<PAGE>
As filed with the Securities and Exchange Commission on June 11, 1996
Registration No.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
CELESTIAL VENTURES CORPORATION
(Name of small business issuer in its charter)
Nevada 6749 13-3727399
------------------------- ---------------------------- ----------------
(State or Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification No.)
382 Route 59 Section 310
Monsey, New York 10952
(914) 369-0132
(Address and telephone number of principal executive offices)
382 Route 59 Section 310
Monsey, New York 10952
(Address of principal place of business or
intended principal place of business)
Irwin Schneidmill, President
Celestial Ventures Corporation
382 Route 59
Monsey, New York 10952
(914) 369-0132
(Name, address and telephone number of agent for service)
----------
Copies to:
Felice F. Mischel, Esq.
Gregory Sichenzia, Esq.
Schneck Weltman Hashmall & Mischel LLP
1285 Avenue of the Americas
New York, New York 10019
(212) 956-1500
Approximate date of proposed sale to the public:
As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered(1) Per Security(2) Price Per Security(2) Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value 349,168 $4.75 $1,658,548 $571.92
("Common Stock")
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 240,000(3) $22.50 $5,400,000 $1,862.08
("Common Stock")
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value 133,334(4) $3.00 $400,002 $137.94
("Common Stock")
- -------------------------------------------------------------------------------------------------------------
Total Registration Fee..................................................................$2,571.94
=============================================================================================================
</TABLE>
- ----------
(1) Pursuant to Rule 416, the Registration Statement also relates to an
indeterminate number of additional shares of Common Stock issuable upon the
exercise of the Warrants pursuant to anti-dilution provisions contained
therein, which shares of Common Stock are registered hereunder.
(2) Estimated solely for purposes of calculating the registration fee.
(3) Common Stock underlying Private Placement Warrants.
(4) Common Stock underlying the Schneidmill and Formicola Warrants.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the Registration Statement shall be come
effective on such date as the Securities and Exchange Commission, acting,
pursuant to said Section 8(a) may determine.
<PAGE>
CELESTIAL VENTURES CORPORATION
CROSS REFERENCE SHEET
Pursuant to Regulation C under the
Securities Act of 1933, as amended (the "Act")
Showing Location in Prospectus of Information
Filed as Part of Registration Statement
Item Number
in Form SB-2 Item Caption in Form SB-2 Caption in Prospectus
- ------------ ------------------------- ---------------------
1 Front of Registration and Outside
Front Cover of Prospectus.............. Outside Front Cover
Page
2 Inside Front and Outside Back Cover
Pages of Prospectus.................... Inside Front and
Outside Back Cover
Pages of Prospectus
3 Summary Information and Risk Factors... Prospectus Summary;
Risk Factors
4 Use of Proceeds........................ Use of Proceeds
5 Determination of Offering Price........ Inapplicable
6 Dilution............................... Inapplicable
7 Selling Security-Holders............... Selling Stockholders
8 Plan of Distribution................... Outside Front and
Outside Back
Cover; Pages of
Prospectus; Plan of
Distribution
9 Legal Proceedings...................... Business - Legal
Proceedings
10 Directors, Executive Officers,
Promoters and Control Persons.......... Management; Certain
Transactions;
Principal
Stockholders
11 Security Ownership of Certain
Beneficial Owners and Management....... Principal
Stockholders
12 Description of Securities.............. Description of
Securities
13 Interest of Named Experts and
Counsel................................ Inapplicable
<PAGE>
14 Disclosure of Commission Position
on Indemnification For Securities
Act Liabilities...................... Management -
Limitation on
Liability of
Directors
15 Organization Within Last Five Year... Business
16 Description of Business.............. Business
17 Management's Discussion and
Analysis or Plan of Operation........ Management's
Discussion and
Analysis of
Financial Condition
and Results of
Operation
18 Description of Property.............. Business - Properties
19 Certain Relationships and Related
Transactions......................... Certain Transactions
20 Market For Common Equity and
Related Stockholder Matters.......... Outside Front Cover,
Risk Factors, Market
For Securities,
Shares Eligible for
Future Sale
21 Executive Compensation............... Management
22 Financial Statements................. Financial Statements
23 Changes in and Disagreements
With Accountants on Accounting
And Financial Disclosure............. Management's
Discussion and
Analysis of
Financial Condition
and Results of
Operation
<PAGE>
Subject to Completion, Dated June 11, 1996
CELESTIAL VENTURES CORPORATION
722,502 Shares of Common Stock, Consisting of
349,168 Shares of outstanding Common Stock and 373,334 Shares of Common Stock
underlying various Warrants.
This Prospectus relates to 722,502 shares of common stock of Celestial
Ventures Corporation, par value $.001 per share (the "Common Stock"), consisting
of (i) 349,168 shares of outstanding Common Stock; (ii) 240,000 Shares of Common
Stock underlying Warrants held by certain private placement investors ("Private
Placement Warrants"); (iii) 66,667 shares of Common Stock underlying Warrants
held by an Officer of the Company (the "Schneidmill Warrant"); (iv) 66,667
shares of Common Stock underlying Warrants held by an shareholder of the Company
(the "Formicola Warrant"). The Private Placement Warrants entitle the holder to
purchase one share of Common Stock until October 3, 1998, at a price of $22.50
per share. Each of the Schneidmill and Formicola Warrants entitle the holder to
purchase 66,667 shares of Common Stock at $3.00 per share until September 8,
1998.
The Selling Stockholders may offer the shares of Common Stock offered
hereby in such manner at such time as it determine, which may or may not involve
brokers or dealer. There is no underwriter or coordinating broker acting in
connection with such proposed sales. Such shares of common stock covered by this
Prospectus, including those issuable upon exercise of Warrants constitute
approximately 43% of such issued and outstanding capital stock of the Company.
The offer for sale of the Common Stock by Selling Stockholders may, in the
future, have a depressive effect on the market price of the Company's
securities. The Company will not receive any portion of the proceeds from such
sales.
The exercise price of the all Warrants and Options were determined by
negotiation between the Company and the and the various holders, and was not
necessarily related to the Company's asset value, net worth, or other
established criteria of value. On May 3, 1996, the Company effectuated a 1 for
15 reverse stock split ("Reverse Stock Split"). On May 3, 1996 the price of the
Common Stock was approximately $.36. All information presented herein assumes
the Reverse Stock Split.
The Company has informed the holders of the Common Stock and Warrants that
the anti-manipulative rules under the Securities Exchange Act of 1934, Rules
10b-2, 10b-6 and 10b-7, may apply to their sales in the market and has furnished
stockholders and warrantholders with a copy of these rules. The Company has also
informed such stockholders and warrantholders of the need for delivery of copies
of this Prospectus. The Company will pay all expenses in connection with this
offering, which expenses are estimated to be approximately $30,000.
The Common Stock is traded on the NASDAQ Electronic Bulletin Board
("NASDAQ") under the symbol CVNR. There is no public market for the Warrants.
Such Warrants may not be offered publicly for resale in the absence of an
effective registration statement and none is contemplated. The Private Placement
Warrants, The Formicola Warrant and the Schneidmill Warrant are sometimes
referred to herein collectively as "Warrants."
On June 6, 1996, as reported by NASDAQ, the last reported bid quotes for the
Common Stock was $5.00.
<PAGE>
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN THAT THEY INVOLVE
A HIGH DEGREE OF RISK AND IMMEDIATE AND SUBSTANTIAL
DILUTION. SEE "RISK FACTORS" AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 11, 1996.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. (the "Commission") a Registration Statement on Form SB-2 under
the Securities Act of 1933 (the "Act") with respect to the securities offered by
this Prospectus. For further information with respect to the securities offered
hereby, reference is made to the Registration Statement and to the exhibits
listed in the Registration Statement. The Company will upon request provide
without charge a copy of any information that was incorporated by reference in
this Prospectus (not including exhibits to the information that is incorporated
by reference unless the exhibits are themselves incorporated by reference). Such
requests should be addressed to Celestial Ventures Corporation, 382 Route 59
Section 310 Monsey, New York 10952; 914-369-0132; Attention: Irwin Schneidmill,
President.
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports, and other
information with the Commission. Reports, Proxy Statements and other information
can be inspected and copies made at the public reference facilities of the
Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, as well as the following Regional Offices: 7 World Trade Center, New
York, New York, 10007, and Room 1204 Everett McKinley Dirksen Building, 219
South Dearborn Street, Chicago, Illinois, 60604. Copies can also be obtained at
prescribed rates from the Commission's Public Reference Section, Judiciary
Plaza, 450 Fifth Avenue, N.W., Washington, D.C. 20549.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information and financial
statements (including the notes thereto) appearing elsewhere in this Prospectus.
Each prospective investor is urged to read this Prospectus in its entirety.
THE COMPANY
The Company, through its wholly-owned subsidiary Remarkable Office
Products, Inc. ("Remarkable"), sells specialized office products featuring time
management and organizational tools to small and medium-sized businesses
nationwide through innovative, aggressive direct marketing catalogs and
programs. The products Remarkable offers include dry erase boards and calendars
with markers which can be wiped clean after use and re-used. The Company also
specializes in calendars and laminated products such as large geographic wall
maps and federal law posters which businesses are required to post (i.e.,
minimum wage posters, equal opportunity and sexual harassment notices). The
Company's strategy includes mailings of a variety of distinctive, full color
catalogs, exceptional customer service, prompt order fulfillment and discounted
prices.
The Company was incorporated in Nevada on January 28, 1987. Remarkable was
incorporated in New Jersey in September 1994 and is a wholly-owned subsidiary of
the Company. Its executive, warehouse and distribution facilities are located at
382 Route 59 Section 310, Monsey, New York 10952. Its telephone number is (914)
369-0132.
3
<PAGE>
The Offering
Securities Offered................. 722,502 shares of Common Stock.
Securities Outstanding............. 953,283 shares of Common Stock and
278,153 Shares of Preferred Stock and
the Warrants.
Use of Proceeds.................... Any money received by the Company upon
exercise of Warrants will be used for
working capital purposes. See "Use of
Proceeds."
Risk Factors....................... The securities being offered hereby
involve a high degree of risk. See "RISK
FACTORS."
NASDAQ Symbols..................... Common Stock - CVNR(1)
- ----------
(1) There can be no assurance that the existing public market for the Company's
securities will be sustained.
4
<PAGE>
Summary Financial Information
The summary financial information set forth below is derived from the
financial statements appearing elsewhere in this Prospectus. This information
should be read in conjunction with such financial statements, including the
notes thereto.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended Nine Months Ended
June 30, March 31, March 31,
1995 1996 1995
--------- ----------------- -----------------
<S> <C> <C> <C>
Statement of Operations Data:
Net sales -0- 915,629 1,040,430
Net income (loss) (615,378) (42,349) (1,551,459)
Net income (loss) per share of Common Stock ($1.08) ($.04) ($3.00)
Shares of Common Stock used in computing
net income (loss) per share 571,350 953,283 517,926
</TABLE>
June 30, 1995 March 31, 1995
------------- --------------
Balance Sheet Data:
Working capital 314,010 (75,589)
Total assets 2,397,638 3,922,825
Total liabilities 334,069 1,068,456
Stockholders' equity 2,063,569 2,854,369
- --------------------
RISK FACTORS
The securities offered hereby are speculative and involve a high degree of
risk. Each prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and this offering,
together with the other information in this Prospectus before making an
investment decision.
1. Recent Losses. During the fiscal years ended October 31, 1994, and June
30, 1995, the Company reported net losses of $1,433,038 and $689,101,
respectively. For the nine month period ended March 31, 1996 the Company
reported net loss of approximately $42,349. There can be no assurance that the
Company will achieve profitability in the future or that it can continue to fund
its losses.
2. Limited Operating History; No Assurance of Development of Services.
Although the Company was incorporated on January 28, 1987, it only acquired
Remarkable Business Products, Inc., on August 29, 1995, and the direct mail
business is a new business line for the Company. There can be no assurance that
the Company's efforts will be successfully completed or that any products will
be successfully marketed or achieve market acceptance. The likelihood of success
of the Company must
5
<PAGE>
be considered in light of the problems, expenses, difficulties, complications
and delays, many of which are beyond the Company's control, frequently
encountered in connection with the formation of a new business and in light of
the competitive environment in which the Company is operating. There can be no
assurance that the Company will successfully complete the plans described
herein. Accordingly, the securities offered hereby involve a high degree of
risk. See "Management's Discussion and Analysis or Plan of Operation" and the
Financial Statements of the Company and the notes thereto.
3. Capital Requirements; Potential Unavailability of Additional Financing.
The Company will generally be required to seek additional debt or equity
financing to fund the costs of continuing operations and acquisitions. The
Company has no current commitments or arrangements for additional financing and
there can be no assurance that any additional financing will be available on
acceptable terms, or at all, following the closing of the Offering. Generally,
following the closing of the Offering, the Company's ability to obtain
additional financing and use the proceeds thereof to fund the costs of
continuing operations will be limited. See "Management's Discussion and
Analysis."
4. Fluctuations in Operating Results; Seasonality. The Company may
experience fluctuations in quarterly operating results due to, among other
factors, seasonal demand for products, the size and timing of customer orders,
changes in the Company's pricing policies or those of its competitors, new
product introductions by competitors, the timing and nature of sales and
marketing expenses, development expenses, other changes in operating expenses,
and general economic conditions. See "Management's Discussion and Analysis."
5. Existing and Planned Products. The Company's success depends, in part,
upon the development of strong brand identification for its current and proposed
products. The primary direction of the Company's marketing plan is to promote
certain of its existing products and develop new products marketed under the
Remarkable name. Achieving and maintaining market acceptance for its products
will require significant efforts and expenditures. There can be no assurance
that the Company will be successful in effecting this plan. See "Business."
6. Dependence Upon Primary Customers. For the fiscal year ended June 30,
1995, one of the Company's customers, V.W. Eimicke, Ltd. and V.W. Eimicke
Associates, Inc. (collectively, "Eimicke"), individually accounted for 7% of the
Company's net sales. For the nine month period ended March 31, 1996, such
customer individually accounted for 7% of the Company's sales. The Company's
written contracts with Eimicke expire on November 30, 1996 and there can be no
assurance that such customer will continue to purchase products from the
Company. The loss of this customer could have a materially adverse effect on the
Company's business. See "Business - Major Customers."
7. Substantial Competition. The office products industry has experienced
increased competition in recent years due to the growth of direct marketing
companies and the emergence of office products superstores. Superstores' target
customers include many of the Company's target customers. Superstores offer
prices that are lower than those typically charged by the Company and are
expected to account for an increasing share of the market over the next several
years. The expansion of superstores has resulted in increased price competition
throughout the industry. In response, the Company recently introduced price
reductions in catalogs mailed to prospective customers. See "Business--
Competition."
6
<PAGE>
8. Dependence Upon Key Personnel. Irwin Schneidmill, Chief Executive
Officer, President, Chief Financial Officer and a director of the Company is a
key employee of the Company and the loss of his services could delay the
achievements of the Company's goals. The Company does not maintain key man life
insurance on the life of Mr. Schneidmill.
9. Outstanding Warrants. As of the date of this Prospectus, the Company has
outstanding 373,334 Warrants. The Warrants provide for the purchase of an
aggregate of 373,334 shares of Common Stock. There is no provision granting the
Company the right to redeem any of such Warrants. To the extent that such
securities are exercised, dilution to the interests of the Company's
shareholders will occur. Moreover, the terms upon which the Company will be able
to obtain additional equity capital may be adversely affected since the holders
of the outstanding Warrants can be expected to exercise them, to the extent they
are able to, at a time when the Company would, in all likelihood, be able to
obtain any needed capital on terms more favorable to the Company than those
provided in the Warrants.
10. No Dividends. The Company has not paid dividends on its Common Stock.
The Company intends to retain any future earnings to finance its growth.
Accordingly, any potential investor who anticipates the need for current
dividends from his or her investment should not purchase any of the securities
offered hereby. See "Dividend Policy."
