chef(R)' s approximately two minutes), requires
personnel to be present for operation and is very large and expensive. To
date, they have found a market only in Japan on a limited basis and do not
resemble vending machines.
Neither franchised nor individually owned pizza outlets can
effectively compete for several reasons. While a pizzeria may provide a cost
competitive offering (on a cost/serving basis), delivery times often approach a
full half-hour and availability in remote locations may be limited. At lease
one major food service company, PepsiCo's Pizza Hut unit, has attempted to
match the portability of the distribution site which is fundamental to vending
machines in general, by experimenting with mobile carts and small kiosks, both
of which require greater capital expenditure and still require attended service
and tend to experiences food spoilage loses.
The domestic vending industry is dominated by a handful of large
national firms such ARAMARK, Service America and Canteen, who are able to exert
buying power from the machine and product manufacturers and placing power with
the location owners. If such large firms decided to enter 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 they will retain exclusive access to
locations at the chain's facilities. In addition, the necessity 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.
EMPLOYEES
The Company currently has twenty-five employees and considers its
relations with its employees to be good. It is currently in the
process of hiring additional employees in key areas of management and
production.
CONSOLIDATED SELECTED FINANCIAL DATA
Set forth below is selected financial data derived from the Company's
consolidated financial statements, some of which appear elsewhere in
this report. This data should be read in conjunction with the
consolidated financial statements, some of which are included
elsewhere in this report. The financial data presented below is that
of Nouveau PA and its subsidiaries and does not reflect the merger
with HMI and the attendent financing. See "Pro Forme Consolidated
Balance Sheet"
<PAGE> 10
<TABLE>
<CAPTION>
YEAR ENDED
31-DEC-95
<S> <C>
Operations Revenue $ 245,313.00
- ------------------------------------------------------------------
Net Income $ 7,593,984.00
- ------------------------------------------------------------------
Net Income (Loss) per Share
of Common Stock $(.16)
- ------------------------------------------------------------------
Balance Sheet Data
- ------------------------------------------------------------------
Working Capital (deficit) 2,031,405
- ------------------------------------------------------------------
Total Assets $ 4,595,560.00
- ------------------------------------------------------------------
Total Liabilities $ 2,666,932.00
- ------------------------------------------------------------------
Stockholder's equity
(deficiency) 1,928,628
- ------------------------------------------------------------------
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTY
The Company pursuant to a sub-lease agreement leases approximately
15,000 square feet in Exton, Pennsylvania where it currently maintains its
corporate offices, limited warehouse and assembly facility. The term of the
sub-lease agreement is three years ending in October 1998. The current base
rent is $67,792. Other annual operating expenses under the sub-lease agreement
are currently $11,600.
The Company lease approximately 3,000 square feet of warehouse space
in Royersford, Pennsylvania on a month to month basis. The monthly rent is
$600.00. The Company also leases approximately 5,000 square feet of warehouse
space in Folcroft, Pennsylvania on a month to month basis. The monthly rent is
$500.00.
In April, 1996 the Company leased approximately 16,400 square feet in
Exton, Pennsylvania across the street from its other 15,000 square feet Exton
plant. The term of the lease is three years. The current annual rent is
$65,600. The Company intends to consolidate the operation in Folcroft and
Royersford into this facility and to also assemble vending machines therein.
In February 1996, the Company entered into an agreement to purchase a
manufacturing facility in West Chester, Pennsylvania. The facility is
approximately 36,000 square feet of which approximately 26,000 square feet is
designed for USDA food manufacturing. The property consists of approximately
twenty developable acres. The purchase price is $1,360,000 of which $40,000
has been paid. Closing on the sale is expected to take place in June 1996
subject to the Company obtaining sufficient funds to complete the purchase.
The Company is currently leasing the facility. It is the Company's intention
to use the facility as its corporate office and food production operation
beginning in June 1996.
ITEM 3. LEGAL PROCEEDINGS. None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. NONE
<PAGE> 11
PART II
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The principal market for the Company's Common Stock is the National
Association of Securities Dealers, Inc. over-the-counter market, on the
Electronic Bulletin Board. The trading symbol for the Common Stock is
"VEND.U".
Prior to January 18, 1996, the Company's Common Stock was
traded under the symbol "HEMI". For the years 1994 and 1995 the high
and low bid price of its Common Stock was 1/4. On January 18, 1996
the Company acquired all of the capital stock of Nouveau PA.. For the
quarter ending March 31, 1996, the high and low bid price of the
Company's Common Stock was 1/4 to 5 3/4. The prices represent prices
between dealers, do not include retail mark-ups, mark downs or
commissions and may not represent actual transactions.
HOLDERS
As of April 8, 1996, the number of stockholders of record was 155,
not including beneficial owners whose shares are held by banks,
brokers and other nominees.
DIVIDENDS
The company has paid no dividends since its inception and does not
anticipate or contemplate paying cash dividends in the foreseeable
future.
