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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 1997
Registration No. 33-6827-LA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
POST-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-18 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
KCD Holdings Incorporated
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(Exact name of registrant as specified in its charter)
Nevada 95-4029439
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(State of incorporation) (I.R.S. Employer Identification No.)
2835 Townsgate Road, Suite 110
Westlake Village, California 91361
(805) 494-6687
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(Address, including zip code, and telephone number, including area code, or
registrant's principle executive offices)
Wellington Ewen, President
2835 Townsgate Road, Suite 110,
Westlake Village, California 91361
(805) 494-6686
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(Name, address, including zip code, and telephone, including area code,
of agent for service)
Approximate date of commencement of proposed sale to public: None. This
post-effective amendment is filed for the purpose of meeting the requirements of
Section 10(a)(3) of the Securities Act of 1933, as amended.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ]
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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, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.[ ]
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 [ ]
<TABLE>
<CAPTION>
Calculation of Registration Fee (1)
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<S> <C> <C> <C> <C>
Title of each Proposed maximum Proposed maximum
class of securities Amount to offering price aggregate Amount of
to be registered be registered per share offering price registration fee
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(1) This Form S-3 is being filed as a Post-Effective Amendment to the
Company's Registration Statement (33-6827-LA), which Registration
Statement was declared effective by the Commission on August 7, 1987,
therefore, no registration fee is required.
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KCD HOLDINGS INCORPORATED
2835 Townsgate Road, Suite 110
Westlake Village, California 91361
(805) 494-6687
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1,376,050 Shares of Common Stock Underlying:
398,850 Class A Warrants to Purchase 398,850 Shares of Common Stock
at $0.50 per Share;
488,600 Class B Warrants to Purchase 488,600 Shares of Common Stock
at $0.75 per Share;
488,600 Class C Warrants to Purchase 488,600 Shares of Common Stock
at $1.00 per Share
- --------------------------------------------------------------------------------
KCD Holdings Incorporated, a Nevada corporation (the "Company"), is engaged in
marketing and distributing a line of diet aid products, sold under the name
"SeQuester(R) 1" as well as an appetite suppressant called "SeQuester(R) 2" and
a dietary aid with Chromium and L-Carnitine sold under the name "SeQuester(R)
3." On or about August 7, 1987, the Company commenced a public offering for the
sale of 250,000 Units consisting of one (1) share of Common Stock, $0.00015 par
value, four (4) Class A Warrants, four (4) Class B Warrants and four (4) Class C
Warrants. The offering was completed on or about October 16, 1987. The Units
were registered by the Company pursuant to a Registration Statement on Form S-18
(the "Registration Statement") which was declared effective by the Commission on
August 7, 1987.
This Post-Effective Amendment No. 2 on Form S-3 to the Registration Statement
(the "Post-Effective Amendment") covers one million three hundred seventy-six
thousand and fifty (1,376,050) shares of Common Stock, par value $0.002,
issuable upon exercise of the Company's outstanding Class A, Class B and Class C
Warrants (collectively referred to herein as the "Warrants"). There are
currently issued and outstanding 398,850 Class A Warrants, 488,600 Class B
Warrants, and 488,600 Class C Warrants. Each Class A Warrant entitles the holder
thereof to purchase one (1) share of Common Stock at fifty cents ($0.50) per
share; each Class B Warrant entitles the holder thereof to purchase one (1)
share of Common Stock at seventy-five cents ($0.75) per share; and each Class C
Warrant entitles the holder thereof to purchase one (1) share of Common Stock at
one dollar ($1.00) per share. The Warrants are redeemable up to and including
June 30, 1997.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. THE SECURITIES SHOULD ONLY BY PURCHASED BY THOSE WHO CAN AFFORD A
COMPLETE LOSS OF THEIR INVESTMENT. SEE "RISK FACTORS" FOR SPECIAL RISKS
CONCERNING THE COMPANY AND THIS INVESTMENT.
THE DATE OF THIS PROSPECTUS IS JANUARY 15, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities Act
of 1934, as amended (the "1934 Act") and in accordance therewith files reports
and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information can be inspected and copied at
the Commission's public reference facilities at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the following regional
offices of the Commission: 7 World Trade Center, Suite 1300, New York, New York
10007 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such material can also be obtained at prescribed rates from the
Commission's Public Reference Section at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549.
This Prospectus constitutes part of the Post-Effective Amendment filed by the
Company with the Commission under the Securities Act of 1933, as amended, (the
"1933 Act"). This Prospectus omits certain 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, the Units, the
Common Stock and the Warrants. Statements contained herein concerning the
provisions of any document are not necessarily complete and, in each instance,
where a copy of such document has been filed with the Commission, reference is
made to the copy so filed. Each such statement is qualified in its entirety by
such reference.
INCORPORATION BY REFERENCE
The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents incorporated
herein by reference (other than exhibits to such documents, unless such exhibits
are specifically incorporated by reference herein). (See "Incorporation of
Information by Reference") Request for such documents should be directed to
Chief Administrative Officer, KCD Holdings Incorporated, 2835 Townsgate Road,
Suite 110, Westlake Village, California 91361, (805) 494-6687.