11. Possible Volatility of Stock Price; Arbitrarily Determined Offering
Price; Arbitrarily Determined Offering Price. The Company's Common Stock is
currently traded on the NASDAQ Electronic Bulletin Board and there can be no
assurance that an active market in any of the Company's securities will be
sustained. In the absence of an active public trading market, an investor may be
unable to liquidate his or her investment. The Company believes that factors
such as the Company's and its competitors' announcements, including those
concerning products, trademarks, patents, and financial results could cause the
price of the Common Stock to fluctuate substantially. The exercise price and
other terms of the Warrants were established arbitrarily by negotiation between
the Company and the holders thereof and are not necessarily related to the
Company's asset value or net worth or other established criteria of value. See
"Description of Securities."
12. Necessity of Continuing Post-Effective Amendments to the Company's
Registration Statement and State Blue Sky Registration; Exercise of Warrants;
Obligation to Warrantholders. Although the Warrants have knowingly be sold to
purchasers in jurisdictions in which the Warrants are not registered or
otherwise qualified for sale, purchasers may move to jurisdictions in which the
Warrants and the Common Stock underlying the Warrants are not so registered or
qualified. In this event, the Company would be unable to issue Common Stock to
those persons desiring to exercise their Warrants unless and until the Warrants
and the underlying Common Stock are qualified for sale in jurisdictions in which
such purchasers reside, or an exemption from such qualification exists in such
jurisdictions. There can be no assurance that the Company will be able to effect
any required qualification.
The Warrants will not be exercisable unless the Company maintains a current
Registration Statement on file with the Commission through post-effective
amendments to the Registration Statement containing this Prospectus. This
post-effective amendment to the Registration Statement will no longer be
"current" as of March 1, 1997. Although the Company has agreed to file
appropriate post-effective amendments to the Registration Statement containing
this Prospectus, and to maintain a current Registration Statement on file with
the Commission relating to the Common Stock underlying the Warrants that is
offered hereby, there can be no assurance that such will be accomplished or that
the Class A Warrants will continue to be so registered. See "Description of
Securities."
7
<PAGE>
The obligation to maintain a current registration statement may impose a
financial burden on the Company and create a contractual liability of the
Company to the warrantholders.
13. Shares Eligible for Future Sale. No assurance can be given as to the
effect, if any, that future sales of Common Stock, will have here on the market
price of Common Stock. Of the Company's shares of Common Stock currently
outstanding, 522,714 are "restricted securities" as that term is defined in Rule
144 under the Securities Act of 1933, as amended ("Act"), and under certain
circumstances may be sold without registration pursuant to that rule. Subject to
compliance with the notice and manner of sale requirements of Rule 144 and
provided that the Company is current in its reporting obligations under the
Securities Exchange Act of 1934, as amended, a person who beneficially owns
restricted shares for a period of at least two years is entitled to sell, within
any three month period, shares equal to the greater of 1% of the then
outstanding shares of Common Stock, or if the Common Stock is quoted on the
NASDAQ System, the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the filing of the required notice of sale with the
Securities and Exchange Commission. See "Shares Eligible For Future Sale." As of
the date of this Prospectus, 190,156 shares of Common Stock, held by 44
beneficial owners, are eligible for sale pursuant to Rule 144. The Company is
unable to predict the effect that sales made under Rule 144 or otherwise may
have on the market price of the Common Stock prevailing at the time of any
sales. Nevertheless, sales of substantial amounts of the restricted shares of
Common Stock in the public market could adversely affect the then prevailing
market for the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities. See "Description of
Securities - "Shares Eligible for Future Sale."
14. Possible Delisting and Risk of Low-Priced Securities. The Common Stock
currently trades on the NASD's OTC Electronic Bulletin Board. At June 6, 1996,
the bid and asked prices were $5.00 and $5.625, respectively. The NASD has more
stringent criteria for listing of securities on NASDAQ. To qualify for NASDAQ
Small-Cap listing, NASDAQ requires satisfaction of certain financial tests,
including the attainment of specified minimum levels of assets, income, net
worth, and certain minimum requirements relating to the market value of the
securities to be listed (exclusive of shares owned by insiders), as well as the
number of shares and stockholders. Specifically, the Company must have at least
$4,000,000 in total assets, $2,000,000 in capital and surplus and a minimum bid
price of at least $3.00. However, there can be no assurance that the Company
will be able to satisfy certain other specified financial tests and market
related criteria required for quotation on NASDAQ. If the Company is unable to
satisfy the NASDAQ listing criteria in the future, its Common Stock will not be
eligible for trading on NASDAQ. Trading, if any, would continue to be conducted
in the over-the-counter market in the so-called "pink sheets" or the "Electronic
Bulletin Board" of the National Association of Securities Dealers, Inc.
("NASD"), and consequently an investor could find it more difficult to dispose
of, or to obtain accurate quotations as to the price of the Company's
securities.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to include an equity security that has a market price of
less than $5.00 per share, subject to certain exceptions. Such exceptions
include any equity security listed on NASDAQ and any equity security issued by
an issuer that has (i) net tangible assets of at least $2,000,000, if such
issuer has been in continuous operation for three years, (ii) net tangible
assets of at least $5,000,000, if such issuer has been in continuous operation
for less than three years, or (iii) average annual revenue of at least
$6,000,000, if such issuer has been in continuous operation for less than three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock, of a disclosure schedule
explaining the penny stock market and the risks association therewith. The
broker-dealer must also provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer, and its
salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the
8
<PAGE>
customer's account. The bid and offer quotations, and broker-dealer and
salesperson compensation information must be given to the customer orally or in
writing prior to effecting the transaction and must be given in writing before
or with the customer's confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from such
rules the broker-dealer must make a special written determination that the penny
stock is a suitable investment for the purchaser and receive the purchaser's
written agreement to the transaction. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that becomes subject to the penny stock rules. If the Company's securities
become subject to the penny stock rules, investors in this offering may find it
more difficult to sell such securities.
In addition, if the Company's securities are not quoted on NASDAQ, or the
Company does not have $2,000,000 in net tangible assets, trading in the Common
Stock would be covered by Rule 15g-9 promulgated under the Exchange Act for
non-NASDAQ and non-exchange listed securities. Under such rule, broker/dealers
who recommend such securities to persons other than established customers and
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities also are exempt from this rule if the market price is
at least $5.00 per share.
If the Company's securities become subject to the regulations applicable to
penny stocks, the market liquidity for the Company's securities could be
severely affected. In such an event, the regulations on penny stocks could limit
the ability of broker/dealers to sell the Company's securities and thus the
ability of purchasers of the Company's securities to sell their securities in
the secondary market.
USE OF PROCEEDS
Any money received by the Company upon the exercise of the Warrants will be
used for working capital purposes. The Company will not receive any portion of
the proceeds from the sales, if any, of Common Stock by the Selling Stockholder.
The maximum amount of proceeds that the Company will receive upon the exercise
of the Warrants is $5,800,002 (assuming the current exercise prices), less
approximately $30,000 in costs associated with this Prospectus. In the event the
maximum amount of proceeds is not received, the Company will first reduce
accounts payable and the remainder will be used for general operating expenses.
However, there can be no assurance that any of the Warrants will be exercised
and the Company receive proceeds therefrom.
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1996 and as adjusted to reflect the exercise of the outstanding
Warrants.
Actual As adjusted
------ -----------
Short term debt .................................. $ 791,814 -0-
Long term debt ................................... $ 276,642 -0-
Shareholders' equity
Preferred Stock .................................. 278 278
Common Stock, $.001 par value, 500,000,000
shares authorized, 953,283 issued (1,499,096) ... 953 1,499
Less: Common Stock Discount Below Par ............ (28,500) (28,500)
Additional paid-in capital ....................... 5,487,927 11,287,383
Retained Earnings (Deficit) ...................... (2,606,289) (2,606,289)
Total Shareholders' equity ............... 2,854,369 8,654,371
MARKET FOR SECURITIES
The high and low bid (price which a market maker is willing to pay for the
Share) and offered (price at which a market maker will sell the Shares)
quotations for the Company's Shares, as reported to the Company's management by
brokerage firms listed on the specified dates by the National Daily Quotation
System, Inc.'s "Pink Sheets" as making markets in the Company's securities are
listed in the following chart. These quotations are between dealers, do not
include retail mark-ups, mark-downs or other fees and commissions, and may not
represent actual transactions.
Date Low Bid High Bid Low Ask High Ask
- ---- ------- -------- ------- --------
Fiscal 1994
- -----------
September 30, 1993 $ 1.875 $ 3.75 $ 9.375 $11.25
December 31, 1993 $16.875 $18.75 $24.375 $26.25
March 31, 1994 $16.875 $18.75 $17.4375 $26.25
June 30, 1994 $11.25 $11.25 $15.9375 $15.9375
Fiscal 1995
- -----------
September 30, 1994 $ 5.15625 $ 5.625 $ 8.4375 $ 8.4375
December 31, 1994 $ 9.375 $ 9.375 $11.25 $11.25
March 31, 1995 $10.74 $11.25 $12.875 $13.125
June 30, 1995 $11.25 $11.25 $13.125 $13.125
Fiscal 1996
- -----------
September 30, 1995 $ 7.50 $ 7.50 $ 9.375 $ 9.375
December 31, 1995 $ 3.75 $ 3.75 $ 4.65 $ 4.65
March 31, 1996 $ 5.625 $ 5.625 $ 7.50 $ 7.50
10
<PAGE>
All prices assume 15 for 1 Reverse Stock Split which was effected on May 3,
1996.
There were approximately 1,779 shareholders of record of the Company's
common stock on June 4, 1996.
DIVIDEND POLICY
The Company has not paid any dividends on its Common Stock and does not
anticipate paying cash dividends in the foreseeable future. The Company intends
to retain any earnings to finance the growth of the Company. There can be no
assurance that the Company will ever pay cash dividends.
11
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data as of and for the years ended October
30, 1994 and June 30, 1995, which have been audited by independent certified
public accountants, and as of and for the nine months ended March 31, 1996 and
March 31, 1995, are derived from the Company's financial statements included
elsewhere in this Prospectus. The selected financial data as of and for the nine
months ended March 31, 1996 and the period ended March 31, 1995, have been
derived from the unaudited financial statements of the Company, and, in the
opinion of management, include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the information set forth
therein. Results for the nine months ended March 31, 1996 are not necessarily
indicative of the results to be expected for the year ending June 30, 1996. This
data should be read in conjunction with the Company's financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." For information relating to the Company's dividend
policy, see "Dividend Policy."
<TABLE>
<CAPTION>
Nine Nine
Years Ended Months Ended Months Ended
October 30, June 30, March 31, March 31,
1994 1995 1996 1995
--------- ------ ------- -------
(In thousands, except for share and per share data)
Statement of Operations Data:
<S> <C> <C> <C> <C>
Net sales .......................................... $ 2,419,511 $-0- $915,629 $ 1,040,430
Cost of goods sold ................................. 1,838,428 -0- 241,692 1,060,368
Gross profit ....................................... 581,083 -0- 673,937 (19,938)
Operating expenses ................................. 1,427,246 48,888 748,008 944,856
Income (loss) before
income taxes ...................................... (1,433,038) (615,378) (41,778) (1,551,459)
Net income (loss) .................................. (1,433,038) (615,378) (42,349) (1,551,459)
Net income (loss) per share of
common stock ...................................... (3.74) (1.08) (.04) (3.00)
Shares used in computing net income (loss) per share 383,463 571,350 953,283 517,926
</TABLE>
March 31, 1996 June 30, 1995
-------------- -------------
Balance Sheet Data:
Working capital ......................... (75,589) 314,010
Total assets ............................ 3,922,825 2,397,638
Long-term debt .......................... 276,642 170,000
Total liabilities ....................... 1,068,456 334,069
Stockholders' equity
(deficiency) .......................... 2,854,369 2,063,569
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto appearing elsewhere in this
Prospectus.
Financial Condition
The Company's financial condition changed substantially at March 31, 1996
compared to June 30, 1995. These changes occurred as a result of the purchase of
Success Direct, Inc. ("Success") and certain assets of Re-Prod, Inc.
("Re-Prod").
The purchase of Success and certain assets of Re-Prod resulted in an
increase of current assets from $478,079 at June 30, 1995 to $716,225 at March
31, 1996 representing an increase of 50% or $238,146. Property, plant and
equipment was increased from $464,892 at June 30, 1995 to $500,716 at March 31,
1996 representing an increase of 8% or $35,824. Other assets increased from
$1,454,667 at June 30, 1995 to $2,705,884 at March 31, 1996 representing an
increase of 86% or $1,251,217 as a result of the purchase of Success Direct and
certain assets of Re-Prod. The Company experienced an increase in current
liabilities from $164,069 at June 30, 1995 to $791,814 at March 31, 1996
representing an increase of 383% or $627,745. The Company also experienced an
increase in long-term liabilities from $170,000 at June 30, 1995 to $276,642 at
March 31, 1996 representing an increase of 63% or $106,642. Shareholders Equity
was increased from $2,063,569 at June 30, 1995 to $2,854,369 at March 31, 1996
representing an increase of 38% or $790,800.
Results of Operations
Comparison of Periods Ended March 31, 1996 and 1995
The consolidated balance sheet as of March 31, 1996 and the consolidated
statement of operations for the nine months ended March 31, 1996 and 1995 have
been derived from the unaudited financial records of the Company. These
financial statements reflect all adjustments, consisting only of normal
recurring items, which in the opinion of management are necessary to fairly
state the Company's financial position and results of operations for the period
presented.
During the nine month period ended March 31, 1996 the Company experienced a
net loss of $(42,349) as compared to a net loss of $(1,551,459) for the nine
months ended March 31, 1995, representing a decrease of 97% or $1,509,110. The
net loss of $(42,349) was on sales of $915,629 as opposed to sales of $1,404,430
for the nine months ended March 31, 1995, a reduction of ($488,801) or 35%. The
reduction of net loss and sales was due to the disposition of the Company's
unprofitable industrial value subsidiaries. Cost of goods sold was $241,692 and
operational expenses were $748,008 for the nine months ended March 31, 1996.
Cost of goods sold was $1,060.368 and operational expenses were $944,856 for the
nine months ended March 31, 1995. The decrease in cost of goods sold and
operational expenses was attributable to changes in the operating entities from
the industrial valve business to the mail order office supply business. Other
income of $32,293 for the nine months ended March 31, 1996 was comprised of
accrued interest of $23,293 on certain notes held by the Company from the
disposition of the industrial value subsidiaries and forgiveness of debt of
$9,000 from certain vendors. For the nine month period ended March 31, 1995 the
Company had other negative income of $(586,665) consisting of interest income of
$210, write-down equipment of $(385,000) related the industrial valve business
and loss on investment of $(201,875) which represents the final write-off of an
investment made by the Company's wholly-owned subsidiary, Celestial Realty
Group, Inc., which has since become inactive.
13
<PAGE>
Comparison of Periods Ended June 30, 1994 and 1995
Management believes that a comparison of the eight month period ended June
30th 1995 to the fiscal year ended October 31, 1994 is not meaningful because of
the length of the reporting periods and the disposition of the Company's valve
businesses as of April 30, 1995. Accordingly, financial statements for the eight
months ended June 30 1995 and 1994 are presented below for comparative purposes.
The consolidated balance sheet as June 30, 1994 and the statement of
operations for the eight months ended June 30, 1994 presented below have been
derived from the unaudited financial records of the Company. These financial
statements reflect all adjustments, consisting only of normal recurring items,
which in the opinion of management are necessary to fairly state the Company's
financial position and results of operations for the period presented.
Consolidated Balance Sheet:
June 30, 1994
1995 (unaudited)
ASSETS:
Current Assets
Cash & cash equivalents (1,131) 23,873
Accounts receivable -- 798,926
Investments 300,000 --
Notes receivable 179,210 52,000
Inventory -- 1,149,786
Prepaid Expenses -- 21,381
Total Current Assets 478,079 2,045,966
---------- ----------
Other Assets 464,892 2,324,654
---------- ----------
Investments 1,250,000 201,875
Notes receivable 204,667 --
Intangible assets net -- 148,780
Refundable deposits -- 17,075
Total Other Assets 1,454,667 367,730
---------- ----------
TOTAL ASSETS 2,397,638 4,738,350
========== ==========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Current Liabilities
Accounts payable 164,069 628,964
Accrued Expenses -- 46,472
Notes payable -- 327,906
Total Current Liabilities 164,069 1,003,342
---------- ----------
Long-Term Liabilities
Notes payable 170,000 1,078,210
Total Liabilities 334,069 2,081,552
---------- ----------
Shareholders' Equity 2,063,569 2,656,798
---------- ----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 2,397,638 4,738,350
========== ==========
14
<PAGE>
Consolidated Statement of Operations:
June 30, 1994
1995 (Unaudited)
Sales - 1,846,759
Cost of Sales - 1,159,659
General and Administrative 48,888 1,007,005
Net Loss Before Interest Income
and Non-Recurring Items (48,888) (319,905)
-------- ---------
Interest Income 4,667
Net Loss Before Non-Recurring
Items (44,221) (319,905)
-------- ---------
Loss Through Date of Disposition
of Subsidiaries (500,041)
Loss on Disposal of Subsidiaries (71,116)
NET LOSS (615,378) (319,905)
======== =========
Liquidity and Capital Resources
In August 1995 the Company acquired 100% of the outstanding common stock of
Success Direct, Inc. and certain assets of Re-Prod Inc., both of which are
business to business direct mail order companies.