Pursuant to the terms of the Company's Series A Preferred Stock, a 4%
annual dividend is due and payable upon redemption. The dividend is
currently being accrued. As of March 31, 1996, the unpaid cumulative
dividends totaled approximately $28,689.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FISCAL YEARS 1994 AND 1995
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1995, the Company has working capital of $2,037,405
compared with a working capital deficiency of $4,668,013 at December 31, 1994.
The major reason for the increase in working capital was a $3,920,000 reduction
in liabilities as a result from confirmation of the Company's Plan of
Reorganization and settlement of a lawsuit with Rowe totaling $5,109,000 which
consisted of $3,038,000 in cash, inventory valued at $2,592,000 and receivables
of $363,000 less cancellation of payables of $884,000. The settlement was
reached in September 1995.
In March 1996, the Company received an additional $300,000 as part of
the settlement. The remaining balance is due in installments of $100,000 in
June 1996 and $500,000 in June 1997.
During the period ending December 31, 1995 the Company received
$183,000 in advances from an officer of the Company. In January 1996, the
Company received an additional advance of $30,000 from the same officer.
In January 1996, the Company received approximately $3,045,000 in net
proceeds from the sale of its
<PAGE> 12
convertible preferred stock in a private placement.
In February 1996, the Company entered into an agreement to purchase a
facility capable of manufacturing the Company's food products. The Company
paid $40,000 to lease the facility until the closing on the sale which is
scheduled for June 1996. At closing the Company will be required to pay
$1,320,000 to purchase the facility. Management presently estimates that it
will cost approximately $700,000 to renovate the facility so that the Company
can begin food manufacturing operations. The Company will need to obtain
financing to purchase the facility and renovate it. The Company will also
need additional funds to finance the manufacturing of its vending machines.
The amount of funds will be determined by the number of vending machines that
are ordered. Currently, the Company has distribution agreements that require
that 1,673 machines be delivered in 1996. The Company's current inventory can
supply approximately 810 machines provided that additional parts are ordered.
The Company will require additional funding to fund its food
production operation and to purchase vending machines. The Company is
currently in the process of attempting to raise additional financing through a
private placement of its securities to meet its short term capital needs. The
Company is also seeking additional sources of financing to meet its longer term
needs. No assurance can be given that the Company will be able to obtain any
additional financing.
RESULTS OF OPERATIONS
For the year ended December 31, 1995 the Company had net sales of
$245,313 compared to net sales of $943,345 at December 31, 1994. The decrease
was as the result of lower pizza sales, machine sales and no license fees paid
in 1995 as the Company had essentially suspended operations during the period
it was in bankruptcy proceedings. In October 1994, the Company sought
protection under Chapter 11 of the bankruptcy code. The Company emerged from
bankruptcy proceedings in December 1995. During the period it was in
bankruptcy the Company's operation were greatly reduced on account of limited
funds. Approximately fifty percent of the Company's sales in 1995 were derived
from one customer, AMTRAK, and consisted of bulk sales of pizzas. The Company
does not expect that it will realize any significant sales to this customer in
the future. The Company currently has agreements from various distributots
that call for orders from such distributors for 1,673 vending machines during
1996. As the Company is only now beginning to commence operations and because
it has no prior experience with the various distributors no assurance can be
given as to how many actual purchase orders will be received pursuant to the
various agreement.
The Company anticipates that it will enter into additional
distribution agreements during 1996. The current distribution agreements are
for sales outside the United States. During 1996, the Company intends to
expand its marketing effort to the domestic marketplace.
General and administrative expenses total $618,392 during 1995. Of
this amount approximately $245,000 was for salaries and approximately $132,00
for rent. General and administrative expenses in 1994 were $998,293.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements required to be filed pursuant to
this Item 7 begins on page F-1 of this report. Such consolidated
financial statements are hereby incorporated by reference into this
Item 7.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE. Non applicable.
<PAGE> 13
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Gary W. Black, Sr. 55 Chief Executive Officer, Chief Financial Officer and,
Chairman of the Board of Directors
Robert J. Brock, Sr. 54 Chief Operating Officer, and Director
Frederick W. Johnson 57 Production Manager, Secretary and Director
</TABLE>
Mr. Black founded Nouveau PA in 1989 and brings thirty years of
experience in the fields of materials engineering, actuation and
mechanism design and systems analysis to the Company. His background
covers sub-systems design for numerous aerospace and space hardware,
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, in food
formulation and robotic vending equipment. Prior to founding and
becoming Chief Executive Officer of Nouveau PA, Mr. Black held
positions as founder and Chief Scientist of Turbo-Technologies, a
materials research and product manufacturing company; owner and Chief
Executive Officer of Penn Precision Manufacturing ("Penn Precision"),
a defense product manufacturing company; owner and Chief Executive
Officer of Applied Manufacturing Sciences, a defense product
manufacturing company; founder and President of MATRA Defense Systems,
a defense product manufacturing company; and a Vice President of
Teleflex Incorporated.