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SUMMARY INFORMATION
THIS SUMMARY IS INTENDED ONLY FOR CONVENIENT REFERENCE, IS NOT INTENDED TO BE
COMPLETE, AND MUST BE READ IN CONNECTION WITH THE FULL PROSPECTUS AND RELATED
EXHIBITS ATTACHED HERETO. THIS PROSPECTUS AND THE ATTACHED EXHIBITS WHICH
DESCRIBE, IN DETAIL, MANY ASPECTS OF THE TRANSACTIONS WHICH ARE MATERIAL TO
SUBSCRIBERS, INCLUDING THOSE SUMMARIZED BELOW, MUST BE READ AND UNDERSTOOD IN
THEIR ENTIRETY BY SUBSCRIBERS. THE FOLLOWING SUMMARY IS, THEREFORE, QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE PROSPECTUS, EXHIBITS, AND
DOCUMENTS.
Warrants
Warrants The Company presently has outstanding 398,850 Class A
Warrants, 488,600 Class B Warrants and 488,600 Class C
Warrants.
Exercise Price The Warrants are exercisable at the following
prices: Class A Warrants at $0.50 per share of Common
Stock; Class B Warrants at $0.75 per share of Common
Stock; and Class C Warrants at $1.00 per share of Common
Stock.
Expiration Date The expiration date for all Warrants is June 30, 1997.
Rights The holders of Warrants are not entitled to vote, to
receive dividend payments or to exercise any of the rights
of Common shareholders for any purpose until such Warrants
have been duly exercised for Common Stock and payment of
the purchase price shall have been made in full.
Common Stock
Common Stock The Company is authorized to issue 25,000,000
shares of Common Stock, of which approximately 14,606,874
shares are currently outstanding. Upon exercise of all
outstanding Class A, Class B and Class C Common Stock
Purchase Warrants of the Company, there shall be issuable
1,376,050 shares of Common Stock, par value $0.002.
Dividend Rights Holders of Common Stock are entitled to receive
such dividends as the Board of Directors may from time to
time declare out of the funds legally available therefor.
However, to date, the Company has not declared or paid
any cash dividends with respect to its Common Stock. The
current policy of the Board of Directors is to retain
earnings, if any, in order to provide for the growth of
the Company.
Voting Rights The holders of Common Stock are entitled to one vote per
share on each matter submitted to a vote at any meeting
of shareholders.
Rights The holders of Common Stock do not have preemptive rights
entitling them to acquire additional shares of Common
Stock or other shares of capital stock of the Company.
The Common Stock is not subject to redemption and carries
no subscription or conversion rights.
Liquidation In the event of liquidation, dissolution or winding up of
the Company, the holders of Common Stock shall be
entitled to share equally in the assets of the Company
after satisfaction of all debts and liabilities.
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THE COMPANY
KCD Holdings Incorporated (the "Company") is engaged in marketing and
distributing a line of diet aid products, including "SeQuester(R) 1" as well as
an appetite suppressant called "SeQuester(R) 2" and a Chromium caplet which is a
mineral necessary for proper carbohydrate metabolism, sold under the name
"SeQuester(R) 3." In October 1996, the Company introduced its fourth product,
PhytoQuest(TM). Recent research shows that PhytoQuest(TM) has the potential to
inhibit the gastrointestinal absorption of cholesterol.
The Company was incorporated in Nevada on February 13, 1986 and its principal
offices are located at 2835 Townsgate Road, Suite 110, Westlake Village,
California 91361. A limited trading market has developed for the Company's
Common Stock. The Company's stock is quoted on the OTC Bulletin Board under the
symbol "KCDH."
RISK FACTORS
Purchase of shares of the Common Stock offered hereby involves a substantial
degree of risk and should only be undertaken by persons who are financially able
to sustain the loss of their entire investment. Prior to exercising the
Warrants, prospective purchasers should carefully review this entire Prospectus
and the section entitled "Risk Factors," as well as the information incorporated
by reference herein. (See "Risk Factors")
USE OF PROCEEDS
The gross proceeds derived from exercise of the Warrants will be used by the
Company for working capital and for general corporate purposes. The Company may
derive gross proceeds in the maximum amount of $1,054,475 or as little as $0.00,
depending upon the number and type of Warrants converted for Common Stock. (See
"Use of Proceeds" and "Plan of Distribution")
WARRANT AND TRANSFER AGENT
The Company's transfer agent for its Common Stock and Warrants is Jersey
Transfer & Trust Company, located at 201 Bloomfield Avenue, Verona, New Jersey
07044.
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RISK FACTORS
THE PURCHASE OF COMMON STOCK OF THE COMPANY INVOLVES A HIGH DEGREE OF RISK AND
IS SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL MEANS WHO HAVE THE FINANCIAL
CAPABILITY TO BEAR THE RISK OF A COMPLETE LOSS OF THEIR INVESTMENT, AND WHO HAVE
ADEQUATE MEANS OF PROVIDING FOR THEIR CURRENT NEEDS AND PERSONAL CONTINGENCIES.