The purchase price of the outstanding common stock of Success Direct, Inc.
was 1,000,000 shares of common stock of Celestial Ventures Corporation. The
purchase price of certain assets of Re-Prod Inc. was $315,000 and 750,00 shares
of common stock of Celestial Ventures Corporation and a $250,000 note payable to
Re-Prod Inc. The interest and principal on this note was scheduled to be payable
monthly and maturing July 31, 1996. However, due to litigation between the
Company and Re-Prod, Inc. payments under the note were suspended November 1995.
At that time approximately $40,000 of principal was paid on the note.
In September 1995 the Company executed a letter of intent to purchase all
the outstanding stock of Nexim Corporation. Upon the execution of the letter of
intent the Company paid $100,000 as a down payment for the purchase of Nexim. In
addition the Company has invested an additional $63,000 for the working capital
of Nexim Corporation. In April 1996 the Company decided not to pursue the
acquisition of Nexim. Nexim has agreed to execute a promissory note in favor of
the Company in the amount of $163,000. The terms of such note are currently
being negotiated.
The Company has financed its operations and acquisitions through the
issuance of equity and debt securities. From April 1995 through July 1995 the
Company received net proceeds of $810,000 form a private placement of securities
which was undertaken by Joseph Dillon & Company, Inc. The private placement
raised $900,000 through the sale of Units consisting of 1,800,000 shares of
common stock at $7.50 per share and 3,600,000 warrants at an exercise price of
$22.50 per share. The net proceeds of this Offering were applied in part to the
Company's outstanding indebtedness resulting form its industrial valve business
in the approximate amount of $500,000 and was applied to the letter of intent
payment to Nexim Corporation in the amount of $100,000 and approximately
$200,000 toward the cash portion of the acquisition of assets of Re-Prod, Inc.
15
<PAGE>
In October 1995 the Company raised an additional $31,250 through the
issuance of 12,500 shares of common stock at $2.50 per share.
From July through November 1995, the Company received loans from Performance
Capital Corporation, a company owned by John Formicola, totaling $205,000 for
working capital and acquisitions which included monies for the acquisition of
assets of Re-Prod, Inc. In March, 1996 the Company and Performance Capital
agreed to convert the loan to common stock at $2.25 per share.
The Company has used all of the funds raised through its financing
activities for working capital and acquisitions of $568,250 and $478,000
respectively.
The Company projects the need for an additional $300,000 in working capital
for the coming fiscal year that will be raised through the exercise of
outstanding warrants or debt securities.
16
<PAGE>
BUSINESS
General
Celestial Ventures Corporation, a Nevada corporation (the "Company"), was
incorporated on January 28, 1987. Initially, the Company had been engaged in the
business of acquiring businesses, divisions of businesses or the assets of
businesses that the Company's management identified as having significant
potential for business success.
Valve Company Acquisitions
Pursuant to an Agreement and Plan of Reorganization dated August 12, 1993,
the Company acquired all of the issued and outstanding common stock of Valves
International, Inc. ("VII"), an Oklahoma corporation in exchange for 850,000
shares of restricted common stock of the Company. As a result of the
reorganization, the Company also acquired Central Valve Services, Inc., Alloy
Valves International, Inc., Valves International, Inc. and CVC International
Inc. as wholly owned subsidiaries of VII. VII and its subsidiaries are operating
companies engaged in the business of valve manufacturing and sales in both
Oklahoma and Texas.
Powder Coating Operations
On October 31, 1993 the Company acquired U.S. Powder Coaters, Inc., whose
principal business consisted of treating and coating metal and non-metal
materials. The acquisition was completed in exchange for 300,000 shares of the
Company's common stock. In 1993 the Company also acquired Gulf Coast Powder
Coatings, Inc. As part of the Company's reorganization, the Company shut down
U.S. Powder Coatings, Inc. in June 1994 and management renegotiated a 50%
reduction of its debt related to its acquisition.
Disposition of Valve and Powder Coating Operations
On August 31, 1995, as of April 30, 1995, the Company entered into a
purchase agreement whereby it sold all of its wholly owned subsidiaries with the
exception of U.S. Powder Coatings, Inc. to Turkey Delight, Inc. d/b/a ATCO
Corporation ("Purchaser" or "ATCO") for $1,900,000 in cash, promissory notes and
common stock. ATCO Corporation is a public company and it principal executive
officer, Mr. Bob J. Sudderth, is also the Chairman of the Board of Directors of
the Company. See "Certain Relationships and Related Transactions". The
subsidiaries referred to herein include Valves International, Inc., Central
Valve Services, Inc., Alloy Valve International, Inc. and Gulf Coast Powder
Coatings, Inc. The sales price consisted of a combination of 1,550,000 shares of
common stock of the Purchaser, issuance of a $200,000 promissory note and the
payment of $150,000 contingent upon the successful completion of a stock
offering by the Purchaser. The assets of U.S. Powder Coatings, Inc. are still
owned by the Company although such subsidiary is inactive.
Direct Mail Acquisitions
On August 29, 1995 the Company purchased, as of July 1, 1995, all of the
issued and outstanding common stock of Success Direct, Inc., a mail order
business products company ("Success"). The principal stockholder of Success, Mr.
Irwin Schneidmill, became the President of the Company on August 1, 1995.
Simultaneously with the acquisition of Success, Success assigned to the
Company its agreement to purchase certain business assets from Re-Prod, Inc.,
including the name Remarkable Products, and the Company consummated the
transaction with Re-Prod, Inc. The assets purchased from Re-Prod, Inc. are
related to the direct mail industry. See "Certain Relationships and Related
Transactions".
17
<PAGE>
In connection with the acquisition of the capital stock of Success, the
Company paid total consideration of 66,667 restricted shares of common stock of
the Company. 27,667 of such shares were paid to Mr. Irwin Schneidmill who was
the 41.5% owner of the capital stock of Success. See "Certain Relationships and
Related Transactions".
In connection with the acquisition of certain assets of Re-Prod, Inc., the
Company paid total consideration consisting of the following; (i) $315,000 in
cash, (ii) a promissory note in the amount of $250,000 which was guaranteed by
Mr. Schneidmill and Mr. John Formicola and (iii) 50,000 shares of the common
stock of the Company which have value guaranteed by Mr. Schneidmill and Mr. John
Formicola, a stockholder of the Company. See "Certain Relationships and Related
Transactions".
The Company operates Success as a wholly owned subsidiary under the
tradename Remarkable Products. On December 7, 1995, Success changed its
corporate name to Remarkable Business Products, Inc. ("Remarkable"), but
continues to use the tradename Remarkable Products. Remarkable was incorporated
in the State of New Jersey in September, 1994.
The Company, through its wholly-owned subsidiary Remarkable, sells
specialized office products featuring time management and organizational tools
to small and medium-sized businesses nationwide through innovative, aggressive
direct marketing catalogs and programs. The products Remarkable offers include
dry erase boards and calendars with markers which can be wiped clean after use
and re-used. The Company also specializes in calendars and laminated products
such as large geographic wall maps and federal law posters which businesses are
required to post (i.e., minimum wage posters, equal opportunity and sexual
harassment notices). The Company's strategy includes mailings of a variety of
distinctive, full color catalogs, exceptional customer service, prompt order
fulfillment and discounted prices.
Industry Background
Distribution within the office products industry is highly fragmented. End
users traditionally have purchased office products from commercial office supply
companies and small retail dealers. These distribution channels account for the
vast majority of the market for office products. Remarkable believes that direct
marketing companies and office products superstores have increased their share
of the office products market over the last several years.
Commercial office supply companies, often referred to as contract
stationers, traditionally have served large businesses through commissioned
sales forces. Contract stationers are able to purchase in large quantities
directly from manufacturers and offer significant volume-related discounts to
their large business customers. Because contract stationers use commissioned
sales forces and volume related programs to market products, it generally is
impracticable for them to service small and medium-sized businesses.
The independent retail channel, through which Remarkable's targeted
customers traditionally have purchased specialized office products, is
characterized by a large number of small retail dealers who primarily purchase
products from wholesalers for resale at or near manufacturers' list prices.
These small retail dealers typically stock a limited inventory of office
products, furniture and business machines.
In the past few years, alternative distribution channels such as office
products superstores and direct marketing companies have captured increasing
market shares at the expense of traditional retail office products dealers.
Superstores have emerged in most urban and suburban markets of the United
States, targeting home office buyers and the small and medium-sized businesses
that purchase from retail dealers, by offering
18
<PAGE>
substantially lower prices. Superstores generally operate on a cash and carry
basis, charge extra for delivery and often require membership to obtain the best
pricing and to gain access to other limited services.
Direct marketing has gained acceptance over the past several years in many
industries, including the office products industry. Direct marketers of office
products utilize a variety of catalogs and other programs to market general
office supplies, furniture and equipment at discounts from manufacturers' list
prices. Large direct marketing companies typically purchase in large quantities
directly from manufacturers and operate from centralized distribution
facilities. These direct marketers develop large, proprietary customer databases
that are segmented and used to improve the effectiveness of catalog mailings to
their customers.
Business Strategy
Remarkable believes that, properly executed, direct marketing provides the
most convenient and cost effective way for small and medium-sized businesses to
purchase certain office products such as the time management and organizational
tools sold by Remarkable. Remarkable also believes that exceptional customer
service, aggressive product merchandising, fast delivery and ease and
convenience in purchasing will become increasingly important competitive factors
as competition increases from office products superstores. Remarkable's strategy
to distinguish itself from other direct marketers of specialized office products
and from low price, low service superstores is to provide small to medium-sized
businesses with exceptional customer service and a convenient, fast and economic
means of purchasing a comprehensive selection of specialized office products.
Remarkable does not compete in the highly competitive area of general office
supplies which include paper, writing instruments, desk accessories or office
furniture because of the small potential profit margin and the substantial
competition in this area.
Remarkable believes that the most important elements of its business
strategy are:
Direct Marketing. Remarkable markets directly to its existing and
prospective customers through frequent catalog mailings of a variety of
distinctive, strategically planned catalogs and specialty solo mailings.
Remarkable uses state of the art information systems to analyze the
results of each mailing and to refine and segment its customer database
and mailing lists. These procedures enable Remarkable to target future
mailings in a manner designed to enhance profitability and customer
response while lowering overall marketing costs.
Customer Service. Remarkable emphasizes exceptional customer service
and customer relations. Remarkable attempts to make catalog shopping as
convenient and easy as possible by providing friendly, courteous order
entry and customer service representatives; no questions asked 30 day
return policy and 30-day open account billing.
Prompt Order Fulfillment. Remarkable ships over 95% of all orders on
the day received. Remarkable estimates that substantially all orders
(other than custom printed items) are received by the customer within
five business days of the order date.
Merchandising. Remarkable believes that the majority of its sales
are made at prices which are discounted from other manufacturers' list
prices. Remarkable updates its products selection to meet the needs of
its customers by continually evaluating the sales and profit performance
of each product through its state of the art information systems.
19
<PAGE>
Catalog Publication
Remarkable uses its various catalogs to market directly to both existing and
prospective customers. Each catalog is printed in full color with an effective
selling presentation, including a picture of each item and a narrative
description that emphasizes key product benefits and features. The catalogs are
created and produced by outside vendors who provide designers, writers and
production artists and are printed by commercial printers.
Remarkable's regular catalog mailings include a complete buyers guide which
is produced once a year and generally mailed in January to all active customers.
Remarkable has a database of over 250,000 customers, 100,000 of which have
ordered from Remarkable in the past two years. Remarkable anticipates producing
the buyer guide bi-annually in the future depending on available working
capital. In March, Remarkable mails a specialty mailing featuring only its
federal law posters (i.e., minimum wage, sexual harassment, workers
compensation, etc.). In April or May Remarkable does an academic mailing
featuring July to June reusable calendars which are used by academic
professionals and administrators. In September, October and November, Remarkable
concentrates on solo mailings which feature Remarkable's main reusable calendars
(January to December). These solo mailings are distinctive in that they are
packaged to look like a bank check making the consumer more likely to open the
mailing.
Marketing
Remarkable's various marketing programs are designed to attract new
customers and to stimulate additional purchases from existing customers.
Remarkable has sold to over 250,000 customers, 100,000 have purchased products
within the last two years.
V.W. Eimicke, Ltd. and V.W. Eimicke Associates, Inc. (collectively
"Eimicke") is Remarkable's largest customer and accounts for approximately 7% of
Remarkable's sales. The Company has a contracts with Eimicke which (i) makes
Eimicke the sole distributor of Remarkable products in Canada, (ii) makes
Remarkable the exclusive manufacturer of laminated Federal law posters sold by
Eimicke in the United States and (iii) makes Eimicke a non-exclusive distributor
of a series of re-markable planning boards and other related products in the
United States. Each of these contracts are dated September 6, 1990 and expire
November 30, 1996.
Remarkable continuously acquires new customers by selectively mailing
specially designed catalogs to prospective customers. Remarkable obtains the
names of prospective customers through the rental of selected mailing lists from
outside marketing information services and other sources. These lists include
lists of business buyers of noncompeting direct mail companies, business
subscription lists and lists of compiled business names. Remarkable also rents
its mailing list to these same sources.
After placing an initial order, new customers receive additional catalogs
and other mailings to stimulate continued product purchases. Generating
bounce-back orders is an important aspect of Remarkable's marketing program
since the costs incurred in acquiring new customers from a particular mailing
may exceed the gross profit generated by that mailing.
Remarkable uses sophisticated state of the art information systems to
analyze the results of individual catalog mailings and uses the information
derived from these analyses to target future mailings. By analyzing the results
of mailings to prospective customers, Remarkable can capture and measure its
cost to acquire new customers. Each new customer is identified and categorized.
The cost to acquire each customer is then compared to the profitability of the
future business that can be expected from a typical customer from this category
based upon Remarkable's prior experience. Management uses these analyses to plan
future prospecting selections and mailings.
20
<PAGE>
Remarkable also uses its information systems to update and segment its
proprietary customer database. Remarkable is able to capture and analyze
customer response to specific catalog mailings through criteria such as recency
and frequency of purchases, the dollar amount of orders and specific products
ordered. The resulting information is used to adjust the frequency and
selectivity of Remarkable's various catalog mailings to particular groups of
customers in order to achieve improved response and profitability.
In addition, Remarkable uses these systems to analyze the performance of
each product and product family. This analysis enables Remarkable to strengthen
the merchandising of its catalogs and to determine the placement of and amount
of space devoted to each product in a particular catalog based upon response,
sales and profit performance.
Distribution Center
Remarkable maintains its corporate headquarters in Monsey, New York. This
location is approximately 5,000 sq. ft. and includes 3,500 sq. ft. of warehouse
space which is Remarkable's distribution center. The distribution center
maintains an inventory of products offered by Remarkable other than custom
printed items.
Order Entry and Fulfillment
Remarkable attempts to make purchasing their specialized office products as
convenient as possible for small and medium-sized businesses. Since
approximately 60% of customer orders are placed by telephone, the efficient
handling of calls is an extremely important aspect of Remarkable's business.
Remarkable offers a nationwide toll-free telephone number for the placing of
orders. Calls are received by well-trained order entry representatives who
utilize on-line terminals to enter customer orders into the fully computerized
order processing systems. The order entry representatives also may use these
systems to access information about products, pricing and promotions in order to
provide better service and answer customer questions. Remarkable's telephone
systems enable prompt and efficient service and have a negligible rate of
abandoned and lost telephone calls. In addition to telephone orders, Remarkable
also receives orders by mail and through a fax line.