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 began his career with
George E. Ellis Company, a manufacturer of specialty containers for
the military, where he held positions as Time Study Engineer,
Personnel Manager and Manufacturing Manager over a ten year period.
He then worked for thirteen years at Ametek, a manufacturer of
aircraft and automotive instruments, where he held managerial
positions related to manufacturing, personnel, production, materials
and plant and production management. Mr. Brock held similar positions
at Action Manufacturing. Mr. Brock was General Manager for Penn
Precision. Mr. Brock is Chief Operating Officer, has responsibility
for Human Resources, Operations Management and reports to the
Company's Chief Executive Officer. He has been employed by the
Company for over five years.
Mr. Johnson brings almost thirty years of experience in industrial
management to the Company. Mr. Johnson received a degree in Business
Administration with a major in Industrial Management. 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.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth the total compensation earned or paid to the
named executive officer by the Company for the fiscal year ended December 31,
1995
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION ----------------------
AWARDS
============================================================================================================================
OTHER RESTRICTED SECURITIES
Year Salary($) Bonus($) ANNUAL STOCK UNDERLYING
COMPENSATION AWARDS OPTIONS/SAR'S(#)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gary W. Black, Sr. 1995 $32,500 $9,000
<CAPTION>
LONG TERM
COMPENSATION
---------------
PAYOUT
==================================
LTIP ALL OTHER
PAYOUTS COMPENSATION
($) ($)
- --------------------------------------------------------
<S> <C>
Gary W. Black, Sr.
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
AGGREGATED OPTIONS/SAR EXERCISES IN THE FISCAL YEAR 1995 AND
FY-END OPTION/SAR VALUES
- -----------------------------------------------------------------------------------------------------------------------------
NUMBER OF
SECURITIES VALUE OF THE UNEXERCISED
SHARES UNDERLYING IN-THE-MONEY OPTIONS
NAME YEAR ACQUIRED ON VALUE UNEXERCISED AT FY-END ($)
EXERCISE (#) REALIZED OPTIONS/SARS AT
EXERCISABLE/ EXERCISABLE/UNEXERCISABLE
UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gary W. Black, Sr. 1995 $0 $0 $0 $0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
OPTIONS/SAR GRANTS IN THE FISCAL YEAR 1995
=============================================================================================================================
INDIVIDUAL GRANTS
=============================================================================================================================
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS EXERCISE OR
NAME YEAR UNDERLYING GRANTED TO BASE PRICE EXPIRATION
OPTION/SARS EMPLOYEES ($/SHARE) DATE
GRANTED IN FISCAL YEAR
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Gary W. Black, Sr. 1995 0 0 0 0
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's
<PAGE> 14
Common Stock, each director, and all executive officers and directors of the
Company as a group, as of April 8, 1996, and their percentage ownership of
Common Stock and their percentage voting power.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Ownership
- ---------------- ----------------------------- ---------
<S> <C> <C>
Gary W. Black, Sr. 3,000,000 26%
212 Phillips Road
Exton, PA 19341
Glengarry Family Investments, L.P. 2,000,000 17%
1120 Pine Street
Norristown, PA 19401 (2)
Robert J. Brock, Sr. 100,000 *
Frederick W. Johnson 25,000 *
ALL executive officers and directors as a
group (3 persons) 3,125,000 27.0%
</TABLE>
- ------------------------
* Less than 1%
(1) Except as otherwise indicated, all of the shares are owned beneficially
and of record. Beneficial ownership has been determined in accordance
with Rule 13d-3 promulgated under the Securities Exchange Act of 1934,
as amended.
(2) A Delaware Limited Partnership whose sole limited partner is a
corporation owned by the spouse of Mr. Gary W. Black, Sr. Mr. Black,
Sr. disclaims any beneficial ownership in these shares.
By virtue of his stock ownership and position with the Company Mr.
Black may be deemed to "control" the Company.
STOCK OPTION PLAN
The Company has adopted a stock option plan (the "Plan") covering
59,000 shares of the Company's Common Stock, $.001 par value, pursuant
to which officers, directors, key employees and consultants of the
Company are eligible to receive incentive as well as non-qualified
stock options and Stock Appreciation Rights ("SAR'S"). The Plan, which
expires in September 1998, is administered by the Board of Directors.
Incentive stock options granted under the Plan are exercisable for a
period of up to 10 years from the date of grant and at an exercise
price which is not less than the fair market value of the Common Stock
on the date of the grant, except that the term of an incentive stock
option granted under the Plan to a stockholder owning more than 10% of
the outstanding Common Stock may not exceed five years and the
exercise price of an incentive stock option granted to such a
stockholder may not be less than 110% of the fair market value of the
Common Stock on the date of the grant. Non-qualified stock options may
be granted on terms determined by the Board of Directors. SAR's which
give the holder the privilege of surrendering such rights for the
appreciation in the Company's Common Stock between the time of grant
and the surrender, may be granted on any terms determined by the Board
of Directors. No SAR's have been granted.