CURRENTLY, ONLY A LIMITED TRADING MARKET FOR THE COMPANY'S COMMON STOCK EXISTS
AND THE COMPANY DOES NOT ANTICIPATE THAT A MORE ACTIVE MARKET WILL DEVELOP IN
THE FORESEEABLE FUTURE. PROSPECTIVE SUBSCRIBERS SHOULD CAREFULLY READ THE ENTIRE
PROSPECTUS, INCLUDING THE INFORMATION INCORPORATED BY REFERENCE HEREIN AND THE
FINANCIAL DATA DESCRIBED HEREIN, AND CONSIDER, AMONG THINGS, THE RISKS FACTORS
LISTED BELOW.
The Company's business, organization and structure all involve elements of risk.
In many instances, these risks arise from factors over which the Company has
little or no control. Some adverse events may be more likely than others and the
consequence of some adverse events may be greater than others. No attempt has
been made to rank risks in the order of their likelihood or potential harm. Each
potential investor is urged and expected to consult with his or her own
advisor(s) for assistance in evaluating the merits and risks herein. In addition
to those general risks enumerated elsewhere in this Prospectus, Subscribers
should also carefully consider the following factors:
HISTORY OF LOSSES
The Company has a limited operating history and has incurred losses from
inception, including a net loss of $570,970 on revenues of $2,525,872 for the
nine month period ended October 31, 1996, and an accumulated deficit of
$6,576,278 as of October 31, 1996. There is no assurance that the Company will
be able to reduce its losses in the future. Consequently, no assurance can be
made that the Company will ever be profitable, that it will be able to pay any
dividends on its Common Stock or that sufficient assets will be available in the
event of a liquidation or dissolution of the Company. (see "Management's Plan of
Operation" and "Financial Statements")
WORKING CAPITAL/ADDITIONAL FINANCING
The Company had positive working capital for the nine month period ended October
31, 1996, however, there can be no assurance that the Company will continue to
have positive working capital. The proceeds received upon exercise of the
Warrants will be applied as working capital, however, in addition to these
proceeds the Company may require additional financing to meet its working
capital needs. The Company will likely seek additional funds through equity or
debt financing, collaborative arrangements with partners or from other sources
in the future. There can be no assurance that any such additional funds will be
available, or if available, that such financing will be on terms acceptable to
the Company or will be adequate for the Company's working capital
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requirements. If any required additional funds are not available from operations
or additional sources of funding, the Company's business will be materially and
adversely affected. (See "Management's Plan of Operation" and "Financial
Statements")
DEPENDENCE UPON KEY PERSONNEL
The current operations and success of the Company depends to a significant
degree upon the continued contributions and management efforts of its present
officers, directors, and operating personnel. In the event that any officer,
director or operating person terminates their association with the Company, the
Company could be adversely affected. Further, the Company's growth and future
success will depend in large part upon its ability to attract and retain highly
qualified personnel. Competition for such personnel from other companies,
academic institutions and other organizations is intense and there can be no
assurance that the Company will be successful in hiring or retaining such
personnel.
EXERCISE PRICES OF THE WARRANTS ARBITRARILY DETERMINED
The exercise prices of the Warrants bear no relationship to the original
offering price of the Units or any other objective criteria of value and in no
event should such exercise price be regarded as an indication of any future
market price of the securities. The exercise prices were arbitrarily determined
by management and do not reflect the fair market value or an independent
valuation of the Shares which are the subject of this Prospectus.
USE OF PROCEEDS NOT SPECIFIC
The proceeds from redemption of the Warrants have been allocated generally to
the Company's working capital requirements. Accordingly, investors will entrust
their funds with management on whose judgment investors must depend.
LACK OF PUBLIC MARKET
The Company's Common Stock is currently traded in the over-the-counter market
("Bulletin Board") and is not traded or quoted on any automated quotation
system. There is currently a very limited trading market for the Company's
Common Stock and the Company does not anticipate that a more active market for
its shares will develop in the foreseeable future. Subscribers therefore may
find it difficult or impossible to liquidate their investment at a time when
they desire to do so and consequently must be prepared to hold the Shares for an
indefinite period of time. There is no assurance that an established public
trading market for the Shares will develop or that, if it develops, it will
continue.
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COMPETITIVE CHALLENGES
The Company competes in an industry which is characterized by intense and
increasing competition. The Company competes primarily on the basis of the
uniqueness, quality and technological content of its SeQuester(R) 1 product, the
completeness of its product line, service and reliability as perceived by the
user, and to a lesser extent, on the basis of price. The Company competes or
will compete with other companies in the diet and weight-loss industry and many
of the Company's present and potential competitors have substantially greater
financial resources, larger research and development budgets, greater sales
volume and larger sales forces than the Company. Although the Company believes
that it can compete against even its largest competitors on the basis of
uniqueness of its SeQuester(R) 1 product and as a result of its increased
product line, including SeQuester(R) 2, SeQuester(R) 3, and PhytoQuest(TM),
there can be no assurance that SeQuester(R) 1 will retain its unique position in
the marketplace or that the addition of its other products will substantially
increase product loyalty.