When an order is entered into the system, the order is electronically
transmitted to the warehouse and a packing slip is printed on a printer for
order fulfillment. Remarkable has achieved efficiencies in order entry and
fulfillment which permit the shipment of over 95% of all orders on the day
received and the shipment of substantially all remaining orders on the following
business day. Orders generally are shipped by United Parcel Service.
Customer Service
Remarkable believes that exceptional customer service and customer relations
are key elements of its marketing program. Remarkable trains its order entry and
customer relations representatives to provide prompt, efficient and courteous
service to all customers.
As part of its commitment to customer service, Remarkable maintains a no
questions asked 30 day return policy. At the customer's request, Remarkable will
arrange for the pick-up of products to be returned and pay all return shipping
costs. Management believes that Remarkable's convenient return policies help
overcome a customer's initial reluctance to ordering products from a catalog.
Total returns and allowances average less than 1% of Remarkable's total sales.
21
<PAGE>
Merchandising and Purchasing
Remarkable offers a full line of time management and organizational tools
including the Remarkable line of reusable calendars which are now in the
sixteenth year of production.
Initial buying decisions are made by a product manager who is responsible
for selecting and pricing products. In addition, the product manager negotiates
with suppliers, analyzes customer response and sales results and plans catalog
page presentations, product promotions and mailing schedules. Inventory levels
are maintained through the use of Remarkable's computerized inventory control
system. This system has enabled Remarkable to minimize its inventory
out-of-stock position.
Remarkable's main product, the various reusable calendars, as well as its
federal law posters are manufactured specifically for Remarkable. The process is
started by an outside graphic design firm who does the layout and graphics for
each calendar or poster in accordance with specifications provided by
Remarkable. Remarkable then orders the particular paper from an independent
paper vendor and the paper, together with the camera ready art work produced by
the graphic designer, are sent to one of two printing firms employed by
Remarkable. Once the artwork is printed on the paper it is sent to a laminator
in the Rochester, New York area who applies the plastic coating and creates the
finished product which is then shipped to the distribution center in Monsey, New
York.
Other products which Remarkable sells, such as the markers, erasers and
cleaning fluids for the reusable calendars are purchased from a variety of
vendors. Geographic maps sold by Remarkable are purchased from American Map,
Inc.
Although a substantial portion of Remarkable's purchases are concentrated
with a relatively small number of suppliers, Remarkable believes that
alternative sources of supply are available for virtually every product it
carries. Remarkable considers its relationships with its suppliers to be
excellent and has not experienced any difficulty in obtaining brand name
products.
Management Information Systems
Remarkable utilizes a sophisticated state of the art computer system
involving all aspects of Remarkable's business. By handling all order entry
fulfillment and fulfillment in a centralized fashion, Remarkable can provide
faster order entry and fulfillment and better customer service. The general
accounting system and inventory control, product merchandising, customer
development and catalog analysis function are supported by Remarkable's computer
system.
Competition
Remarkable operates in a highly competitive environment. In its targeted
market of small to medium-sized businesses, Remarkable believes that its
principal competitors are other direct marketing companies and office supply
superstores. Remarkable's competitors are larger and have greater financial
resources than Remarkable.
Remarkable believes that its competitive position is enhanced by its
Remarkable line of calendars now in its sixteenth year of production and its
history of customers, prices and its strong commitment to customer service.
Remarkable believes that its commitment to customer service has enabled it to
compete effectively against other direct marketers of office supply products,
some of which offer comparable products at prices lower than those charged by
Remarkable.
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Direct marketing of office products has expanded in recent years at the
expense of local retail dealers. A key aspect of this growth has been overcoming
initial customer reluctance to purchase office products by catalog. As a result,
Remarkable views the success of other direct marketing companies as beneficial
to Remarkable because it increases customer acceptance of the direct marketing
concept. Remarkable believes that its principal competitors are G-Neil, Inc., a
company based in Florida, Myron Manufacturing and Keith Clark, a division of a
public company, in the direct market segment of the specialized office products,
and specifically the time management and organizational tools industry.
Competitors of Remarkable may be financially stronger, but still view Remarkable
as the industry leader. The office products industry has experienced increased
competition in recent years due to the emergence and rapid growth of office
products superstores. Superstores offer a wide variety of office products in a
warehouse-type setting at prices that are lower than those typically offered by
Remarkable. Superstores are continuing to increase their share of the office
products market. The expansion of the superstores has resulted in increased
price competition throughout the industry. Remarkable has responded to this
increased competition by aggressively emphasizing Remarkable's customer service
and stylish product line.
Future Operations
In September 1995, the Company executed a letter of intent to purchase
all of the issued and outstanding stock of Nexim Corp. ("Nexim"). Andrew
Jaloza, a shareholder of Nexim, became a director of the Company in January
1996. Upon the execution of the letter of intent, the Company paid to Nexim
$100,000 as a down payment for the purchase of Nexim. Nexim owns a technology
known as Medphone, a medical devise product, to which the Company has invested
approximately $63,000 toward its development. Nexim has no revenues and is not
an operating company. In April 1996, the Company decided not to pursue the
acquisition of Nexim. Nexim has agreed to execute a promissory note in favor
of the Company upon terms that are presently being negotiated in the amount
of $163,000 which represents a $100,000 downpayment to Nexim and $63,000 in
development costs.
Employees and Employee Training.
Remarkable places great emphasis on employee training and seeks to instill
in each employee a commitment to provide his or her best, honest and personal
service to every customer, large or small. Remarkable reinforces the importance
of understanding customers and their needs by periodically requiring all of its
managers and officers to receive incoming orders and customer service calls.
Employees are given updates on Remarkable's progress, products and progress
and are provided an opportunity to comment openly on its operations and
management. Remarkable will institute a program to provide additional incentives
for outstanding job performance and to afford career opportunities to each
employee in accordance with his or her skills, personal effort and future
potential. Remarkable will institute a bonus program for its officers and
managers. An employee stock purchase plan will be made available for all
full-time employees. See "Management Compensation Pursuant to Plans."
Remarkable considers its relations with its employees to be excellent. At
March 31, 1996, Remarkable employed approximately 6 persons on a full-time
basis, of whom 2 were engaged in management and administration, 3 were engaged
in marketing, order processing, customer service and creative services and 1 was
engaged in warehouse distribution operations. None of Remarkable's employees are
covered by a collective bargaining agreement.
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State Sales Taxes
Remarkable collects sales taxes only in New York and New Jersey. Remarkable
sells products to customers in all states of the United States. Several states
are pursuing litigation against a number of direct marketing companies seeking
sales tax for products sold into those states. From time to time, legislation
has been proposed in Congress that would have the effect of requiring Remarkable
to collect and remit sales taxes in each state where sales are consummated.
Remarkable believes that the enactment of any such legislation, or any other
changes in applicable law that would require Remarkable to collect sales taxes
in additional states, would impose an administrative burden on Remarkable but
would not have a material adverse effect on its business.
Properties
Remarkable's corporate headquarters are located at 382 Route 59, Section
310, Monsey, New York 10952. The facility includes approximately 5,000 square
feet, of which approximately 1,500 square feet are dedicated to office space and
approximately 3,500 square feet are used for warehouse and distribution
purposes. The 5,000 square foot office is occupied pursuant to a lease which
expires in October 31, 1998 and provides for an option to renew for two
successive five-year periods. This lease is made in the name of Success Direct,
Inc. which had changed its name to Remarkable Office Products, Inc. The monthly
rent is $3,000 per month.
The Company also sublets office space in Westwood, New Jersey at a monthly
rent of $1,637. The primary lease is held by Mr. Irwin Schneidmill, the
Company's President. In December, 1995, the Company moved all of its operations
to Monsey, New York and a third party has occupied this space as of April 1,
1996.
Legal Proceedings
Although there are no material legal proceedings pending against the
Company, as of the date of this Report, Celestial Realty Group. Inc., the
Company's inactive wholly owned subsidiary was involved in a lawsuit which was
filed in the Circuit Court for Eleventh Judicial Circuit in and for Dade County,
Florida by Mystic Pines, a Florida joint venture on June 13, 1990.
Progress of the Case
As of the date of this Prospectus, the Company has no further standing to
seek the relief as set forth in its amended complaint. This is based upon a
court ordered award of the lawsuit to NCNB bank. NCNB owned the mortgage on the
subject property and as a result of a foreclosure action, the lawsuit was
awarded to NCNB to satisfy the deficiency. The Company has had no choice but to
disallow any assets reflecting a favorable outcome in this action.
The Company filed on February 21, 1995 a complaint against Re-Prod, Inc. and
its stockholder Jacob Lahav in Federal Court in the Southern District of New
York, White Plains, File Number 961274, which seeks a modification of the
purchase price of the assets of Re-Prod, Inc. The Company contends that certain
assets, including accounts receivable and the customer mailing list, which the
Company was purchasing did not exist at the time of the acquisition or were
severally impaired. As a result the Company has suspended payments under a
$250,000 note payable to Re-Prod, Inc. and will not honor other terms of the
acquisition.
On March 14, 1996 Re-Prod Inc. and Jacob Lahav counter-claimed against the
Company, Mr. Schneidmill and John Formicola claiming fraud and conversion,
breach of contract, failure to pay on promissory, securities fraud and failure
to honor guarantee. The Company, Mr. Schneidmill and Mr. Formicola are
vigorously defending the claims against them and the Company is pursuing its
claims against Re-Prod and Mr. Lahav.
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MANAGEMENT
Directors, Executive Officers and Key Employees
The directors, executive officers and key employees of the Company are as
follows:
Name Age Position
---- --- --------
Bob J. Sudderth 56 Chairman, Director
Irwin Schneidmill 42 CEO, President, Chief Financial Officer and Director
Andy Jaloza 37 Director
James Lofland 45 Director
Robert Trause 53 Director
Martin Ewenstein 61 Director
Directors are elected to serve until the next annual meeting of stockholders
and until their successors have been elected and have qualified. Directors do
not receive remuneration for their services as such, but may be reimbursed for
expenses incurred in connection therewith, such as the cost of travel to Board
meetings. Officers serve at the pleasure of the Board of Directors until their
successors have been elected and have qualified.
Bob J. Sudderth currently serves as Chairman of the Board and had been the
President and Treasurer of the Company until August 1, 1995. Mr. Sudderth has
been active in the valve business since 1966, having worked in valve sales and
service, and related businesses in Oklahoma, Texas, California, New Jersey and
Canada. During the 1970's and 1980's he was active as an officer in unrelated
companies engaged in the business of industrial equipment supplies, oil and gas
development and production, and real estate development. From 1988 to 1990 he
spent full time on personal investments, primarily on real estate projects which
were operated by unrelated third parties. In January, 1990, he filed a personal
voluntary Chapter 7 petition in US Bankruptcy Court for the Northern District of
Texas, Dallas Division. The case was discharged on April 14, 1992. In late 1990,
Mr. Sudderth founded and operated Valves International in northeastern Oklahoma
and later incorporated it in that state. Valves International, Inc. had been a
wholly owned subsidiary of the Company. Following a growing volume of business
with customers and suppliers in the Texas Gulf Coast area, he acquired the
industrial valve shop and office facility at 4807 Clinton Drive in Houston in
May, 1992, and changed the name to Central Valve Services, Inc. From that
company, Alloy Valve International, Inc. was formed in October, 1992 as a
separate corporation to perform both domestic and international sales and
marketing functions for valve inventory at all company locations. CVS and AVI
had both been wholly owned subsidiaries of the Company. On ,1995, Mr. Sudderth
became the President and Chief Executive Officer and Director of Turkey Delight,
Inc. a/k/a ATCO Corporation, a publicly traded company which trades on the "Pink
Sheets". On August 1, 1995, ATCO purchased substantially all of the valve
businesses from the Company. As a result of such acquisition, the Company owns
approximately 34% of ATCO. See "Certain Relationships and Related Transactions".
Irwin Schneidmill has been the President, Chief Executive Officer and the
Director of the Company
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since August 1, 1995. From January 1991 to July 1993, Mr. Schneidmill had been a
partner at Cataino & Schneidmill, CPAs, a public accounting firm. From July 1993
to October 1994, Mr. Schneidmill had been the sole stockholder of Irwin
Schneidmill, P.C., a public accounting firm. Mr. Schneidmill formed Success
Direct, Inc., a New Jersey corporation in October 1995 and remains as the
President of that Company. See "Certain Relationships and Related Transactions".
Andrew Jaloza became a director of the Company in November 1995. For the
last five years Mr. Jaloza has been a practicing attorney in New York City. Mr.
Jaloza is shareholder of Nexim Corp., a corporation that the Company
had executed a letter of intent to purchase in September 1995. This acquisition
is no longer being pursued by the Company. See "Certain Relationships and
Related Transactions".
James Lofland has been a director of the Company since November of 1995. For
the last five years he has owned and operated Lofland's Restaurant in New York
City.
Robert W. Trause has been a director of the Company since March 4, 1996.
From 1991 to present he has been a commercial insurance broker at Professional
Insurance Associates in Carlstadt, New Jersey. From 1990 through 1991 he had
been a consultant at Employer Solutions, Inc. in Farmingdale, New Jersey where
he consulted companies in reduction of corporate overhead and employee benefits.
From 1986 to 1990 Mr. Trause had been a Senior Vice President of J.T. Moran &
Company Inc., an investment bank, where he directed administration for the New
York headquarters and 16 branches which encompassed over 1,000 employees.
Martin Ewenstein became a director of the Company on March 4, 1996. Mr.
Ewenstein is the Vice President of Yonmir Pearls, Inc., a privately held
importer of pearls. Mr. Ewenstein has held this position for the past five
years. Prior thereto he had been employed by CBS broadcasting for 20 years as a
corporate planning economist. Mr. Ewenstein has also been a book publisher and a
real estate entrepreneur.
Directors of the Company are elected for one year terms or until their
successors are elected, and officers serve at the pleasure of the Board of
Directors.
Executive Compensation
At June 30, 1995, neither the Company nor its subsidiaries paid a salary to
any of its officers. Mr. Irwin Schneidmill became the President and Chief
Executive Officer of the Company in August, 1995 at an annual salary of $140,000
per annum which salary was approved by the Board of Directors of the Company at
that time. In consideration of his employment by the Company Mr. Schneidmill
also received and beneficially owns 66,667 options of the Company which are
immediately exercisable at $3.00 per share pursuant to a Stock Option
Certificate and Agreement dated September 15, 1995. The options expire in
September 1998. In addition, the Company pays $570 per month for the lease on
Mr. Schneidmill's car, plus automobile insurance. Mr. Schneidmill also
participates in the Company's group health insurance plan.
Employment and Consulting Agreements
Mr. Schneidmill has entered into a five-year employment agreement dated
March 1, 1996 with the Company to act as President and Chief Executive Officer;
which provides for an initial annual base salary of $120,000. Mr. Schneidmill
shall also be entitled to bonuses based on increased sales and earnings of the
operating entity. Under the employment agreement, Mr. Schneidmill also receives
disability insurance, hospitalization, major medical, vacation and other
employee benefits, reimbursement of reasonable business expenses incurred on
behalf of the Company, and use of Company-owned vehicles.
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Limitation on Liability of Directors
As permitted by Nevada law, the Company's Certificate of Incorporation
contains an article limiting the personal liability of directors. The
Certificate of Incorporation provides that a director of the Company shall not
be personally liable for any damages from any breach of fiduciary duty as a
director, except for liability based on a judgment or other final adjudication
adverse to him establishing that his acts or omissions were committed in bad
faith, or the result of active or deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained a financial profit
or other advantage to which he was not legally entitled. This article is
intended to afford directors additional protection and limit their potential
liability from suits alleging breach of the duty of care. The Company believes
this article will assist it in securing services of directors who are not
employees of the Company. As a result of the inclusion of such a provision,
holders of the Common Stock may be unable to recover monetary damages against
directors for actions taken by them which constitute negligence or gross
negligence in violation of their fiduciary duties, although it may be possible
to obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available for any particular case,
holders of the Common Stock may not have an effective remedy against the
challenged conduct.