To date, no options are currently in effect.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Gary W. Black, Sr. is employed by the Company as it Chief
Executive Officer. His annual
<PAGE> 15
compensation is $150,000. Mr. Black also receives a car allowance of $750.00
per month. Mr. Black's spouse and three sons also are employed by the Company.
Mr. Robert Brock is employed by the Company as its President and Chief
Operating Officer. His annual compensation is $80,000.
Mr. Frederick W. Johnson is employed by the Company as its Production
Manager. His annual compensation is $60,000.
Mr. Gary W. Black, Jr. is the President of Nouveau Vend International
a wholly owned subsidary of the Company. His annual compensation is $72,000.
The Company leases automobiles for Messrs. Brock, Johnson and Gary W.
Black, Jr. and Brett A. Black, the General Manager of the Company's Food
Division who is a son of Mr. Gary W. Black, Sr. The terms of the leases are
for three years ending in February 1999. The total lease payment is $1,500 per
month. The automobiles are leased from a company owned by a stockholder of the
Company. This stockholder also performs legal services for the Company. The
Company considers the terms of the leases to be no less favorable then could
have been obtained from a third party and multiple bids were received prior to
effecting the subject leases.
In February, the Company advanced Mr. Gary W. Black, Sr.
$200,000. In April, $100,000 was repaid with interest.
ITEM 13. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
A. The following documents are filed as part of this report:
1. The consolidated financial statements filed as part
of this report are listed under the caption "Index to
Financial Statements and Schedules", appearing
elsewhere in this report.
2. The following Exhibits are filed herein:
<TABLE>
<CAPTION>
Exhibit
Number Description
-------------------
<S> <C>
3.1(a) Certificate of Incorporation and By Laws
3.2(b) Form of Certificate of Designation - Series A Convertible Preferred Stock
4.1(a) Form of Warrant
*10.0 Agreement and Plan of Merger By and Among Health
Management, Inc. and Nouveau International, Inc.
dated January 18, 1996.
21.0(d) Subsidiaries of the registrant
27.0(d) Financial Data Schedule
</TABLE>
B. Reports on Form 8-K filed January 30, 1996: (i) to report an event under
Item 2 regarding the registrants' acquisition of all of the issued and
outstanding capital stock of Nouveau International, Inc.and
<PAGE> 16
an event under item 4 to report a change in certifying accountants.
* Incorporated by reference from registrants' Current Report on
Form 8-K January 30, 1996.
<PAGE> 17
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, duly authorized.
DATED: April 30, 1996 NOUVEAU INTERNATIONAL, INC.
BY:/S/ Gary W. Black
-----------------------
Gary W. Black, Sr.
Chief Executive Officer
In accordance with Section 13 or 15(d) of the Exchange Act, this
report has been signed by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/S/ Gary W. Black, Sr. Chief Executive Officer (Principle April 30, 1996
- ------------------------ Executive Officer , Principal
Gary W. Black, Sr. Financial Officer and Principal
Accounting Official and Director
/S/ Robert J. Brock, Sr. Chief Operating Officer and April 30, 1996
- ------------------------ Director
Robert J. Brock, Sr.
* Director April * , 1996
- ------------------------
Frederick W. Johnson
</TABLE>
32
<PAGE> 18
PRO FORMA CONSOLIDATED BALANCE SHEET
AS AT DECEMBER 31, 1995
(Unaudited)
The following pro forma consolidated balance sheet gives effect to (i)
the acquisition of Nouveau International, Inc., by Health Management, Inc. for
60% of the common stock of HMI. Since the stockholders of Nouveau have the
majority of the outstanding shares, the transaction has been accounted for as
if Nouveau were the acquiring company. The accounts of HMI have been recorded
at book amount since it had no operations, (ii) the issuance in a private
placement of preferred stock with warrants to purchase 112,560 shares of common
stock for an aggregate of $3,500,000, (iii) repayment of debt and acquisition
of patent technology from proceeds of private placement. This statement should
be read in conjunction with the financial statements of Nouveau International,
Inc. appearing elsewhere herein. The pro forma financial information is
presented for illustrative purposes only and is not necessarily indicative of
financial position had the transactions occurred on December 31, 1995.