The Company estimates that there are in excess of 100 diet aid products on the
market which fall into various categories. There are "Appetite
Suppressants,"such as Dexatrim(TM) and Accutrim(TM); "Thermogenics," such as
Chroma Slim(TM), the so called "Fat burning" products; "Diuretics" which aid in
water weight reduction, with products such as Diurex(TM) and Aqua-ban(TM); and a
"Sequestrant" which limits the body's absorption of fat. The Company believes
that there are very few sequestrant products on the market and that its
SeQuester(R) 1 was the first product of its kind on the market. The Company
believes that by being the first sequestrant product on the market, the Company
may have captured customer recognition and loyalty that gives its product a
certain marketing advantage over subsequently introduced sequestrant products.
With the addition of SeQuesters(R) 2 and 3 and PhytoQuest(TM) to its product
line, the Company believes that it will increase its name recognition and be
better able provide for its customer's dietary needs, thereby improving its
market position. However, the diet industry is highly competitive and there can
be no assurance that the Company's additional products can effectively compete
with similar existing products that have greater name recognition.
CONTROL
The Company's present directors, officers, and key employees hold the power to
vote an aggregate of approximately 49% of the Company's outstanding Common
Stock. As holders of a majority of the voting power, they will remain in a
position to exercise substantial control of the Company by determining the
outcome of substantially all matters required to be submitted to a vote of
stockholders, including (1) the election of the Board of Directors; (ii)
amendments to the Company's Articles of Incorporation; and (iii) approval of
mergers and other significant corporate transactions. The foregoing may have the
effect of discouraging or preventing certain types of transactions involving an
actual or potential change of control of the Company, including transactions in
which the holders of Common Stock might otherwise receive a premium for their
shares over the then current market price.
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CONCENTRATION OF COMPANY BUSINESS
The business of the Company is concentrated solely on its diet and weight-loss
products and therefore, lacks significant diversification. The lack of
diversification could negatively impact the Company in the event that any of its
SeQuester(R) products are not marketable or any other event occurs which
negatively impacts the Company and its products.
DEPENDENCE ON MANUFACTURERS
The Company does not manufacture nor package its SeQuester(R) products, but
instead relies on third-parties for its manufacturing and packaging needs. The
success of the Company is dependent, in part, upon the availability of
manufacturers to fulfill its orders on an as-needed basis and upon timely
delivery of its products. Reliance on such third-parties generally involves
several risks, including the possibility of labor problems, failure to procure
needed materials, increases in labor and related costs, and reduced control over
delivery schedules, any or all of which could adversely affect the Company's
financial results. In addition, although the Company has identified alternate
sources for these services, qualification of the alternative companies and
establishment of acceptable terms with such alternative sources may result in
delays and could adversely affect the Company's sales of its products and
results of operations. The Company occasionally experiences delays in receiving
shipments from its packagers, which can cause delays in the shipment of product
to its customers. Also, the Company has occasionally experienced delivery of
defective product, which can affect the reliability and reputation of the
Company and its products. There can be no assurance that the Company will be
able to continue to obtain manufacturing and packaging services in a timely or
cost-effective manner. A significant interruption in any of the described
procedures could have a material adverse effect on the Company's results of
operations.
REGULATIONS
Food and Drug Administration. For purposes of regulation by the Food
and Drug Administration ("FDA") under the Food, Drug and Cosmetic Act ("FDCA"),
certain of the Company's products are considered to be dietary supplements, and
certain of the Company's products are considered to be over-the-counter ("OTC")
drugs. The manufacture, distribution, marketing, storage, record-keeping, and
labeling, as well as other specified items relating to dietary supplements and
OTC drugs, are subject to comprehensive FDA regulation. Among the restrictions
applicable to dietary supplement products is that all labeling claims must be
truthful and substantiated and may not include any claims that the product
diagnoses, treats, cures, or prevents any disease. For OTC drugs such as those
marketed by the Company, ingredients and labeling claims must be in conformity
with specific product monographs contained in FDA regulations. Although the
Company believes that its products currently comply with applicable laws and
regulations administered by the FDA in these respective areas, FDA enforcement
policy is still evolving, particularly with respect to dietary supplements.
There can be no assurance that the FDA will not take enforcement action against
one or more of the Company's products on labeling or other grounds. Such
enforcement action could have serious negative implications for the Company.
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Federal Trade Commission. The advertising and promotion of the
Company's products is subject to regulation by the Federal Trade Commission
("FTC") under the Federal Trade Commission Act ("FTCA"). Among other
requirements, the FTC requires that all claims made in advertising be truthful
and substantiated in accordance with standards that have been developed by the
FTC. The Company's advertising claims for its SeQuester(R) products were
recently the subject of inquiry by the Seattle Regional Office of the FTC which
alleged that previous claims for the SeQuester(R) 1 product were false and/or
unsubstantiated in violation of the FTCA. On December 18, 1996, the Company's
Board of Directors approved a proposed administrative consent order which, if
accepted by the Commission, would require the Company to pay $150,000 to the FTC
and maintain adequate substantiation for future advertising claims. The proposed
consent order will not become final until it is approved by the Commission and
is published for notice and comment. In the event the proposed consent order is
not approved, the Company intends to resume settlement discussions with the FTC.