The Company's Certificate of Incorporation and Bylaws also provide for
indemnification of all officers and directors of the Company to the fullest
extent permitted by law. In addition, Messrs. Schneidmill and Formicola are also
entitled to such indemnification pursuant to an indemnification agreement with
the Company.
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 Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On August 29, 1995 the Company purchased, as of July 1, 1995, all of the
issued and outstanding common stock of Success Direct, Inc., a mail order
business products company ("Success"). The principal stockholder of Success, Mr.
Irwin Schneidmill who owned 41.5% of Success, became the President and Chief
Executive Officer of the Company on August 1, 1995.
Simultaneously with the acquisition of Success, Success assigned to the
Company its agreement to purchase certain business assets from Re-Prod, Inc.,
including the name Remarkable Products, and the Company consummated the
transaction with Re-Prod, Inc. The assets purchased from Re-Prod, Inc. are
related to the direct mail industry.
In connection with the above, the Company paid to Mr. Schneidmill 27,667
shares of the restricted common stock of the Company. Additionally, in
connection with the acquisition of certain assets of Re-Prod, Inc., Mr.
Schneidmill and Mr. John Formicola, a stockholder of the Company, have
personally guaranteed the payment by the Company of a $250,000 promissory note
payable to Re-Prod, Inc., which represents part of the consideration paid by the
Company to acquire the assets of Re-Prod, Inc. This note bares interest at 9%
per annum and is to be paid monthly by the Company in varying amounts by
applying the income received from renting its mailing list on a monthly basis.
On November 20, 1995, the Company contends there was $210,127.53 principal
amount remaining under the note.
As part of the acquisition, Re-Prod, Inc., also received 50,000 shares of
the restricted common stock of the Company. 25,000 of such 50,000 were
personally guaranteed by Mr. Schneidmill to have a market value of
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$393,750 ($15.75 per share) on January 1, 1996. The value of the common stock at
February 1, 1996 was approximately $78,750. The Company and Mr. Schneidmill and
Mr. Formicola personally, have also executed a "Put Option Agreement", whereby
Re-Prod, Inc. can put these 50,000 shares to the Company as of January 1, 1996
and demand payment of $393,750. Such demand was made on January 31, 1996.
However, due to litigation between the parties this demand has not been honored.
See "Legal Proceedings". Furthermore, Mr. Schneidmill and Mr. Formicola have
guaranteed that the remaining 50,000 shares of the Company's common stock held
by Re-Prod, Inc. will have a market value of $412,500 on July 1, 1996. The
shares having a guaranteed value at July 1, 1996 are subject to an identical Put
Option Agreement.
The Company, together with Mr. Schneidmill and Mr. Formicola have contended
that the assets purchased from Re-Prod, Inc. were not as represented in the
purchase agreement and are seeking a renegotiation of the consideration paid for
those assets, including a renegotiation of their personal guarantees. See "Legal
Proceedings".
The Company has agreed to indemnify Mr. Schneidmill and Mr. Formicola
against any liability resulting from these guarantees.
Mr. Schneidmill is the lessee of 2,850 square feet of office space at 345
Kinderkamack Road in Westwood, New Jersey. The annual rent for such space is
$51,300. Mr. Schneidmill has sublet a portion of this space to the Company at a
monthly rent of $1,637. Although, as of December 1995, the Company has moved
substantially all of its operations to Monsey, New York and is not currently
utilizing the Westwood, New Jersey space, it will paying its rent under the
sub-lease until April 1, 1996 when another sub-tenant will take over the space.
In addition, a portion of this space is sublet to Performance Capital
Corporation, a financial consulting firm owned by Mr. John Formicola, a
shareholder of the Company, for $500 per month. In return for consulting
services and certain loans made to the Company by Performance Capital
Corporation, the Company has paid this $500 per month since December 1995.
Performance Capital Corporation which is owned by Mr. John Formicola had
lent Success $250,000 prior to its acquisition by the Company in the form of
five promissory notes in the amount of $50,000 each dated December 15, 1994 and
January 15, February 15, March 15 and April 15, 1995. Each bearing interest at
the rate of 10% per annum. Performance Capital Corporation had owned 41.5% of
Success at that time. The Company assumed that debt upon the acquisition of
Success and paid to Performance Capital Corporation 27,667 shares of common
stock of the Company. The terms of that debt are as follows: all interest is to
accrue through 1995 and payments on interest are to commence February 1, 1996
and accrued interest shall be paid in six equal monthly installments. Payments
on principal are to commence February 1, 1997 and shall be paid monthly,
together with interest, for 60 months. Subsequent to the acquisition of Success
by the Company, Mr. Formicola and or Performance Capital have lent the Company
an aggregate of approximately $205,000 for working capital purposes. This
$205,000 debt is subject to an 11% demand promissory note date August 1, 1995.
On August 31, 1995, the Company entered into a purchase agreement whereby it
sold all of its wholly owned subsidiaries with the exception of U.S. Powder
Coatings, Inc. to Turkey Delight, Inc., a/k/a ATCO Corporation ("Purchaser") for
$1,900,000 in cash, promissory notes and common stock. ATCO Corporation is a
public company and it principal executive officer, Mr. Bob J. Sudderth, is also
the Chairman of the Board of Directors of the Company. The subsidiaries referred
to herein include Valves International, Inc., Central Valve Services, Inc.,
Alloy Valve International, Inc. and Gulf Coast Powder Coatings, Inc. The sales
price consisted of a combination of 1,550,000 shares of common stock of ATCO,
issuance of a $150,000 promissory note and the payment of $200,000 contingent
upon the successful completion of a stock offering by ATCO. Currently, among the
Company's largest asset is its shareholdings of ATCO Corporation.
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Mr. Sudderth had sold certain equipment and facilities to Central Valve
Services, Inc., which had been a subsidiary of the Company at the time of such
sale. Mr. Sudderth is owed approximately $600,000 from Central Valve Services,
Inc. as a result of such sale. The Company is not liable for such debt.
In September 1995, the Company executed a letter of intent to
purchase all of the issued and outstanding stock of Nexim, Andrew
Jaloza who is a stockholder of Nexim became a director of the Company in
January 1996. Upon the execution of the letter of intent, the Company paid a
down payment for the purchase of Nexim. Nexim owns a technology known as
Medphone, a medical devise product, to which the Company has invested
approximately $63,000 toward its development. The Company has determined not
to proceed with the acquisition and is negotiating with Nexim to
establish the terms of a promissory note to repay the Company for its
expenditures.
Richard Greene, the Company's former President and legal counsel received
6,667 shares of the Company's common stock in full payment of legal services
previously rendered to the Company. These shares were registered for Mr. Greene
pursuant to a Form S-8 filed with the Securities and Exchange Commission on
September 18, 1995, and Mr. Greene has since disposed of the shares.
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of February 1, 1996, the record and
beneficial ownership of Common Stock of the Company by each officer and
director, all officers and directors as a group, and each person known to the
Company to own beneficially or of record five percent or more of the outstanding
shares of the Company:
Number of Percentage
Shares Owned of Shares
Name and Address** Beneficially(1)(3) Outstanding
- ------------------ ------------------ -----------
Irwin Schneidmill(2) 94,334 9.9%
Bob J. Sudderth(4) 63,500 6.66%
P.O. Box 32
Nowata, OK 74448
John Formicola(5) 187,648 19.68%
Re-Prod, Inc. 50,000 5.24%
245 Pegasus Avenue
Northvale, NJ 07647
Jacob Lahav(6) 50,000 5.24%
Officers and directors
as a group (2 persons) (2) 157,667 16.56%
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- ----------
* Less than 1%.
** Unless otherwise specified, the address of each named person is c/o 382
Route 59, Section 310, Monsey, NY 10952.
(1) Shares of Common Stock which are not outstanding but which a person has the
right to acquire within sixty days pursuant to outstanding options are
deemed outstanding for the purpose of computing such person's ownership of
Common Stock and percentage of outstanding Common Stock owned by such
person, but are not deemed to be outstanding for the purpose of computing
number of shares or the percentage of Common Stock owned by any other
person.
(2) Includes 66,667 shares issuable upon exercise of currently exercisable
options which are exercisable at $3.00 per share. See "Executive
Compensation."
(3) Does not include 278,153 of Preferred Stock of the Company which is
currently exercisable into Common Stock.
(4) Includes 8,334 shares owned by Joyce Sudderth, the wife of Bob J. Sudderth.
(5) Includes 27,667 shares owned by Performance Capital Corp., 100% of which
100% is owned by John Formicola, includes 93,316 shares of Common Stock held
by Mr. Formicola as a result of a conversion of approximately $205,000 in
debt at a conversion rate of $2.25 per share, includes options to purchase
66,665 shares of Common Stock which are immediately exercisable at $3.00 per
share.
(6) By virtue of his positions as Chief Executive Officer and President of
Re-Prod, Inc., as well as a 100% owner of Re-Prod, Inc., Mr. Lahav may be
deemed to have voting and investment power with respect to, and therefore
may be deemed beneficial owner of, Re-Prod Inc's ownership of the Company.
DESCRIPTION OF SECURITIES
Capital Stock
Common Stock
The Company is authorized to issue 500,000,000 shares of Common Stock, $.001
par value per share. As of the date of this Prospectus, there are 953,283 shares
of Common Stock outstanding. Each share of Common Stock entitles the holder
thereof to one vote on all matters submitted to a vote of the shareholders.
Since the holders of Common Stock do not have cumulative voting rights, holders
of more than 50% of the outstanding shares can elect all of the directors of the
Company and holders of the remaining shares by themselves cannot elect any
directors. The holders of Common Stock do not have preemptive rights or rights
to convert their Common Stock into other securities. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of the Common
Stock have the right to a ratable portion of the assets remaining after payment
of liabilities and after payment to the preferred stockholders. All shares of
Common Stock outstanding and to be outstanding upon completion of this offering
are and will be fully paid and nonassessable.
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Preferred Stock
The Company is also authorized to issue 500,000,000 shares of preferred
stock $.001 par value. As of the date of this prospectus 278,153 shares of
preferred stock are outstanding. The preferred stock entitles holders to a
preference in liquidation upon dissolution of the Company's assets. The
preferred stock is convertible into common stock at the rate of 15 shares of
preferred stock for one share of common stock.
SHARES ELIGIBLE FOR FUTURE SALE
As of the date of this Prospectus, the Company has outstanding 953,283
shares of Common Stock, without taking into account shares of Common Stock
issuable upon exercise of the Warrants.
Of the Company's shares of Common Stock currently outstanding, 522,714 are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act of 1933, as amended ("Act"), and under certain circumstances may be sold
without registration pursuant to that rule. As of the date of this Prospectus,
190,156 shares of Common Stock, held by 44 beneficial owners, are eligible for
sale pursuant to Rule 144.
In general, under Rule 144 as currently in effect, subject to satisfaction
of certain other conditions, a person (or persons whose shares are required to
be aggregated), including any affiliate of the Company, who beneficially owns
"restricted shares" for a period of at least two years is entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of 1% (9,5331 after this offering) of the then outstanding shares of
Common Stock, or if the Common Stock is quoted on the NASDAQ System, the average
weekly trading volume of the Common Stock during the four calendar weeks
preceding the filing of the required notice of sale with the Securities and
Exchange Commission. The seller also must comply with the notice and manner of
sale requirements of Rule 144, and there must be current public information
available about the Company. In addition, any person (or persons whose shares
are aggregated) who is not, at the time of the sale, nor during the preceding
three months, an affiliate of the Company, and who has beneficially owned
restricted shares for at least three years, can sell such shares under Rule 144
without regard to any of the limitations described above.
No predictions can be made of the effect, if any, that future sales of
restricted shares or the availability of restricted shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of the restricted shares of Common Stock in the public
market could adversely affect the then prevailing market prices for the Common
Stock and could impair the Company's ability to raise capital through the sale
of its equity securities.
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SELLING STOCKHOLDER AND
PLAN OF DISTRIBUTION
The Selling Stockholders and number of securities owned are as follows:
Common Stock Warrants
Priscilla and Burton Apat(1) 3,334 6,667
William Ballantyne(1) 3,334 6,667
Dr. Jose Bardelas(1) 3,334 6,667
Roger Bosch(1) 834 1,667
Richard Caporaso(1) 1,667 3,333
Sal Coppola(1) 834 1,667
Howard Culver Targhee(1) 3,334 6,667
Robert Cunio(1) 3,334 6,667
Joseph Danowski(1) 834 1,667
Joseph Domousky(1) 3,334 6,667
Michael Ferlisa(1) 3,334 6,667
Frank Fila(1) 6,667 13,333
Lou Freedman(1) 3,334 6,667
Chaskel Friesel(1) 3,334 6,667
Richard Haraif(1) 3,334 6,667
Mark Kirethernes(1) 6,667 13,333
Fred Kline(1) 10,000 20,000
Augusto Panzini(1) 1,667 3,333
Vincent Pazienza(1) 13,334 26,667
Michael Pontano(1) 6,667 13,333
George Restivo(1) 3,334 6,667
Dr. Stewart Rosenberg(1) 3,334 6,667
Mel Schwartz(1) 3,334 6,667
Stephen Sholy(1) 6,667 13,333
Walter Spilsbury(1) 6,667 13,333
Richard Stallin(1) 1,667 3,333
Robert Wilkins(1) 3,334 6,667
B&B Vending(1) 834 1,667
Leonard Waldman(1) 3,334 6,667
Walter Wiebe(1) 3,334 6,667
Phil & Lisa Silvergate JT (1) 1,667 3,333
Performance Capital Corporation(2) 93,316
Howard Sperling(3) 2,500
John Patten(4) 10,000
Irwin Schneidmill(5) 66,665
John Formicola(6) 66,665
Re-Prod, Inc.(7) 50,000
Gregory Sichenzia(8) 1,667
Thomas A. Rose(8) 1,667
Edward Weltman(8) 1,667
David Hashmall(8) 1,667
Mae Parker(9) 33,333
Kathleen N. Patten(9) 13,333
Kathleen N. Patten c/o Mary C. Patten(9) 6,667
Kathleen N. Patten c/o Sara E. Patten(9) 6,667
Anne L. Patten(9) 6,667
TOTAL 349,168
32
<PAGE>
1. In April 1995, Joseph Dillon & Company, Inc., (the "Underwriter") a
registered broker dealer, undertook a private placement of approximately
$900,000 of the Company's securities. The securities offered consisted of
120,000 shares of Common Stock and Common Stock Purchase Warrants ("Private
Purchase Warrants") exercisable for 240,000 shares of Common Stock at an
exercise price of $22.50 per share. The Private Placement Warrants expire on
October 3, 1998. The Underwriter may act as a coordinating broker acting in
connection with the proposed sale of shares by these Selling Stockholders.
2. Performance Capital Corporation received shares of stock in conversion of
approximately $205,000 of debt at the rate of $2.25 per share on March 1, 1996.
The sole shareholder of Performance Capital Corporation is John Formicola, a
shareholder of the Company.
3. Howard Sperling received Common Stock as a result of a private placement of
securities in October 1995.
4. John Patten received shares of Common Stock in
connection with a conversion of a $25,000 loan made to the Company.
5. Irwin Schneidmill received 66,667 options to purchase Common Stock of the
Company in connection with his original employment with the Company. The Options
are exercisable at $3.00 per share of Common Stock and expire on September 8,
1998.
6. John Formicola received 66,667 options to purchase common stock in respect of
a personal guarantee made for the benefit of the Company. The Options are
exercisable at $3.00 per share of Common Stock and expire on September 8, 1998.
7. Re-Prod, Inc. received 50,000 in connection with the acquisition of certain
assets from Re-prod, Inc. by the Company.
8. These individuals, attorney's of the law firm Schneck Weltman Hashmall &
Mischel, LLP received Common Stock in exchange for legal services rendered.
9. These individuals and entities purchased common stock of the Company in
various private placement transactions on July 29, 1994, October 11, 1994,
November 22, 1994, December 10, 1994, December 15, 1994 and December 19, 1994
the purchase of the Common stock was $1.50 per share in each transaction.
All Selling Stockholders are free to offer and sell the shares of Common Stock
and the Common Stock underlying Warrants following exercise thereof, in such
manner and at such prices as it shall determine. Such shares may be offered by
the Selling Stockholders in one or more types of transactions, which may or may
not involve brokers, dealers or cash transactions. Other than the securities
held by the Private Placement investors, There is no underwriter or coordinating
broker acting in connection with the proposed sale of shares by the Selling
Stockholders.