<TABLE>
<CAPTION>
Historical
-----------------------------
Nouveau Health
International, Management, Pro Forma
A S S E T S Inc. Inc. Adjustments Pro Forma
----------- -------------- ----------- ------------------- -----------
<S> <C> <C> <C> <C> <C>
Current assets:
Cash. . . . . . . . . . . . . . . . . . . . . . . . $ 376,971 $ 3,045,000 (B)) $1,190,200
(2,231,771) (C))
Accounts receivable . . . . . . . . . . . . . . . . 22,083 22,083
Inventory . . . . . . . . . . . . . . . . . . . . . 3,174,659 3,174,659
Settlement receivable . . . . . . . . . . . . . . . 362,694 362,694
Due from affiliate. . . . . . . . . . . . . . . . . 32,287 32,287
----------- ------------ -----------
Total current assets . . . . . . . . . . . . 3,968,694 813,229 4,781,923
Property and equipment, net. . . . . . . . . . . . . . 117,250 117,250
Settlement receivable. . . . . . . . . . . . . . . . . 448,142 448,142
Technology patents . . . . . . . . . . . . . . . . . . 530,821 (C) 530,821
Other assets . . . . . . . . . . . . . . . . . . . . . 61,474 (45,000) (B) 16,474
----------- ------------ -----------
T O T A L. . . . . . . . . . . . . . . . . . $4,595,560 $ 1,299,050 $5,894,610
=========== ============ ===========
L I A B I L I T I E S
---------------------
Current liabilities:
Current portion of prepetition liabilities. . . . . $1,397,885 $(1,200,950) (C) $ 196,935
Accounts payable, accrued expenses and other
current liabilities . . . . . . . . . . . . . . . 349,640 349,640
Loan payable, stockholder . . . . . . . . . . . . . 183,764 183,764
----------- ------------ -----------
Total current liabilities. . . . . . . . . . 1,931,289 (1,200,950) 730,339
Prepetition liabilities. . . . . . . . . . . . . . . . 635,643 (500,000) (C) 135,643
Fees payable . . . . . . . . . . . . . . . . . . . . . 100,000 100,000
----------- ------------ -----------
Total liabilities. . . . . . . . . . . . . . 2,666,932 (1,700,950) 965,982
----------- ------------ -----------
STOCKHOLDERS' EQUITY
--------------------
Convertible preferred stock (convertible into
1,125,000 shares of common stock) ($3,500,000
liquidation preference) . . . . . . . . . . . . . . 3,000,000 (B) 3,000,000
Common stock . . . . . . . . . . . . . . . . . . . . . 389,714 $ 2,960 (381,424) (A) 11,250
Additional paid-in capital . . . . . . . . . . . . . . 784,705 378,464 (A)) 378,464
(784,705) (A))
Retained earnings (deficit). . . . . . . . . . . . . . 1,538,914 (787,665) 787,665 (A) 1,538,914
----------- ---------- ----------- -----------
Total stockholders' equity . . . . . . . . . 1,928,628 - 0 - 3,000,000 4,928,628
----------- ---------- ------------ -----------
T O T A L . . . . . . . . . . . . . . . . . $4,595,560 $ - 0 - $ 1,299,050 $5,894,610
=========== ========== ============ ===========
</TABLE>
F-8
<PAGE> 19
PRO FORMA CONSOLIDATED BALANCE SHEET
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
(A) Reflects the exchange of 6,750,000 shares (60%) of HMI's common stock
for all of the outstanding shares of Nouveau International, Inc.'s
common stock.
(B) Reflects the issuance of 70 shares of Series A 4% Cumulative
Convertible Redeemable Preferred Stock with a par value $.001 per
share. Each share was issued with warrants to purchase 1,608 shares
of common stock at an exercise price of $.50 per share expiring three
years from the date of issue.
<TABLE>
<S> <C>
Shares. . . . . . . . 70
Price per unit. . . . $ 50,000
-----------
3,500,000
Less issuance costs . 500,000
-----------
$3,000,000
===========
</TABLE>
(C) Reflects the repayment of debt and acquisition of patent technology
from the proceeds of the private placement.
F-9
<PAGE> 20
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, nor is it indicative of the future operating results or financial
position of the Company.
<TABLE>
<CAPTION>
Historical
----------------------------
Nouveau Health
International, Management, Pro Forma
Inc. Inc. Adjustments Pro Forma
------------- ----------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
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 $ 9,022 627,420
Selling . . . . . . . . . . . . . . . . . . . . . . 34,839 34,839
------------ -------- ------------
653,237 9,022 662,259
------------ -------- ------------
Loss from operations . . . . . . . . . . . . . . . . . (632,206) (9,022) (641,228)
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 $(9,022) $(5,979,459) $ (568,364)
============ ======== ============ ============
Pro forma loss per share before extraordinary item . . $(.05)
======
Pro forma weighted average shares outstanding. . . . . 11,750,000
===========
</TABLE>
(1) To adjust for nonrecurring gain on settlement of lawsuit.