(See the Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on November 7, 1995 and October 31, 1996).
CERTAIN FEDERAL INCOME TAX RISKS
The Company will not provide and does not intend to provide any information or
advise regarding any tax matter concerning the exercise of the Warrants or an
investment in the Shares hereunder. Therefore, investors are urged to consult
with their own tax advisors, attorneys or accountants before exercising the
Warrants for the Company's Common Stock.
DEPENDENCE ON MARKETING STRATEGY
The Company distributes its products to wholesalers and retailers through direct
sales to wholesalers and through commissioned brokers to drug and food chain
retailers and mass merchandisers. The Company has successfully placed
SeQuester(R) products on the shelves of over 35,000 retail store locations
nationally in major drug and food chain retailers. In order to achieve
substantial sales increases necessary to increase the Company's operations, the
Company must be able to initiate relationships with additional vendors without
jeopardizing the Company's existing vendor relationships. In addition, the
future growth and success of the Company will continue to depend upon its
reseller channels and any deterioration of the Company's relationship with these
customers or any material diminution in the customers' sales volumes would
adversely affect the Company's business and results of operations.
SALES VOLUME
Sales of the Company's products are "ad driven" meaning that the volume of sales
is related to the amount of advertising featured for a particular product.
Accordingly, the Company believes that significant advertisement expenses must
be undertaken in order to increase revenues. In addition,
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the Company must continually seek to increase its level of operations and sales
by entering into additional markets. However, even if the Company is able to
increase expenditures for advertising and enter into additional markets, there
can be no assurance that any such action will be of sufficient magnitude to
permit any significant increase in the Company's results of operations or
profitability.
LITIGATION
The Company is currently a party to several lawsuits and has incurred or may
incur certain liabilities in connection with such matters. The Company may incur
substantial expense in connection with the resolution of such lawsuits and any
unfavorable settlement or judgement against the company could have a material
adverse effect upon the Company.
SUPERIOR RIGHTS OF CREDITORS
Unsecured and secured creditors ("Creditors") of the Company whose debts arose
prior to the time of any dividend payment or other distribution have superior
rights to restitution over the Company's shareholders, including holders of the
Shares. The Company is legally obligated to satisfy its past debts and
obligations to its Creditors prior to making any dividend or other payments to
its shareholders, including payments upon dissolution or winding up of the
Company or in bankruptcy, whether or not the Creditors' claims have been reduced
to judgment. The Company currently has significant debt and anticipates that it
will continue to incur and carry significant debt in the future.
DIVIDENDS ON COMMON SHARES
No dividend has been paid on the Common Shares since inception and none is
contemplated at any time in the foreseeable future.
MANAGEMENT OF RAPID GROWTH
The Company has experienced rapid growth, with revenues and expenses increasing
significantly over the past three years. It is the intention of the Company to
continue to expand its presence in the diet-aid industry by entering new
markets. Such growth has and will continue to place significant demands on the
Company's management and operational resources. To manage its growth, the
Company from time-to-time upgrades its management information systems and
controls. If the Company is unable to manage its growth effectively, its failure
to do so could have a material adverse effect on the Company.
DIVIDEND AND OTHER RIGHTS; LIMITATIONS PURSUANT TO NEVADA BUSINESS CORPORATION
ACT
Warrant holders are not entitled to dividend rights or any other rights granted
to holders of common stock. Upon exercise of the Warrants for Shares, the
holders of such Shares are entitled to receive dividends when, if and as
declared by the Board of Directors, however, there can be no assurance that the
Company will have sufficient funds to pay such dividends, or even if such funds
are
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available, that the Company will be permitted to make such dividend payments
under the provisions of the Nevada Business Corporation Act and other applicable
laws, which generally prohibit the Company from paying dividends or making other
distributions if the Company would be unable to pay its debts as they become due
in the usual course of business or if the Company's assets would be less than
its liabilities, plus the amount that would be needed to satisfy any superior
rights to payment if the Company were to be dissolved, after giving effect to
such dividend or distribution. The Company does not anticipate the payment of
dividends on the Shares in the foreseeable future, even if such funds are
legally available therefor. The Company may also issue a secured debt
obligation, enter into a credit facility, or issue a series or class of
Preferred Stock in connection with a future financing which is superior to the
Shares offered hereunder, and which entitle the holders thereof to preferences
with respect to interest or dividend payments or upon the Company's assets in
the event of a liquidation or dissolution of the Company.
SIGNIFICANT CUSTOMERS
The Company is not dependent upon a few major customers to maintain its
operations, however, a loss of a significant number of customers or of a few
major customers could have a material adverse effect on the Company.