33
<PAGE>
Transfer Agent, Warrant Agent and Registrar
The transfer agent, warrant agent and registrar for the Common Stock is
Florida Atlantic Stock Transfer Co., Tamarac, Florida 33321.
LEGAL MATTERS
The validity of the securities offered hereby has been passed upon for the
Company by Schneck Weltman Hashmall & Mischel LLP, New York, New York.
EXPERTS
The audited financial statements included in this Prospectus have been so
included in reliance on the report of Joel S. Baum, P.C., as independent
certified public accountants, for the periods indicated in their report, given
on the authority of such firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C. 20549, a Registration Statement on Form SB-2, under the
Securities Act of 1933, as amended, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, as permitted by
the Rules and Regulations of the Commission. For further information with
respect to the Company, the Common Stock and the Warrants, reference is hereby
made to such Registration Statement and the exhibits and scheduled filed
herewith. The Registration Statement and the exhibits and schedules filed
therewith, may by inspected without charge at the Commission's office in
Washington, D.C. and copies of all or any part thereof may be obtained from the
Commission upon payment of the prescribed fee.
34
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
FINANCIAL STATEMENTS
Index to Consolidated Financial Statements
Page
----
Report of Independent Certified Public Accounts F-2
Consolidated Financial Statements
Consolidated Balance Sheet as of June 30, 1995 and
October 31, 1994 F-3-4
Consolidated Statements of Operations for the Eight
Months Ended June 30, 1995 and the Twelve Months
Ended October 31, 1994 F-5
Consolidated Statements of Stockholders' Equity for the
Twelve Months Ended October 31, 1992, 1993, 1994 and
the Eight Months Ended June 30, 1995 F-6
Consolidated Statements of Cash Flows for the Eight
Months Ended June 30, 1995 and the Twelve Months
ended October 31, 1994 F-7
Notes to Audited Consolidated Financial Statements F-8-15
Unaudited Financial Statements for the Nine Months
Ended March 31, 1996
Condensed Consolidated Balance Sheets F-16-17
Condensed Consolidated Sttatements of Operations F-18-19
Consolidated Statements of Cash Flows F-20
Notes to Unaudited Consolidated Financial Statements F-21
F-1
<PAGE>
[LETTERHEAD OF JOEL S. BAUM P.A.]
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Celestial Ventures Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheets of Celestial
Ventures Corporation and Subsidiaries as of June 30, 1995 and October 31, 1994
and the related consolidated statements of operations, stockholders' equity and
cash flows for the eight months ended June 30, 1995 (Note 1) and the year ended
October 31, 1994. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our 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 referred to above present fairly, in
all material respects the financial position of Celestial Ventures Corporation
and Subsidiaries as of June 30, 1995 and October 31, 1994 and the results of its
operations for the periods ended June 30, 1995 and October 31, 1994 in
conformity with generally accepted accounting principles.
Coral Springs, Florida /s/ Joel S. Baum P.A.
February 14, 1996
F-2
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND OCTOBER 31, 1994
1995 1994
---- ----
Assets
Current Assets
Cash and Cash Equivalents $ (1,131) $ 13,749
Accounts Receivable - 0 - 382,859
Notes Receivable (Note 11) 179,210 - 0 -
Inventory (Note 1) - 0 - 1,103,255
Investments (Note 11) 300,000 - 0 -
Prepaid Expenses - 0 - 19,756
----------- ----------
Total Current Assets 478,079 1,519,619
----------- ----------
Property, Plant & Equipment (Net)
(Note 2) 464,892 2,020,943
----------- ----------
Other Assets
Investments (Note 11) 1,250,000 - 0 -
Notes Receivable (Note 11) 200,000 - 0 -
Interest Receivable 4,667 - 0 -
Refundable Deposits - 0 - 17,942
Intangible Assets (Note 6) - 0 - 234,836
----------- ----------
Total Other Assets 1,454,667 252,778
----------- ----------
Total Assets $ 2,397,638 $3,793,340
=========== ==========
See Accompanying Notes to Consolidated Financial Statements.
F-3
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 AND OCTOBER 31, 1994
1995 1994
---- ----
Liabilities
Current Liabilities
Account Payable $164,069 $ 392,326
Accrued Expenses - 0 - 47,461
Notes Payable (Note 3) - 0 - 347,890
-------- ----------
Total Current Liabilities 164,069 787,677
-------- ----------
Long Term Liabilities
Notes Payable (Note 3) 170,000 1,174,525
-------- ----------
Total Liabilities $334,069 $1,962,202
-------- ----------
Shareholders' Equity
Shareholders' Equity
Preferred Stock - $.001 par value;
Authorized 500,000,000; issued
and outstanding - 889,426 shares
at June 30, 1995 and October 31,
1994 $ 889 $ 889
Common Stock - $.001 par value;
authorized 500,000,000; issued
and outstanding - 9,905,868
shares at June 30, 1995 and
7,768,884 shares at October 31,
1994 9,906 7,769
Less: Common stock discount below
par value (28,500) (28,500)
Additional Paid in Capital 4,362,154 3,738,012
Accumulated Deficit (2,280,880) (1,887,032)
----------- -----------
Total Shareholders' Equity $ 2,063,569 $ 1,831,138
----------- -----------
Total Liabilities
& Shareholders' Equity $ 2,397,638 $ 3,793,340
=========== ===========
See Accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE EIGHT MONTHS ENDED JUNE 30, 1995
AND THE YEAR ENDED OCTOBER 31, 1994
1995 1994
---- ----
Sales $ -0- $ 2,419,511
----------- -----------
Cost of Sales -0- 1,838,428
----------- -----------
Gross Profit -0- 581,083
Operating Expenses:
General & Administrative
Expenses 48,888 1,427,246
----------- -----------
Loss Before Interest Income
and Nonrecurring Items (48,888) (846,163)
Interest Income 4,667 -0-
----------- -----------
Net Loss Before Nonrecurring
Items (44,221) (846,163)
Nonrecurring Items:
Write down of Equipment -0- 385,000
Loss on Investment (Note 4) -0- 201,875
Loss Through Date of Disposition of
Subsidiaries (Note 11) 500,041 -0-
Loss on Disposal of Subsidiaries 71,116 -0-
----------- -----------
Net (Loss) (615,378) (1,433,038)
Accumulated Deficit - Beginning (1,887,032) (453,994)
Sale of Subsidiaries (Note 11) 221,530 -0-
----------- -----------
Accumulated Deficit - Ending $(2,280,880) $(1,887,032)
=========== ===========
Weighted Average Common
Shares Outstanding 8,570,253 5,751,942
----------- -----------
Earnings (Loss) Per Share
(Note 12) $ (.07) $ (.25)
=========== ===========
See Accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FROM OCTOBER 31, 1992 THROUGH JUNE 30, 1995
<TABLE>
<CAPTION>
Common Common Additional
Preferred Common Stock Stock Paid-In Accumulated
Stock Stock Subscribed Discount Capital Deficit
----- ----- ---------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance
10/31/92 $ 1,863 $ 2,695 $ - 0 - $ (28,500) $ 950,242 $ (719,228)
----------- ----------- ------- ----------- ----------- -----------
Common Stock
Issued - 0 - 1,040 - 0 - - 0 - 1,611,883 - 0 -
Subscriptions
issued - 0 - - 0 - 1,006 - 0 - - 0 - - 0 -
Net Income
10/31/93 - 0 - - 0 - - 0 - - 0 - - 0 - 265,234
----------- ----------- -------- ----------- ----------- -----------
Balance
10/31/93 1,863 3,735 1,006 (28,500) 2,562,125 (453,994)
Stock Issued
(Redeemed) (974) 4,034 - 0 - - 0 - 1,175,887 - 0 -
Subscriptions
Received - 0 - - 0 - (1,006) - 0 - - 0 - - 0 -
Net (Loss)
10/31/94 - 0 - - 0 - - 0 - - 0 - - 0 - (1,433,038)
----------- ----------- ------- ----------- ----------- -----------
Balance
10/31/94 889 7,769 - 0 - (28,500) 3,738,012 (1,887,032)
Common Stock
Issued - 0 - 2,137 - 0 - - 0 - 446,689 - 0 -
Sale of
Subsidiaries - 0 - - 0 - - 0 - - 0 - 177,453 221,530
Net (Loss)
6/30/95 - 0 - - 0 - - 0 - - 0 - - 0 - (615,378)
----------- ----------- ------- ----------- ----------- -----------
Balance
6/30/95 $ 889 $ 9,906 $ - 0 - $ (28,500) $ 4,362,154 $(2,280,880)
=========== =========== ======= =========== =========== ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE EIGHT MONTHS ENDED JUNE 30, 1995
AND THE YEAR ENDED OCTOBER 31, 1994
1995 1994
---- ----
Cash Flows From Operations:
Net Income (Loss) $ (615,378) $(1,433,038)
Adjustments to Reconcile Net Income
to Net Cash Used for Operating
Activities:
Depreciation & Amortization - 0 - 129,999
(Increase) Decrease in Inventory 1,103,255 (280,276)
Decrease in Accounts Receivable 382,859 30,459
Decrease in Subscription Receivable - 0 - 1,006
(Increase) Decrease in Notes
Receivable (383,777) 52,000
(Increase) Decrease in Prepaid
Expenses 14,139 (179)
Decrease in Other Assets 247,161 132,290
(Decrease) in Accounts Payable (228,257) (322,487)
(Decrease) in Accrued Expenses (47,461) (19,229)
Increase (Decrease) in Notes
Payable (1,352,315) 14,984
(Increase)in Investments (1,550,000) - 0 -
----------- -----------
Net Cash (Used) Provided by
Operations (2,429,774) (1,694,471)
Cash Flows From Financing Activities:
Increase in Long Term Debt - 0 - 171,996
----------- -----------
Cash Flows From Investing Activities:
Sale of Subsidiaries 1,900,000 - 0 -
Purchase of Property, Plant
& Equipment - 0 - (83,351)
Issuance of Common Stock 2,137 3,060
Write down of Fixed Assets - 0 - 385,000
Subscriptions of Common Stock - 0 - (1,006)
Additional Paid in Capital
generated as a result of issuance
of Common Stock 512,757 1,175,887
----------- -----------
Net Cash Provided by (Used for)
Investing Activities 2,414,894 1,479,590
----------- -----------
Net (Decrease) in Cash (14,880) (42,885)
Cash - Beginning of Year 13,749 56,634
----------- -----------
Cash - End of Year $ (1,131) $ 13,749
=========== ===========
See Accompanying Notes to Consolidated Financial Statements.
F-7
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A - Organization and Business
Celestial Ventures Corporation was organized under the laws of the
State of Nevada on January 28, 1987. The Company's activities consist
of ownership of various diversified businesses. These businesses are
involved in the sales and repair of industrial valves, and
application of powder coatings onto industrial materials. The valve
and application of Powder Coating businesses were sold May 1, 1995.
The Company subsequently purchased a wholly-owned subsidiary on July
1, 1995, Success Direct Inc., which is in the business of "Business
to Business" direct mail marketing. Effective June 30, 1995, the
Company changed its year-end from October to June.
B - Significant Accounting Policies
Basis of Accounting:
The Company policy is to prepare its financial statements using the
accrual basis of accounting in accordance with generally accepted
accounting principles.
Inventory:
Inventory is valued at the lower of cost or market determined by the
weighted average method.
Property, Equipment and Depreciation:
Property and equipment are recorded at cost. The Company charges
expenditures for additions or major replacements to the asset
accounts. The Company provides for depreciation using the
straight-line method over the estimated useful lives of the assets.
Organizational Costs and Goodwill:
Organization costs and goodwill are capitalized and are being
amortized using the straight-line method over 5 and 40 years,
respectively.
Principles of Consolidation:
The consolidated financial statements include accounts of its
wholly-owned subsidiaries. All material intercompany transactions
have been eliminated.
F-8
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 2 - PROPERTY, PLANT AND EQUIPMENT
Consists of the following:
1995 1994
---- ----
Land $ - 0 - $ 125,000
Building - 0 - 390,806
Equipment 458,475 1,682,025
Office Furniture and Equipment - 0 - 29,439
Transportation Equipment - 0 - 18,200
Leasehold Improvements 40,270 65,830
-------- ----------
Total 498,745 2,311,300
Less: Accumulated Depreciation (33,853) (290,357)
--------- ----------
$ 464,892 $2,020,943
========= ==========
NOTE 3 - LONG-TERM DEBT
1995 1994
---- ----
12% Note due to Plaza Bank
secured by inventory
& equipment $ - 0 - $ 7,000
10.875% Note due to Warburton
Valve of Texas, Inc., secured
by inventory and equipment - 0 - 6,317
Notes to various individuals
and companies due primarily
beyond one calendar year at
varying interest rates; see
Item (b) below. - 0 - 434,664
13% Note due to shareholder
/CEO, including various
accrued amounts. - 0 - 585,359
Interest and non-interest
bearing notes due to Sirco, Inc.
in connection with an asset
acquisition. - 0 - 129,429
4% RM Note; see Item (a)
below. 170,000 170,000
$25,000 revolving line of
credit with Lone Star Bank.
Variable Interest. - 0 - 20,528
-Continued-
F-9
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 3 - LONG-TERM DEBT - Continued
1995 1994
---- ----
9% Notes of varying maturities
due to W.A. Salzman, in
connection with an asset
acquisition. $ - 0 - $ 123,563
Various notes to vendors
and suppliers due within
one year. - 0 - 45,555
--------- ----------
Total Long Term Debt 170,000 1,522,415
Less Current Portion - 0 - (347,890)
--------- ----------
Net Long Term Debt $ 170,000 $1,174,525
========== ==========
As described in Note 1, the Company has or is currently in the
process of voluntarily restructuring its debt. This includes such
actions as:
a.) Prior to October 31, 1994, management negotiated at 50%
reduction of its debt related to the acquisition of U.S. Powder
Coaters, Inc. This also resulted in the recognition of
extraordinary income in the amount of $170,000.
b.) After October 31, 1994, management negotiated significant changes
in its debt to individuals. Interest rates, which had been as high as
60% per annum, were reduced to 18%, and terms of repayment were
extended for an additional two years.
c.) Numerous loans and other obligations (such as trade accounts
payable) which had been in default were either permanently reduced or
else deferred beyond one year.
d.) Note to shareholder was subsequently satisfied by exchange
of building and equipment of equal value.
e.) Subsequently, the Company has substantially renegotiated the
terms of its loans and notes which were in default at year-end.
F-10
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 4 - INVESTMENT IN JOINT VENTURE AND LITIGATION
On May 29, 1989, the Company, through its wholly-owned subsidiary,
Celestial Realty Group, Inc. entered into a Joint Venture Agreement
with Mystic Pines, Inc. for the purpose of developing and building
single family homes. The Company contributed $525,000 for a 35%
interest in the venture. Since 1990, however, the Company and Mystic
Pines initiated a lawsuit against B.F. Properties and Reserve Estates
and other related parties and affiliates in order to recoup it
investment. During 1994, the bank which had a security interest in
the lands, foreclosed on the property and secured a choice in action.
In effect, the Company had lost its security interest in the real
property.
As of October 31, 1994, the remaining $201,875 was written off the
books of the Company as being uncollectible.
NOTE 5 - INCOME TAXES
At October 31, 1994, the Company had a net operating loss
carryforward in excess of $2,000,000. The carryforwards will be
available for the reduction of future Federal income tax provisions,
the extent and timing of which are not determinable.
In February 1992, the Financial Accounting Standards Board issued a
new standard on accounting for income taxes ("SFAS No. 109"). The
Company is required to adopt the new accounting and disclosure rule
no later than June 30, 1994, although earlier implementation is
permitted.
Because the Company has net operating loss carryforwards without a
history of earnings, implementation of SFAS No. 109 is not expected
to have a material effect on the Company's reported financial
position and net income (loss) in the year the statement is adopted.
F-11
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 6 - INTANGIBLE ASSETS
Intangible assets consist of the following:
1995 1994
---- ----
Goodwill $ - 0 - $ 136,418
Client Lists - 0 - 60,000
Organization Costs - 0 - 62,808
------- ---------
Total - 0 - 259,226
Less: Accumulated Amortization - 0 - (24,390)
------- ----------
Net $ - 0 - $ 234,836
======= =========
Goodwill was generated as a result of the business combination
accounted for by the purchase method, more fully discussed in Note 9,
and is being amortized over a forty year period using the straight
line method.