F-10
<PAGE> 21
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND DECEMBER 31, 1994
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS
To the Stockholder
Nouveau International, Inc.
and Subsidiaries
We have audited the accompanying balance sheets of Nouveau International,
Inc. and subsidiaries as at December 31, 1995 and December 31, 1994 and the
related statements of operations, 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 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 that our audit provides 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
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
As discussed in Note L, in January 1996, the Company was acquired by
Health Management, Inc. through a reverse acquisition of stock.
New York, New York
February 7, 1996
<PAGE> 23
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-------------------------
A S S E T S 1995 1994
----------- ------------ ------------
(debtor-in-
possession)
<S> <C> <C>
Current assets:
Cash (Note B) . . . . . . . . . . . . . . . $ 376,971 $ 16,932
Accounts receivable . . . . . . . . . . . . 22,083 28,979
Inventory (Notes A[3] and C). . . . . . . . 3,174,659 621,298
Settlement receivable (Note D). . . . . . . 362,694
Due from affiliate (Note E) . . . . . . . . 32,287 32,287
----------- ------------
Total current assets . . . . . . . . 3,968,694 699,496
Property and equipment, net (Notes A[4] and F) 117,250 265,099
Settlement receivable (Note D) . . . . . . . . 448,142
Other assets . . . . . . . . . . . . . . . . . 61,474 38,508
----------- ------------
T O T A L. . . . . . . . . . . . . . $4,595,560 $ 1,003,103
=========== ============
L I A B I L I T I E S
---------------------
Current liabilities:
Current portion of prepetition liabilities
(Note G). . . . . . . . . . . . . . . . . $1,397,885 $ 5,318,371
Accounts payable, accrued expenses and
other current liabilities (Note D). . . . 349,640 49,138
Loan payable, stockholder (Note H). . . . . 183,764
----------- ------------
Total current liabilities. . . . . . 1,931,289 5,367,509
Prepetition liabilities (Note G) . . . . . . . 635,643 1,300,950
Fees payable (Note D). . . . . . . . . . . . . 100,000
----------- ------------
Total liabilities. . . . . . . . . . 2,666,932 6,668,459
----------- ------------
Commitments and contingencies (Note I)
STOCKHOLDER'S EQUITY (CAPITAL DEFICIENCY)
-----------------------------------------
Common stock (Note J). . . . . . . . . . . . . 389,714 389,714
Retained earnings (deficit). . . . . . . . . . 1,538,914 (6,055,070)
----------- ------------
Total stockholder's equity
(capital deficiency) . . . . . . . 1,928,628 (5,665,356)
----------- ------------
T O T A L. . . . . . . . . . . . . . $4,595,560 $ 1,003,103
=========== ============
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 2 -
<PAGE> 24
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------
1995 1994
------------ ------------
(debtor-in-
possession)
<S> <C> <C>
Revenues:
Net sales (Note K). . . . . . . . . . . . . $ 245,313 $ 943,345
Cost of goods sold. . . . . . . . . . . . . 224,282 859,287
------------ ------------
Gross profit . . . . . . . . . . . . 21,031 84,058
------------ ------------
Operating expenses:
General and administrative. . . . . . . . . 618,398 922,909
Selling . . . . . . . . . . . . . . . . . . 34,839 75,384
------------ ------------
653,237 998,293
------------ ------------
(Loss) from operations . . . . . . . . . . . . (632,206) (914,235)
------------ ------------
Other income (expenses):
Gain from settlement of lawsuit (Note D). . 5,979,459
Gain from disposition of technology
patents (Note I). . . . . . . . . . . . . 530,821
Interest income . . . . . . . . . . . . . . 105,216 23,686
Interest expense. . . . . . . . . . . . . . (32,352) (213,179)
(Loss) on abandonment and sale of property
(Note F). . . . . . . . . . . . . . . . . (92,338) (3,279)
Reorganization expense. . . . . . . . . . . (41,401) (15,000)
------------ ------------
5,918,584 323,049
------------ ------------
Income (loss) before extraordinary item. . . . 5,286,378 (591,186)
Extraordinary item:
Compromise of prepetition liabilities
(Note G). . . . . . . . . . . . . . . . . 2,307,606
----------- -----------
NET INCOME (LOSS). . . . . . . . . . . . . . . 7,593,984 (591,186)
(Deficit) - beginning of year. . . . . . . . . (6,055,070) (5,463,884)
------------ ------------
RETAINED EARNINGS (DEFICIT) - END OF YEAR. . . $ 1,538,914 $(6,055,070)
============ ============
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 3 -
<PAGE> 25
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended
December 31,
-------------------------
1995 1994
------------ -----------
(debtor-in-
possession)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss). . . . . . . . . . . . . . $ 7,593,984 $ (591,186)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Gain from sale of technology . . . . . (530,821)
Litigation settlement. . . . . . . . . (5,979,459)
Loss on abandonment and sale of
property . . . . . . . . . . . . . . 92,338 3,279
Compromise of prepetition liabilities. . (2,307,606)
Depreciation . . . . . . . . . . . . . . 58,276 63,987
Interest imputed on lawsuit settlement . (97,266)
Changes in operating assets and