ECONOMIC CONDITIONS OF THE COMPANY
The stability of the Company's operating results may fluctuate as a result of
many factors, including, but not limited to, customer demand and market
acceptance of the Company's products, new product introductions, effectiveness
of advertising, as well as other factors. Further, the Company's business is
sensitive to the spending patterns of its customers, which in turn are subject
to prevailing economic conditions and other factors beyond the Company's
control. The Company's results of operations could be materially adversely
affected by changes in economic conditions or customer spending patterns for
dietary-aid products.
PENNY STOCK; POTENTIAL ADVERSE EFFECT ON THE MARKET FOR THE COMPANY'S SECURITIES
Effective August 11, 1993 the Securities and Exchange Commission adopted Rule
15g-9 which established the definition of "penny stock," for purposes relevant
to the Company, as any equity security that has a market price of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transactions, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must (i) obtain
financial information and representations regarding the investor's investment
experience and objectives of the person; and (ii) make a reasonable
determination that the transaction in penny stocks are suitable for that person
and that person has sufficient knowledge and experience in financial matters to
be capable of evaluating the risks of transactions in penny stocks. The broker
or dealer must also
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<PAGE> 14
deliver, prior to any transaction in a penny stock, a disclosure schedule
prepared by the Commission relating to the penny stock market, which in
highlight form (i) sets forth the basis on which the broker or dealer made the
suitability determination; and (ii) that the broker or dealer received a signed,
written agreement from the investor prior to the transaction. Disclosure also
has to be made about the risks of investing in penny stock and about commissions
payable to both the broker-dealer and the registered representative, current
quotations for the securities and the rights and remedies available to an
investor in cases of fraud in penny stock transactions.
The foregoing required penny stock restrictions will not apply to the Company's
securities in the event such securities are approved for listing on NASDAQ and
have certain price and volume information provided on a current and continuing
basis. There can be no assurances that the Company's securities will qualify for
exemption from these restrictions if a market ever develops for the Company's
securities. If such a market does develop and the Company's securities were
subject to the rules on penny stocks, the market liquidity for the Company's
securities could be adversely affected.
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<PAGE> 15
DETERMINATION OF OFFERING PRICE AND USE OF PROCEEDS
The offering price for the Units and the exercise prices for the Warrants were
arbitrarily determined without regard to the Company's assets or earnings or
other objective criteria of value. The exercise prices of the Warrants do not
bear any relation to the offering price of the Units or to the future market
price of the securities.
The gross proceeds received by the Company can range from zero dollars ($0.00),
in the event that no Warrant holders elect to convert, to one million fifty-four
thousand four hundred seventy-five dollars ($1,054,475) in the event that all
holders elect to exercise the Warrants for the Company's Common Stock. The
Company currently has no specific plans for the use of the proceeds which may be
derived from the exercise of the Warrants other than the general intention to
apply any net proceeds towards working capital and for general corporate
purposes. Actual expenditures may vary from these stated uses, depending upon
future economic conditions and business opportunities.
Net proceeds from the exercise of Warrants not required on an immediate basis
will be held in cash, money market accounts, interest bearing deposits,
short-term certificates of deposit, bankers' acceptances, or other short-term
cash equivalents.
DESCRIPTION OF COMMON STOCK AND WARRANTS
WARRANTS
The Company presently has outstanding 398,850 Class A Warrants, 488,600 Class B
Warrants and 488,600 Class C Warrants. Each Warrant is exercisable for one (1)
share of the Company's Common Stock at the following prices: Class A Warrants at
$0.50 per share of Common Stock; Class B Warrants at $0.75 per share of Common
Stock; and Class C Warrants at $1.00 per share of Common Stock. The expiration
date for all Warrants is June 30, 1997. The holders of Warrants are not entitled
to vote, to receive dividend payments or to otherwise exercise any of the rights
of Common Stock shareholders, until such time as the Warrants have been duly
exercised for Common Stock and payment of the purchase price shall have been
made in full.
COMMON STOCK
The Company is authorized to issue 25,000,000 shares of $0.002 par value Common
Stock, of which approximately 14,606,874 shares are currently issued and
outstanding. Upon exercise of all outstanding Class A, Class B and Class C
Warrants there would be an additional 1,376,050 shares of Common Stock
outstanding. The holders of Common Stock are entitled to one vote per share on
all matters submitted to a vote at any meeting of shareholders. The holders of
Common Stock are entitled to receive dividends as the board of directors may
from time to time declare out of funds legally available therefor. However, to
date, the Company has not declared or paid any cash dividends with respect to
its Common Stock and does not anticipate the declaration or the payment of cash
dividends in the foreseeable future. The holders of Common Stock do not have
preemptive
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<PAGE> 16
rights to acquire any additional shares of capital stock of the Company and the
Common Stock is not subject to redemption and carries no subscription or
conversion rights. In the event of liquidation, dissolution or winding up of the
Company, the holders of Common Stock shall be entitled to share equally in the
assets of the Company, if any, after satisfaction of all debts, liabilities and
preferences of any other class of capital stock of the Company.