NOTE 7 - ACQUISITIONS
A. On July 26, 1993, the Company acquired Gulf Coast Powder
Coatings, Inc., whose principal business consists of placing
powder coatings on to metal and non-metal materials, for 210,000
shares of common stock and $150,000. The acquisition was
accounted for under the purchase method. The excess of the cost
of the acquired company over the sum of the amounts assigned to
identifiable assets acquired, less liabilities assumed, has been
recorded as goodwill, and will be amortized over a forty year
period, using the straight-line method.
B. On August 12, 1993, the Company acquired all of the issued and
outstanding common stock of Valves International, Inc., whose
principal business is re-manufacturing and sales of valves, in
exchange for 850,000 shares of common stock of the Company. As
a result of the acquisition, the Company also acquired Central
Valve Services, Inc. and Alloy Valves International, Inc. as
wholly owned subsidiaries of Valves International, Inc. The
acquisition was accounted for under the pooling of interests
method. Under the pooling method the acquired company activity
for the full period reported on is included.
F-12
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 8 - ACQUISITION, Continued
Adjustments Allocation
Required By of
Pre-Acquisition Purchase Acquisition
Balances Method Cost
--------------- ----------- -----------
Net Tangible
Assets $ 21,582 $225,000 $ 246,582
Intangible
Assets - 0 - 136,918 136,918
-------- -------- ---------
$ 21,582 $ 361,918 $ 382,500
--------- ========= =========
The acquisition costs was derived based on 210,000 shares valued at
an average market price of the Company's common stock at the time of
the acquisition, which was $1.25 per share plus $150,000 cash.
NOTE 9 - RELATED PARTIES
The former Chief Executive Officer, who is also a shareholder of the
Company, sold equipment and facilities to Central Valve Services,
Inc, for which he is owed, approximately $600,000 at October 31,
1994. Subsequently, the equipment and facilities were transferred
back to the shareholder in 1995.
NOTE 10- COMMITMENTS AND CONTINGENCIES
A subsidiary of the Company has incurred approximately $80,000 of
unpaid payroll tax liabilities to the Internal Revenue Service.
Currently, a payment plan is being worked out with the government on
the satisfaction of this outstanding liability. This liability was
ceased when Central Valve Services, Inc. was sold on May 1, 1995.
F-13
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 11- SALE OF SUBSIDIARIES
In August 95, the Company sold all its wholly-owned subsidiaries
with the exception of U.S. Powder Coatings, Inc. to Turkey
Delite, Inc. (a publicly held company) for $1,900,000 in cash,
promissory notes and common stock. This transaction was
effective as of May 1, 1995.
a.) The Subsidiaries referred to above are as follows: Valves
International, Inc., Central Valve Services, Inc., Alloy Valve
International, Inc., and Gulf Coast Powder Coatings, Inc.
b.) The sales price consisted of a combination of 1,250,000 shares of
restricted common stock of Turkey Delite, Inc. an additional 300,000
shares of restricted common stock of Turkey Delite, Inc. wherein the
Company can cause said shares to be restricted for public sale after
one year from the effective date; an additional $200,000 payable in
four quarterly installments of $50,000, with interest at 8% per
annum; a five year, 8%, promissory note in the principal amount of
$150,000. Also, an additional 350,000 shares of Turkey Delite, Inc.'s
common stock will be held in escrow pending the payment of certain
debts of the subsidiaries by Turkey Delite, Inc. who is the guarantor
of the debts. The principles followed by the parties in determining
the consideration were as follows: The subsidiaries were valued at
book value and Turkey Delite, Inc.'s shares were valued at
anticipated market value.
The market for Turkey Delite, Inc. common stock is thinly traded
and its market is maintained by one market maker.
The sale has been made effective as of May 1, 1995.
A stockholder and former CEO of the Company is a CEO and stockholder
in Turkey Delite, Inc.
NOTE 12- EARNINGS PER SHARE
Primary earnings per share include the weighted average number of
common shares outstanding. The weighted average number of common
shares outstanding was 8,570,253 shares.
F-14
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995 AND OCTOBER 31, 1994
NOTE 13- SUBSEQUENT EVENTS
a.) As indicated in Note 11, the Company has sold substantially
all its operating assets in 1995.
b.) The Company in April 1995, raised in a private placement in
excess of $500,000. These funds have been earmarked for
future acquisitions.
c.) The Company has transferred to a shareholder a building and
equipment in satisfaction of indebtedness of approximated
$500,000.
d.) The Company has substantially restructured it's debt via
extended terms, interest rates and issuance of stock.
e.) On August 31, 1995, the Company acquired a wholly owned
subsidiary Success Direct, Inc. in a business combination
accounted for as a pooling of interests. The purchase price
consisted of 315,000 in cash, assumption of $600,000 in debt,
1,750,000 shares of the common stock of the company and the
subsequent registration of 750,000 shares to permit their
public resale. The principle followed by the parties in
determining the consideration is that of market value.
f.) The Company instituted a lawsuit against Reprod, Inc.
claiming damages for misrepresentation of the value of the
assets acquired by the Company's subsidiary.
F-15
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, June 30,
1996 1995
--------- --------
ASSETS
Current Assets
Cash and Cash Equivalents $ 30 $ (1,131)
Accounts Receivable 84,253 --
List Rental Receivable 33,551 --
Inventory 212,472 --
Notes Receivable 150,000 179,210
Prepaid Expenses and Sundry Receivables 235,919 --
Investments -- 300,000
----------- -----------
Total Current Assets 716,225 478,079
----------- -----------
Property, Plant and Equipment 542,366 498,745
Less: Accumulated Depreciation 41,650 33,853
----------- -----------
Net Property, Plant and Equipment 500,716 464,892
----------- -----------
Other Assets
Investments 1,550,000 1,250,000
Intangible Assets (Net) 949,999 --
Notes Receivable 200,000 200,000
Security Deposits 5,885 --
Interest Receivable -- 4,667
----------- -----------
Total Other Assets 2,705,884 1,454,667
----------- -----------
TOTAL ASSETS $ 3,922,825 $ 2,397,638
=========== ===========
See Accompanying Notes to Condensed Consolidated Financial Statements
F-16
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
March 31, June 30,
1996 1995
--------- --------
LIABILITIES
Current Liabilities
Accounts Payable $ 193,126 $ 164,069
Accrued Expenses and Sundry Liabilities 51,122 --
Notes Payable 547,566 --
----------- -----------
Total Current Liabilities 791,814 164,069
----------- -----------
Long-Term Liabilities
Notes Payable 265,892 170,000
Loan Payable Officer 10,750 --
----------- -----------
Total Long-Term Liabilities 276,642 170,000
----------- -----------
TOTAL LIABILITIES 1,068,456 334,069
----------- -----------
SHAREHOLDERS EQUITY
Shareholders Equity
Preferred Stock 278 889
Common Stock 14,286 9,906
Less Common Stock Discount Below Par Value (28,500) (28,500)
Additional Paid-In-Capital 5,474,594 4,362,154
Accumulated Deficit (2,606,289) (2,280,880)
----------- -----------
TOTAL SHAREHOLDERS EQUITY 2,854,369 2,063,569
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $ 3,922,825 $ 2,397,638
=========== ===========
See Accompanying Notes to Condensed Consolidated Financial Statements
F-17
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31
1996 1995
----------- -----------
Revenues
Sales $ 915,629 1,040,430
----------- -----------
Cost of Sales 241,692 1,060,368
----------- -----------
Gross Profit 673,937 (19,938)
Operating Expenses
General and Administrative Expenses 748,008 944,856
----------- -----------
Net (Loss) Before Other Income (Deductions) (74,071) (964,794)
----------- -----------
Other Income (Deductions)
Interest Income 23,293 210
Forgiveness of Debt 9,000 --
Write-Down of Equipment -- (385,000)
Loss on Investment -- (201,875)
----------- -----------
Total Other Income (Deductions) 32,293 (586,665)
----------- -----------
Net Profit (Loss) before Taxes $ (41,778) $(1,551,459)
Income Taxes 571 --
----------- -----------
Net Profit (Loss) $ (42,349) $(1,551,459)
=========== ===========
Net Profit (Loss) Per Share $ (.01) $ (.17)
=========== ===========
See Accompanying Notes to Condensed Consolidated Financial Statements
F-18
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31
1996 1995
--------- ---------
Revenues
Sales $ 232,836 $ 287,900
--------- ---------
Cost of Sales 79,348 223,177
--------- ---------
Gross Profit 153,488 64,723
Operating Expenses
General and Administrative Expenses 218,482 294,290
--------- ---------
Net Profit (Loss) Before Other Income (Deductions) (64,994) (229,567)
--------- ---------
Other Income (Deductions)
Interest Income 7,000 140
Forgiveness of Debt -- --
Write-Down of Equipment -- --
Loss on Investment -- --
--------- ---------
Total Other Income (Deductions) 7,000 140
--------- ---------
Net Profit or (Loss) before taxes $ (57,994) $(229,427)
Income Taxes 571 --
--------- ---------
Net Profit or (Loss) $ (58,565) $(229,427)
========= =========
Net Profit or (Loss) Per Share $ (.01) $ (.03)
========= =========
See Accompanying Notes to Condensed Consolidated Financial Statements
F-19
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1996
Cash Flows from Operating Activities
Net Loss $ (42,349)
-----------
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation 5,059
Amortization 50,001
Deferred income taxes 0
Changes in assets and liabilities:
Decrease (increase) in:
Accounts receivable (112,999)
Inventories (164,255)
Prepaid expenses (217,883)
Security Deposits 106
Increase (decrease) in:
Accounts payable (39,171)
Accrued expenses and sundry liabilities 51,122
-----------
Total adjustments (428,020)
-----------
Net cash used in operating activities (470,369)
Cash Flows From Investing Activities:
Purchase of property & equipment (16,202)
Advances on notes receivable 29,210
Purchase of intangible assets (1,000,000)
-----------
Net cash used in investing activities (986,992)
Cash Flows From Financing Activities:
Proceeds from short term loans 483,000
Repayments of short term loan (109,722)
Proceeds from long term loans 0
Repayments of long term loan (2,550)
Proceeds from officer 68,224
Repayments to officer (96,639)
Issuance of common stock 1,116,209
-----------
Net cash provided by financing activities 1,458,522
Net increase in cash 1,161
Cash beginning (1,131)
-----------
Cash ending 30
===========
F-20
<PAGE>
CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
Celestial Ventures Corporation was organized under the laws of the State
of Nevada on January 28, 1987. The Company's activities consist of
ownership of various diversified businesses. These businesses are
involved in "Business to Business" direct mail marketing and application
of powder coating onto industrial materials. Effective June 30, 1995,
the Company changed its year end from October to June.
NOTE A: Significant Accounting Policies
1. The books and records are maintained on the accrual method of
accounting.
2. Inventories:
Inventories are stated at the lower of cost (first-in, first-out basis),
or market.
3. Investments are accounted for using the equity method of accounting.
4. Property and Equipment:
Property and equipment are stated at cost less accumulated depreciation
and amortization. The Company depreciated and amortizes its property and
equipment primarily by the straight-line method over the estimated
economic life of the assets for financial reporting purposes.
5. Intangible Assets:
Intangible Assets are capitalized and are being amortized using the
straight-line method over 15 years.
6. The consolidated financial statements include accounts of its
wholly-owned subsidiaries. All material intercompany transactions have
been eliminated.
7. Income Taxes:
The Company has adopted the Statement of Financial Accounting Standards
109. Statement 109 uses the assets and liability method, deferred taxes
assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases.
NOTE B: Accounts Receivable
Accounts Receivable is derived from sales in the ordinary course of
business. As of March 31, 1996, no allowance for doubtful accounts has
been provided and all known bad debts have been written off.
NOTE C: Inventories
Inventories at March 31, 1996 are made up of finished goods, in the
companies' warehouse.
F-21
<PAGE>
NOTE D: Property and Equipment
Major classifications of property and equipment and their respective
lives are summarized below:
March 31 Depreciable
1996 Lives
---- -----
Equipment 492,768 7-10 years
Furniture & fixtures 3,623 5 years
Leasehold improvements 45,975 10-39 years
-------
Total 542,366
Accumulated depreciation 41,650
-------
500,716
=======
Depreciation expense totaled $5,059 for the nine months ended March 31,
1996.
NOTE E: Intangible Assets
Intangible assets are made up of the following:
March 31 Amortizable
1996 Lives
---- -----
Customer list 850,000 15 years
Trademarks 100,000 15 years
Telephone numbers 50,000 15 years
---------
Total 1,000,000
Accumulated amortization 50,001
---------
Net Intangible assets 949,999
=========
NOTE F: Investment:
In August 1995, the Company sold all of its wholly-owned subsidiaries
with the exception of U.S. Powder Coatings, Inc, to Turkey Delite, Inc.
(A publicly held company) for $1,900,000 in cash, promissory notes and
common stock accounting for 34% of the issued an outstanding stock of
Turkey Delite, Inc. This transaction was effective as of May 1, 1995.
The sales price consisted of a combination of 1,250,000 shares of
restricted common stock of Turkey Delite, Inc. and additional 300,000
shares of restricted common stock of Turkey Delite, Inc. wherein the
Company can cause said shares to be restricted for public sale after one
year from the effective date; an additional $200,000, of which $150,000
is payable short term with interest at 8% per annum, and the balance of
$50,000 is due in four quarterly installments of $12,500 at an interest
rate of 8% per annum payable after payments of $150,000 short term note;
a $150,000 promissory note due in the fifth year, with interest due
quarterly at 8% per annum. In addition, 350,000 shares of Turkey Delite,
Inc.'s common stock will be held in escrow pending the payment of
certain debts of the subsidiaries by Turkey Delite, Inc. who is the
guarantor of the debts. The principles followed by the parties in
determining the consideration were as follows: The subsidiaries were
valued at book value and Turkey Delite, Inc.'s shares were valued at
anticipated market value.
F-22
<PAGE>
NOTE F: Investment (Continued)
The Company is required to account for their investment in Turkey
Delite, Inc., using the equity method of accounting. The Company is
required to adjust it's investment in Turkey Delite, Inc. by 34% of the
Income or Losses from the date of acquisition. As of March 31, 1996
there has been no completion of financial data for Turkey Delite, Inc.
and upon completion, the adjustment is not expected to have a material
impact on these financial statements.
The market for Turkey Delite, Inc. common stock is thinly traded and its
market is maintained by one market maker. AS of the date of acquisition,
the market value of the 1,550,000 shares of Turkey Delite, Inc. was
valued at $1 per share.
A stockholder and former CEO of the Company is the CEO and stockholder
in Turkey Delite, Inc.
NOTE G: On July 1, 1995 the Company acquired Success Direct, Inc. in a business
combination counted for as a pooling of interest. Success Direct, Inc.
became a wholly owned subsidiary of the Company through exchange of
1,000,000 shares of the Company's common stock for all the outstanding
stock of Success Direct, Inc. The financial statements of prior years
have been restated to give effect to the combination.
The summarized assets and liabilities of the separate companies on July
1, 1995, the date of acquisition, were as follows:
Acquired
Company Company
Current assets $ 182,746 $ 65,891
Property and equipment 464,892 24,681
(net)
Other assets 1,750,000 5,991
---------- ---------
2,397,638 96,564
Current liabilities (164,069) (110,808)
Long-term debt (170,000) (268,816)
---------- ---------
2,063,569 (283,060)
========== =========
NOTE H: On July 1, 1995 the Company was assigned the rights to purchase the
Accounts receivable, Inventory, and Intangible assets, from Remarkable
Products, Inc., in exchange for Cash, Notes payable and common stock of
the Company.
NOTE I: Notes receivable
The Company took back two notes and common stock as consideration for
the sale of the Companies wholly-owned subsidiary.
NOTE J: Note Payable-Short Term
A unsecured note payable in the original amount of $250,000 with
interest payable at 10% per annum, payable in minimum monthly
installment of $10,000 per month. As of March 31, 1996 the outstanding
balance due on the note is $176,277.