liabilities:
Decrease in accounts receivable. . . 6,896 14,790
Decrease in inventory. . . . . . . . 39,553 88,939
(Increase) decrease in other assets. (22,966) 5,478
Increase (decrease) in accounts
payable and accrued fees and
expenses:
Prepetition. . . . . . . . . . . (46,783) 603,434
Postpetition . . . . . . . . . . (849,498) 49,138
Proceeds from litigation settlement. 3,038,000
(Decrease) in customer deposits. . . (17,542)
Net cash provided by (used in)
operating activities . . . . . . 1,525,469 (310,504)
------------ ----------
Cash flows from investing activities:
Purchase of property and equipment . . . . . (3,765) (25,444)
Proceeds from sale of asset. . . . . . . . . 1,000
------------ ----------
Net cash (used in) investing
activities . . . . . . . . . . . (2,765) (25,444)
------------ ----------
Cash flows from financing activities:
Proceeds from loans made by investor . . . . 90,169
Payment of secured prepetition liabilities . (1,346,429) (23,071)
Loans from stockholder . . . . . . . . . . . 183,764 268,616
------------ ----------
Net cash provided by (used in)
financing activities . . . . . . (1,162,665) 335,714
------------ ----------
NET INCREASE (DECREASE) IN CASH . . . . . . . . 360,039 (234)
Cash - beginning of year. . . . . . . . . . . . 16,932 17,166
------------ ----------
CASH - END OF YEAR. . . . . . . . . . . . . . . $ 376,971 $ 16,932
============ ==========
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest . $ 29,931 $ 4,976
</TABLE>
Attention is directed to the foregoing auditors' report and
to the accompanying notes to financial statements.
- 4 -
<PAGE> 26
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - 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.
The Company is currently in the process of negotiating supply and
marketing agreements needed to broaden the distribution of their products.
[2] Principles of consolidation:
The consolidated financial statements of Nouveau International, Inc.
include the accounts of its wholly owned subsidiaries, Nouveau Foods
International, Inc. and Nouveau Vend International, Inc. Intercompany balances
and transactions 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).
(continued)
- 5 -
<PAGE> 27
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - Business and Summary of Significant Accounting Principles:
(continued)
[5] 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.
[6] 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.
(NOTE B) - Cash:
At December 31, 1995, cash includes $338,000 of funds received from the
lawsuit settlement referred to in Note D. These funds are being held in a
restricted escrow account and are segregated for payment to a secured creditor
and the Company's attorneys.
(NOTE C) - Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
----------- -----------
(debtor-in-
possession)
<S> <C> <C>
Component parts . . . . . . . $1,443,885 $153,560
Work-in-process . . . . . . . 151,800 55,962
Finished machines . . . . . . 1,578,974 411,776
---------- --------
T o t a l . . . . . $3,174,659 $621,298
========== ========
</TABLE>
(continued)
- 6 -
<PAGE> 28
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE C) - Inventories: (continued)
Included in inventory at December 31, 1995 is approximately $900,000 of
parts and substantially all of the work-in-process and finished machines which
were received from a vendor pursuant to the litigation settlement referred to
in Note D. These goods were valued at their current replacement cost.
(NOTE D) - 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 $3,038,000 through December 1995; the
remaining balance is due in installments of $300,000 in March 1996, $100,000 in
June 1996 and a final installment of $500,000 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 G) and attorneys' fees for
services rendered in connection with the settlement of the lawsuit. Fees
payable to the litigating attorneys amount to $300,000 at December 31, 1995.
The current portion due of $200,000 is included in accounts payable and accrued
expenses in the accompanying balance sheet.
(NOTE E) - Due From Affiliate:
Due from affiliate consists of a loan due on demand from a company which
is wholly owned by the stockholder of the Company.
(continued)
- 7 -
<PAGE> 29
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE F) - Property and Equipment:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
--------- -----------
(debtor-in-
possession)
<S> <C> <C>
Machinery and equipment . . . . $228,428 $425,027
Furniture and fixtures. . . . . 23,015 23,015
Transportation equipment. . . . 10,796 7,032
--------- ---------
262,239 455,074
Less accumulated depreciation . 144,989 189,975
--------- ---------
T o t a l . . . . . . $117,250 $265,099
========= =========
</TABLE>
In July 1995, the Company abandoned leasehold improvements with a net book
value of $90,640. In addition, the Company limited production to the assembly
of vending machines during the first three months of 1995. The Company
discontinued depreciating manufacturing equipment for the remainder of the
year. In 1996, the Company expects to resume full production and will
depreciate its manufacturing equipment over its remaining useful life.