EXERCISE OF WARRANTS
Holders of any of the Company's Class A, Class B and Class C Warrants may
exercise the Warrants by tendering the Warrant, together with the full exercise
price in U.S. dollars made payable to KCD Holdings Incorporated, to the
Company's Warrant Agent, Jersey Transfer & Trust Company, located at 201
Bloomfield Avenue, Verona, New Jersey 07044. The Warrants may be exercised at
any time through June 30, 1997; provided, that, the Company's registration
statement for the Warrants as filed with the Securities and Exchange Commission
is then current.
EXPERTS
The financial statements of the Company for the fiscal year ended January 31,
1996 incorporated by reference in this Prospectus and elsewhere in the
Registration Statement to the extent and for the period indicated in their
report, have been audited by Grant Thornton LLP, independent accountants, as
indicated in their report with respect thereto, and are included in reliance
upon the authority of said firm as experts in giving said report.
The financial statements of the Company for the fiscal year ended January 31,
1995 incorporated by reference in this Prospectus and elsewhere in the
Registration Statement to the extent and for the periods indicated in their
report, have been audited by Horsfall, Murphy & Pindroh, independent
accountants, as indicated in their report with respect thereto, and are included
in reliance upon the authority of said firm as experts in giving said report.
LEGAL MATTERS
Manning, Marder & Wolfe has rendered an opinion to the Company (a copy of which
has been filed as an exhibit to the Registration Statement), to the effect that
the shares of Common Stock offered hereby upon exercise of the Warrants will be
legally issued, fully-paid and nonassessable.
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<PAGE> 17
INCORPORATION OF INFORMATION BY REFERENCE
The following documents filed with the Commission are incorporated herein by
this reference:
(1) The Company's Annual Report on Form 10-KSB for the fiscal year ended
January 31, 1996;
(2) The Company's Quarterly Reports on Form 10-QSB for its fiscal quarters
ended April 30, 1996; July 31, 1996; and October 31, 1996;
(3) The Company's Current Reports on Form 8-K which were filed with the
Commission on the following dates: February 26, 1996; April 4, 1996;
April 18, 1996; April 24, 1996; July 8, 1996; and October 31, 1996.
All reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of each such report or document.
Any statement contained in a document incorporated or deemed to be incorporated
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. Subject to the foregoing, all
information appearing in this Prospectus is qualified in its entirety by the
information appearing in the documents incorporated by reference.
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<PAGE> 18
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling persons
of the small business issuer 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 Act
and is, therefore, unenforceable.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company anticipates that the expenses incurred or to be incurred in
connection with the preparation and filing of this Post-Effective Amendment and
the transactions contemplated hereby will be approximately as follows:
DESCRIPTION AMOUNT
----------- ------
Printing and duplication costs ..................$2,000
Accounting fees and expenses......................3,000
Legal fees and expenses..........................15,000
Blue Sky fees.....................................3,000
Warrant Agent's fees and expenses.................2,000
Total...........................................$25,000
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<PAGE> 19
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 78.751 of the Nevada Business Corporation Act (the "Nevada Act"),
the Company has powers to indemnify its directors and officers against
liabilities they may incur in such capacities, including liabilities under the
1933 Act. The Company's Bylaws provide that the Company may indemnify its
directors and officers to the full extent and in the manner permitted by the
laws of the State of Nevada.
The above discussion of the Company's Bylaws and of the Nevada Act is not
intended to be exhaustive and is respectively qualified in its entirety by such
Bylaws and Statutes.
The Company's policy is to enter into indemnification agreements with each of
its directors. Each indemnification agreement provides that the Company will
indemnify a director against expenses, judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative, in which the director is or was a defendant, or
is threatened to be made a defendant by reason of the fact that the director is
or was an agent of the Company, but only if (a) the director acted in good faith
and in a manner that the director reasonably believed to be in the best
interests of the Company and (b) in the case of a criminal proceeding, the
director had no reasonable cause to believe that his or her conduct was
unlawful.
In addition, the Company will also indemnify a director against expenses
actually and reasonably incurred by the director in connection with the defense
or settlement of any threatened, pending or completed action by or in the right
of the Company to obtain a judgment in the Company's favor, in which the
director was or is a defendant or is threatened to be made a defendant by reason
of the fact that the director is or was an Agent of the Company, if the director
acted in good faith and in a manner that the director believed to be in the best
interest of the Company's shareholders.
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<PAGE> 20
ITEM 16. EXHIBITS
The following documents are filed herewith or incorporated by reference herein:
Exhibit Number Title of Exhibit
-------------- ----------------
4.1 Specimen Certificate for Shares of Common
Stock of the Company (1)
4.2 Warrant Agreement and Form of Warrant Applicable
to the A, B, and C Warrants (1)
5.1 Opinion and Consent of Manning, Marder & Wolfe
23.1 Consent of Grant Thornton LLP, Auditors for the
Company
23.2 Consent of Horsfall, Murphy & Pindroh, Auditors
for the Company
23.3 Consent of Manning, Marder & Wolfe (2)
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-18 (File No. 33-6827-LA), which was declared effective by the Commission
on August 7, 1987 and incorporated herein by this reference.