F-23
<PAGE>
NOTE K: Long-term Debt
Long-term debt is payable and secured as follows:
1. Note payable in an original amount of $202,000,
due on demand, with interest at 10% per annum. $197,000
2. Note payable in an original amount of $340,000
with interest at 4% per annum. 170,000
3. Note payable with an unsecured repayment plan
with interest at 10% per annum. 250,000
4. Note payable in an original amount of $24,495
payable in 60 monthly installments of $567
including interest with a final payment due
December 30, 1999. 20,181
---------
Total 637,181
Less: Current maturities 371,289
---------
Total long-term Debt $ 265,892
=========
The debt matures after December 31, 1996 is due as
follows:
1997 250,000
1998-after 15,892
-------
265,892
========
NOTE L: Related Party Transactions
The Company has loan payable to one of the officers in the amount of
$10,750 payable on demand with interest payable at a rate of 6%. At
March 31, 1996 no interest has been paid or accrued.
NOTE M: At June 30, 1995, the company had a net operating loss carryforward in
excess of $1,100,000. The carryforward will be available for the
reduction of future Federal income tax provisions, the extent and timing
of which are not determinable.
Deferred income taxes include the tax impact of net operating loss
carryforwards. Realization of these assets is contingent on future
taxable earnings. In accordance with the provisions of SFAS No. 109, a
valuation allowance of $380,000 at March 31, 1996 is deemed adequate for
these and other items which are not considered probable of realization.
F-24
<PAGE>
NOTE N: Commitment and contingencies
Commitments:
The Company conducts its operation from facilities that are leased under
a four year lease ending December 30, 1998. The lease calls for monthly
rent payments starting in November 1994 of $1,000.00 per month plus a
pro-rata share of real property taxes. The Company also leases an
automobile expiring June 1997 for monthly payments of $569.
Future Minimum Lease payments for operating leases at March 31, 1996
are:
Years ended Operating
March 31, 1996 Lease
-------------- ---------
1997 18,828
1998 15,414
1999 9,000
------
43,242
======
Contingencies
The Company initiated a law suit against Reprod, Inc. claiming damages
for misrepresentation of the value of the assets acquired by the
Company's subsidiary.
NOTE O: Earnings Per Share: Primary earnings per share include the weighted
average number of common shares outstanding. The weighted average number
of common shares outstanding was 12,874,767 shares.
NOTE P: Other Matters
On May 29, 1989, the Company, through its wholly-owned subsidiary,
Celestial Realty Group, Inc. entered into a joint venture agreement with
Mystic Pines, Inc. for the purpose of developing and building single
family homes. The Company contributed $525,000 for a 35% interest in the
venture. Since 1990, however, the Company and Mystic Pines initiated a
lawsuit against B.F. Properties and Reserve Estates and other related
parties and affiliates in order to recoup its investment. During 1994,
the bank which had a security interest in the lands, foreclosed on the
property and secured a choice in action. In effect, the Company had lost
its security interest in the real property.
As of October 31, 1994, the investment of $525,000 has been written off
the books of the Company as being uncollectable.
NOTE Q: Subsequent Events: Pursuant to a Board Resolution the Company declared a
one for fifteen reverse split of the Company's outstanding common stock.
The record date for the reverse was May 3, 1996.
F-25
<PAGE>
TABLE OF CONTENTS
Page
----
PROSPECTUS SUMMARY......................................................... 3
THE COMPANY................................................................ 3
RISK FACTORS............................................................... 6
USE OF PROCEEDS ........................................................... 11
CAPITALIZATION............................................................. 12
MARKET PRICE OF SECURITIES................................................. 13
DIVIDEND POLICY............................................................ 13
SELECTED FINANCIAL DATA.................................................... 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................. 15
BUSINESS................................................................... 19
MANAGEMENT................................................................. 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 31
PRINCIPAL STOCKHOLDERS..................................................... 34
DESCRIPTION OF SECURITIES.................................................. 35
SHARES ELIGIBLE FOR FUTURE SALE............................................ 36
SELLING STOCKHOLDER AND PLAN OF DISTRIBUTION............................... 37
LEGAL MATTERS.............................................................. 38
EXPERTS.................................................................... 38
ADDITIONAL INFORMATION..................................................... 38
FINANCIAL STATEMENTS.......................................................F-I
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied on as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy, by any person
in any jurisdiction in which it is unlawful for such person to make such offer
or solicitation. Neither the delivery of this Prospectus nor any offer,
solicitation or sale made hereunder, shall under any circumstances create an
implication that the information herein is correct as of any time subsequent to
the date of the Prospectus.
722,502 Shares of Common Stock, Consisting of
349,168 Shares of outstanding Common Stock and 373,334 Shares of Common Stock
underlying various Options and Warrants.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. Indemnification of Directors and Officers
Reference is made to Section 78.135 of the General Corporation Law of the
State of Nevada. As permitted by Nevada law, the Company's Certificate of
Incorporation contains an article limiting the personal liability of directors.
The Certificate of Incorporation provides that a director of the Company shall
not be personally liable for any damages from any breach of fiduciary duty as a
director, except for liability based on a judgment or other final adjudication
adverse to him establishing that his acts or omissions were committed in bad
faith, or the result of active or deliberate dishonesty and were material to the
cause of action so adjudicated, or that he personally gained a financial profit
or other advantage to which he was not legally entitled. The Company's
Certificate of Incorporation and Bylaws also provide for indemnification of all
officers and directors of the Company to the fullest extent permitted by law. In
addition, Messrs. Irwin Schneidmill and John Formicola, a director and executive
officer and shareholder of the Company, respectively, are also entitled to such
indemnification pursuant to their indemnification agreements with the Company
from all losses, damages or expenses that they may incur to Re-Prod, Inc. in
connection with a limited personal guarantee that each of Mr. Schneidmill and
Formicola furnished for the benefit of the Company.
Item 25. Other Expenses of Issuance and Distribution
SEC Filing Fees $2,571.94
Legal Fees and Expenses* $ 15,000
Accounting Fees and Expenses* $ 3,000
Miscellaneous* $9,428.06
Total $ 30,000
- -------------
* Indicates expenses that have been estimated for the purpose of filing.
Item 26. Recent Sales of Unregistered Securities
There have been no issuances of the registrant's unregistered securities
within the past three years, except for the following:
In April 1995, Joseph Dillon & Company, Inc., (the "Underwriter") a
registered broker dealer, undertook a private placement of approximately
$900,000 of the Company's securities. The securities offered consisted of
120,000 shares of Common Stock and 240,000 Common Stock Purchase Warrants
("Private Purchase Warrants") exercisable for 240,000 shares of Common Stock at
an exercise price of $22.50 per share. The Private Placement Warrants expire on
October 3, 1998.
In February 1996, Performance Capital Corporation received shares of stock
in conversion of $205,000 of debt at the rate of $2.25 per share. The Sole
shareholder of Performance Capital Corporation is John Formicola, a shareholder
of the Company.
II-1
<PAGE>
In December 1995, Howard Sperling received Common Stock as a result of a
private placement of securities in October 1995.
On March 1, 1996, John Patton received 6,667 shares of Common Stock in
connection with his conversion of a $25,000 loan made to the Company.
In September 1995, Irwin Schneidmill received 66,667 options to purchase
Common Stock of the Company in connection with his original employment with the
Company. The Options are exercisable at $3.00 per share of Common Stock and
expire in September 8, 1998.
In September 1995, John Formicola received 66,667 options in consideration
of certain personal guarantees granted to the Company, to purchase 66,667 shares
of Common Stock of the Company. The Options are exercisable at $3.00 per share
of Common Stock and expire in September 8, 1998.
On August 29, August 1995, Re-Prod, Inc. received 50,000 in connection with
the acquisition of certain assets from Re-prod, Inc. by the Company.
On January 9, 1996, four attorney's of the law firm Schneck Weltman Hashmall
& Mischel, LLP each received 1,667 shares of Common Stock in exchange for legal
services rendered.
On July 29, 1994, October 11, 1994, November 22, 1994, December 10, 1994,
December 15, 1994 and December 19, 1994 various members of the Patten family and
Mae Parker, purchased an aggregate of 66,667 shares of Common Stock at $1.50 per
share.
The foregoing transactions were exempt from registration pursuant to section
4(2) of the Securities Act of 1933.
Item 27 EXHIBITS
Exhibit
Nos. Description
---- -----------
3(a)- - Certificate of Incorporation of the Company
* 3(b) - Bylaws of the Company
** 4(a) - Form of Common Stock Certificate
** 10(a) - Purchase Agreement between the Company and Gulf Coast Powder
Coatings, Inc., and ATCO Corporation for the purchase of Gulf
Coast Powder Coatings, Inc. by ATCO Corporation dated August 31,
1995
** 10(b) - Purchase Agreement between the Company and Valves International,
Inc., Central Valve Services, Inc, Alloy Valve International,
Inc. (d/b/a CVC International and/or T.J. Lingle International)
(collectively, the "Subsidiaries") and ATCO Corporation for the
purchase of the Subsidiaries by ATCO Corporation, dated August
31, 1995.
** 10(c) - Purchase Agreement between Success Direct, Inc., Irwin
Schneidmill, Performance Capital Corporation, Martin Ewenstein,
Brian Ugles, John Ecke and Cathy Santo ("Sellers") and the
Company, for the purchase by the Company of Success Direct, Inc.
II-2
<PAGE>
** 10(d) - Assignment of contract between Success Direct, Inc. and the
Company for the rights to purchase assets of Re-Prod, Inc., dated
August 31, 1995.
** 10(e) - Purchase Agreement between the Company and Reprod, Inc., for the
purchase of certain assets of Re-Prod, Inc., dated August 31,
1995.
*** 10(f) - Promissory Note in the principal amount of $205,000 bearing
interest at 11% per annum between the Company as borrower and
Performance Corporation as lender, dated August 1, 1995.
*** 10(g) - Promissory Notes dated December 15, 1994 through April 15, 1995
in the aggregate amount of $250,000 ($50,000) bearing interest at
10% per annum between Success Direct, Inc. as borrower and
Performance Capital Corporation as lender.
*** 10(h) - Employment Agreement between Irwin Schneidmill and the Company
dated March 1, 1996.
*** 10(i) - Supply contracts between the Company and Eimicke, Ltd. each dated
September 6th, 1990.
*** 10(j) - Indemnity Agreement between the Company and Irwin Schneidmill and
John Formicola, indemnifying them against liabilities arising
from the acquisition of assets of Re-Prod, Inc. 21 - Subsidiaries
of the Company
(b) Reports on Form 8-K - The Registrant did not file any reports on
Form 8-K during the last quarter of the fiscal year ended June
30, 1995. The Registrant since the last quarter filed a report on
Form 8-K dated August 31, 1995. Such report did not contain
required financial statements. An amendment to the Form 8-K was
filed on February 24, 1996.
23 - Consent of Joel S. Baum, CPA.
* Incorporated by reference to the Company's Registration Statement on Form
S-8 dated September 18, 1995.
** Incorporated by reference to the Company's Report on Form 8-K dated August
31, 1995.
*** Incorporated by reference to the Company's Report on Form 10-KSB for the
period ended June 30, 1995.
Item 28. Undertakings
A. Certificates
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which it offers or sells
securities, 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 which, individually or together, represent a fundamental change
in the information set forth in the Registration Statement; (iii) to
include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat
the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the small business issuer pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
Registration Statement as of the time the Commission declared it
effective.
II-3
<PAGE>
(3) For the purpose of determining any liability under the
Securities Act, to treat each post-effective amendment that contains a
form of prospectus as a new Registration Statement relating to the
securities offered in the Registration Statement, and that offering of
such securities at that time as the initial bona fide offering of these
securities.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officer and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer 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 small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the city of New York on June 11, 1996.
CELESTIAL VENTURES CORPORATION
By:/s/ IRWIN SCHNEIDMILL
-------------------------------
Irwin Schneidmill, President,
Chief Executive Officer,
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ IRWIN SCHNEIDMILL
------------------------ Chief Executive Officer, June 11, 1996
Irwin Schneidmill President, and a
Director
/s/ BOB J. SUDDERTH Chairman of the Board June 11, 1996
------------------------
Bob J. Sudderth
/s/ ANDREW JALOZA
------------------------ Director June 11, 1996
Andrew Jaloza
/s/ JAMES LOFLAND
------------------------ Director June 11, 1996
James Lofland
/s/ ROBERT TRAUSE
------------------------ Director June 11, 1996
Robert Trause
/s/ MARTIN EWENSTEIN
------------------------ Director June 11, 1996
Martin Ewenstein
II-5
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
Registration No.
------------------------------
EXHIBITS
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CELESTIAL VENTURES CORPORATION
(Exact name of Registrant as specified in its charter)
<PAGE>
EXHIBIT INDEX
Exhibit
Nos. Description
---- -----------
3(a) - Certificate of Incorporation of the Company
* 3(b) - Bylaws of the Company
** 4(a) - Form of Common Stock Certificate
** 10(a) - Purchase Agreement between the Company and Gulf Coast Powder
Coatings, Inc., and ATCO Corporation for the purchase of Gulf
Coast Powder Coatings, Inc. by ATCO Corporation dated August 31,
1995.
** 10(b) - Purchase Agreement between the Company and Valves International,
Inc., Central Valve Services, Inc, Alloy Valve International,
Inc. (d/b/a CVC International and/or T.J. Lingle International)
(collectively, the "Subsidiaries") and ATCO Corporation for the
purchase of the Subsidiaries by ATCO Corporation, dated August
31, 1995.
** 10(c) - Purchase Agreement between Success Direct, Inc., Irwin
Schneidmill, Performance Capital Corporation, Martin Ewenstein,
Brian Ugles, John Ecke and Cathy Santo ("Sellers") and the
Company, for the purchase by the Company of Success Direct, Inc.
** 10(d) - Assignment of contract between Success Direct, Inc. and the
Company for the rights to purchase assets of Re-Prod, Inc., dated
August 31, 1995.
** 10(e) - Purchase Agreement between the Company and Reprod, Inc., for the
purchase of certain assets of Re-Prod, Inc., dated August 31,
1995.
*** 10(f) - Promissory Note in the principal amount of $205,000 bearing
interest at 11% per annum between the Company as borrower and
Performance Corporation as lender, dated August 1, 1995.
*** 10(g) - Promissory Notes dated December 15, 1994 through April 15, 1995
in the aggregate amount of $250,000 ($50,000) bearing interest at
10% per annum between Success Direct, Inc. as borrower and
Performance Capital Corporation as lender.
*** 10(h) - Employment Agreement between Irwin Schneidmill and the Company
dated March 1, 1996.
*** 10(i) - Supply contracts between the Company and Eimicke, Ltd. each dated
September 6th, 1990.
*** 10(j) - Indemnity Agreement between the Company and Irwin Schneidmill and
John Formicola, indemnifying them against liabilities arising
from the acquisition of assets of Re-Prod, Inc.
21 - Subsidiaries of the Company
(b) Report1s on Form 8-K - The Registrant did not file any reports on
Form 8-K during the last quarter of the fiscal year ended June
30, 1995. The Registrant since the last quarter
<PAGE>
filed a report on Form 8-K dated August 31, 1995. Such report did
not contain required financial statements. An amendment to the
Form 8-K was filed on February 24, 1996.
23 - Consent of Joel S. Baum, CPA.
* Incorporated by reference to the Company's Registration Statement on Form
S-8 dated September 18, 1995.
** Incorporated by reference to the Company's Report on Form 8-K dated August
31, 1995.
*** Incorporated by reference to the Company's Report on Form 10-KSB for the
period ended June 30, 1995.
<PAGE>
[Letterhead of Joel S. Baum P.A.]
, 1996
Celestial Ventures Corporation
382 Route 59 Section 310
Monsey, NY 10952
RE: CELESTIAL VENTURES CORPORATION AND SUBSIDIARIES
File No. 33-12613-NY
Dear Sir or Madam,
I consent to the use in this Registration (Form SB-2) of my report dated
February 14, 1996 on the financial statements of CELESTIAL VENTURES CORPORATION
AND SUBSIDIARIES.
I also consent to the use of my name appearing under the caption "Experts".
Very truly yours,
/s/ Joel S. Baum P.A.
1515 University Drive o Suite 222 o Coral Springs, Florida 33071
N. Broward (305) 752-1712 o S. Broward (305) 920-9047 o Fax (305) 344-3694