(continued)
- 8 -
<PAGE> 30
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE G) - Prepetition Liabilities:
Prepetition liabilities consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1995 1994
----------- -----------
(debtor-in-
possession)
<S> <C> <C>
Secured:
Former investor. . . . . $1,700,950 $2,900,950
Bank . . . . . . . . . . 146,429
----------- -----------
1,700,950 3,047,379
----------- -----------
Priority:
Tax claims . . . . . . . 33,293 80,076
Former stockholder . . . 48,000
----------- -----------
81,293 80,076
----------- ----------
Unsecured:
Stockholders . . . . . . 22,636 226,356
Trade and other
miscellaneous claims . 132,131 2,300,333
Former investor. . . . . 96,518 965,177
----------- -----------
251,285 3,491,866
----------- -----------
T o t a l . . . . 2,033,528 6,619,321
Less current portion. . . . 1,397,885 5,318,371
----------- -----------
Noncurrent portion. . . . . $ 635,643 $1,300,950
=========== ===========
</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 is payable to a former investor in
the Company and is partly collateralized by the proceeds of the litigation
settlement referred to in Note D. Total payments made against this claim
through December 31, 1995 amount to $1,200,000.
In January 1996, the Company used a portion of the proceeds received from
the sale of preferred stock (Note L) to pay the remaining balance of secured
claims owed to the former investor of $1,700,950.
(continued)
- 9 -
<PAGE> 31
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE G) - Prepetition Liabilities: (continued)
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 $242,000 for the year ended
December 31, 1995 and $55,000 for the period of October 24, 1994 through
December 31, 1994.
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 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.
Minimum payments due for all claims under the plan of reorganization are
as follows:
<TABLE>
<CAPTION>
Secured Priority Unsecured Total
------------ -------- --------- -----------
<S> <C> <C> <C> <C>
1996 . . . . . . . . $1,200,950 $71,293 $125,642 $1,397,885
1997 . . . . . . . . 500,000 10,000 125,643 635,643
----------- -------- --------- -----------
$1,700,950(1) $81,293 $251,285 $2,033,528
========== ======== ========= ===========
</TABLE>
(1) Amount paid in full using the proceeds of the sale of preferred stock (Note
J).
(NOTE H) - Loans Payable - Stockholder:
These loans were made to the Company from October to December 1995, were
secured, and were repaid in January 1996. The loans bore interest at 10% per
annum. Interest expense on these loans amounted to $2,421 for the year ended
December 31, 1995.
(continued)
- 10 -
<PAGE> 32
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE I) - Commitments and Contingencies:
[1] 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 on March 31,
1999. These leases are subject to escalations for the Company's pro rata share
of real estate taxes and operating expense. Future minimum rental payments,
exclusive of escalation payments for taxes and utilities, under these leases
are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
1996 . . . . . . . . . . . . . . . . $ 69,672
1997 . . . . . . . . . . . . . . . . 73,440
1998 . . . . . . . . . . . . . . . . 37,662
---------
T o t a l. . . . . . . . . $180,774
=========
</TABLE>
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.
[2] In 1994, the Company repaid $530,281 of its secured debt upon the
foreclosure by the creditor against certain technology patents. The Company
recorded a gain of $530,281 from the disposition of its technology patents. In
January 1996, the Company used a portion of the proceeds received from the sale
of preferred stock (Note L) to repurchase these patents for its exclusive use
for $530,821.
[3] In connection with the Company's petition for relief under the
bankruptcy laws, various suits and judgements have been filed against the
Company. In the opinion of the Company's management and legal counsel, these
claims will not result in any liability to the Company.
(NOTE J) - Common Stock:
At December 31, 1995, 10,000,000 shares of $1 par common stock are
authorized, of which 2,198,992 are issued and outstanding. From inception, the
Company received payments totalling $389,714 from the sale of stock. The
Company is 100% owned by one stockholder who became the owner of all
outstanding shares upon confirmation of the Plan.
(continued)
- 11 -
<PAGE> 33
NOUVEAU INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(NOTE K) - Other:
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.
In addition, accounts receivable due from this customer was $21,873 at December
31, 1995.
In addition, the Company sold certain vending machines to a stockholder in
1994 for $12,000.
(NOTE L) - Subsequent Event:
[1] 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 and
therefore the acquisition will not be accounted for as a business combination.
Concurrent with the transaction, in a private placement, HMI sold 70 units,
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. ("NI").
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. 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 1999.
[2] NI is currently in the process of attempting to raise additional
financing through a private placement of debt securities. The Company is
seeking additional sources of financing however there is no assurance that such
financing will be obtained.
[3] In February 1996, NI formed Noveau Equities, Inc. and entered into
contract for the purchase of a building in which it will construct and operate
a food processing plant. The purchase price of the building is $1,360,000. NI
has made a nonrefundable down payment of $40,000 and is currently seeking
additional financing which is needed to fund the balance of the purchase price.
There is noassurance that such financing will be obtained.
- 12 -