(2) The Consent of Manning, Marder & Wolfe is contained in Exhibit 5.1.
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 of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent fundamental change in the information
set forth in the Registration Statement.
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<PAGE> 21
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the Registration Statement is on Form S-3 or Form S-8 and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than 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 of 1933 and will be governed by
the final adjudication of such issue.
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<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Post-Effective
Amendment No. 2 to Form S-18 Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the County of Ventura, State
of California, on January 15, 1997.
KCD HOLDINGS INCORPORATED
/s/ Wellington Ewen
-------------------------
Wellington Ewen, President and
Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 2 to Form S-18 Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Wellington Ewen President, Chief Financial January 15, 1997
- ------------------------------ Officer and Director
Wellington Ewen
/s/ Bonnie L. Richards Vice President, Secretary, January 15, 1997
- ------------------------------ and Director
Bonnie L. Richards
/s/ Oleg Batratchenko Director January 15, 1997
- ------------------------------
Oleg Batratchenko
/s/ Stephen Miller, M.D. Director January 15, 1997
- ------------------------------
Stephen Miller, M.D.
/s/ Gerald Epstein Director January 15, 1997
- ------------------------------
Gerald Epstein
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<PAGE> 23
EXHIBIT INDEX
The following is a list of exhibits filed as part of this Post
Effective Amendment:
EXHIBIT
NO. TITLE OF EXHIBIT
------- ----------------
4.1 Specimen Certificate for Shares of Common
Stock of the Company (1)
4.2 Warrant Agreement and Form of Warrant Applicable
to the A, B, and C Warrants (1)
5.1 Opinion and Consent of Manning, Marder & Wolfe
23.1 Consent of Grant Thornton LLP, Auditors for the
Company
23.2 Consent of Horsfall, Murphy & Pindroh, Auditors
for the Company
23.3 Consent of Manning, Marder & Wolfe (2)
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-18 (File No. 33-6827-LA), which was declared effective by the Commission
on August 7, 1987 and incorporated herein by this reference.
(2) The Consent of Manning, Marder & Wolfe is contained in Exhibit 5.1.
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<PAGE> 1
Exhibit 5.1
Opinion and Consent of Manning, Marder & Wolfe
MANNING, MARDER & WOLFE
707 Wilshire Boulevard, 45th Floor
Los Angeles, California 90017
(213) 624-6900
January 15, 1997
KCD Holdings Incorporated
2835 Townsgate Road, Suite 110
Westlake Village, California 91361
Ladies and Gentlemen:
We are furnishing this opinion to you to be filed as Exhibit 5.1 to the
Post-Effective Amendment No. 2 to Form S-18 Registration Statement on Form S-3
(the "Registration Statement") of KCD Holdings Incorporated (the "Company") to
be filed with the Securities and Exchange Commission. The Registration Statement
relates to the Company's Class A, Class B and Class C Warrants (collectively the
"Warrants") which are exercisable for shares of the Company's Common Stock. All
shares subject of the Registration Statement are hereinafter referred to as the
"Shares."
We are familiar with the proceedings taken by the Company in connection
with the issuance of the Warrants and the filing of the Registration Statement.
Upon the basis of the foregoing and such investigations as we have
deemed necessary in connection with this opinion we are of the opinion that the
Shares when issued upon exercise of the Warrants and paid for in accordance with
the terms of the Warrants, will be legally issued, fully-paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, and to the reference to our firm under the caption
"Legal Matters" in the Registration Statement.
Very truly yours,
MANNING, MARDER & WOLFE
By: /s/ Manning, Marder & Wolfe
<PAGE> 1
Exhibit 23.1
Consent of Grant Thornton LLP, Auditors for the Company
We have issued our report dated May 10, 1996, accompanying the consolidated
financial statements of KCD Holdings Incorporated and subsidiary appearing in
the fiscal 1996 Annual Report of the Company to its shareholders included in the
Annual Report on Form 10-KSB for the year ended January 31, 1996, which are
incorporated by reference in this Registration Statement on Form S-3. We consent
to the incorporated by reference in the Registration Statement on Form S-3 of
the aforementioned report.
Grant Thornton LLP
Los Angeles, California
January 21, 1997
<PAGE> 1
Exhibit 23.2
Consent of Horsfall, Murphy & Pindroh, Auditors for the Company
We consent to the incorporation by reference in the registration statement (No.
33-6827-LA) on Form S-3 of KCD Holdings Incorporated of our report dated May 13,
1995 appearing in the January 31, 1996 annual report on Form 10-KSB relating to
the consolidated balance sheet of KCD Holdings Incorporated and subsidiary (the
Company) as of January 31, 1995 and the related consolidated statements of
operations, changes in stockholders' deficit and cash flows for the year then
ended and to the reference to our firm under the heading "Experts" in the
prospectus.
Horsfall, Murphy & Pindroh
Pasadena, California
January 21, 1997
