<PAGE> 1
As Filed with the Securities and Exchange Commission on December 1, 1995
File No. 33-59055
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT*
UNDER THE
SECURITIES ACT OF 1933
------------
CROWN LABORATORIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C>
Delaware 75-2300995
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) ID No.)
</TABLE>
6780 Caballo Street
Las Vegas, Nevada 89119
(702) 696-9300
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Principal Executive Offices)
CRAIG E. NASH, CHIEF EXECUTIVE OFFICER
CROWN LABORATORIES, INC.
6780 Caballo Street
Las Vegas, Nevada 89119
(702) 696-9300
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copies of Communications to:
RONALD P. GIVNER, ESQ.
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 Avenue of the Stars, Tenth Floor
Los Angeles, California 90067
(310) 203-8080
Fax: (310) 203-0567
Approximate date of commencement of proposed sale to the public: As soon as
possible after the Registration Statement is declared effective.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box.
[ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
<PAGE> 2
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 3
CALCULATION OF REGISTRATION FEE
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<CAPTION>
=============================================================================================================================
Proposed Maxi- Proposed Maximum Amount of
Title of Securities Amount to be mum Offering Aggregate Offering Registration
to be Registered Registered Price Per Share Price Fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par value 4,207,962 Shs. $1.75 (1) $7,363,933.5 $2,539.29
Previously paid
$3,708.37
Total due -0-
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</TABLE>
(1) Calculated pursuant to Rule 457(c).
_____________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
*Pursuant to Rule 429 the enclosed Prospectus constitutes a combined Prospectus
also relating to securities covered by Registration Statement No. 33-72912
(Common Stock) and constitutes a post-effective amendment to said Registration
Statement.
<PAGE> 4
P R O S P E C T U S
December __, 1995
CROWN LABORATORIES, INC.
COMMON STOCK
($0.001 PAR VALUE)
This Prospectus relates to 7,247,303 shares of the Common Stock of
CROWN LABORATORIES, INC. (the "Company"), which may be offered from time to
time by any or all of the Selling Stockholders named herein (the "Selling
Stockholders"), including shares to be received upon exercise of warrants and
options. The Company will not receive any proceeds from the sale of the shares
offered hereby but will receive certain proceeds upon exercise of the warrants
and options, which proceeds will be used for working capital. The Company
estimates that the expenses of this offering will be approximately $37,000, all
of which will be paid by the Company.
The Company has been advised by the Selling Stockholders that they
may sell all or a portion of the shares offered hereby from time to time on the
American Stock Exchange Emerging Company Marketplace (the "Amex-ECM") in
privately negotiated transactions, or otherwise, including sales through or
directly to a broker or brokers. Sales will be at prices and terms then
prevailing or at prices related to the then current market prices or at
negotiated prices. In connection with any sales, any broker or dealer
participating in such sales may be deemed to be underwriters within the meaning
of the Securities Act of 1933. See "Plan of Distribution."
The Common Stock of Crown Laboratories, Inc. is traded on the
AMEX-ECM (AMEX-ECM symbol: CLL.ec). On November 22, 1995, the last sale price
of the Company's Common Stock, as reported by the AMEX-ECM, was $1.75.
________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.
________________________________
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" ON PAGES 8-10.
SEE ALSO "RECENT SIGNIFICANT DEVELOPMENTS" ON PAGES 5-7.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the
Securities and Exchange Commission (the "Commission") are incorporated herein
by reference: the Company's Annual Report on Form 10-KSB, Form 10-K/A-1 and
Form 10-KSB/A-2 for the fiscal year ended December 31, 1994, the Company's
Current Report on a Form 8-K and 8-K/A-1, for March 8, 1995 and Form 8-K for
October 12, 1995, the Company's Quarterly Reports on Form 10-QSB for the
fiscal quarters ended March 31, 1995, June 30, 1995 and September 30, 1995,
and the Company's Registration Statement on Form 8-A.
All other documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the securities under
this Prospectus shall be deemed to be incorporated by reference herein and to
be a part hereof from the date of filing of such documents, except as to any
portion of any future Annual or Quarterly Report to Stockholders which is not
deemed to be filed under said provisions or any portion of a Proxy Statement
not deemed incorporated herein by reference. Any statement made in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that such statement is replaced
or modified by a statement contained in a subsequently dated document
incorporated by reference or contained in this Prospectus. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated in this Prospectus by reference, other than exhibits to
such documents. Written or oral requests for such copies should be directed to
Larry Rosenthal, Director of Investor Relations, or Craig Nash, Chief Executive
Officer, 6780 Caballo Street, Las Vegas, Nevada 89119 (Telephone: (702)
696-9300).
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and in accordance therewith files reports, proxy statements and
other information with the Commission. These reports, proxy statements and
other information can be inspected and copied at prescribed rates at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following Regional Offices of the
Commission: The Chicago Regional Office, Northwest Atrium Center, 500 West
Madison Street, Suite 1400, Chicago Illinois 60661-2511 and the New York
Regional Office, 7 World Trade Center, 12th Floor, New York, New York 10048.
Such reports, proxy statements and other information filed by the Company can
also be inspected at the offices of the American Stock Exchange, Inc., 86
Trinity Place, New York, New York 10006. Copies of such materials can also be
obtained by mail at prescribed rates upon written request addressed to the
Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549.
The Company has filed with the Commission in Washington, D.C., a
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, with respect to the Common Stock offered hereby (the "Registration
Statement"). This Prospectus does not contain all of the information set forth
in the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the securities offered hereby, reference is made to
the Registration Statement, including the exhibits and financial statements and
schedules, if any, filed therewith or incorporated therein by reference.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete, and in each instance, reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement or incorporated herein by reference, each statement
being qualified in its entirety by such reference. The Registration Statement,
including the exhibits thereto, may be inspected without charge at the
Commission's principal office in Washington, D.C., and copies of any and all
parts thereof may be obtained from such office after payment of the fees
prescribed by the Commission.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more
detailed information and financial statements (including notes thereto)
appearing elsewhere in or incorporated by reference into this Prospectus.
THE COMPANY
Crown Laboratories, Inc. (the "Company") is engaged in the
development of, and intends to manufacture and market, a proprietary line of
pharmaceutically-balanced nutritional and medical application products designed
for the special needs of residents in nursing homes and patients in hospitals.
Generally, these individuals are over age 70, and prefer foods that are easy to
ingest, or are flavorful, or easily digestible, and nutritionally complete.
The Company's liquid products will be provided in aseptically sealed, flexible
packages. Formulations are designed to provide a maximum of nutrient and
caloric support in easily consumable forms. The Company currently intends to
offer four liquid products, two medical solutions, and 26 dry-mixed products
for use by individuals with dietary restrictions including low sodium diets and
diabetic diets. Additionally, caloric enhancement and nutritional supplement
products will be available.
The Company's product lines will consist of standard products for
nursing homes and specialized products such as those for kidney dysfunction and
tube feeding. Currently the Company is in the final stages of completing the
liquid manufacturing line on which it will produce primary products for sale.
The Company will have limited sales until such line is complete and
operational.
The commissioning process has begun with regard to the Company's
proprietary line of aseptic liquid products. The commissioning process is
required to be completed in order to manufacture the liquid products. See
"Recent Significant Developments -- Manufacturing Plant."
The Company was incorporated in Delaware on February 23, 1989. The
Company's address and telephone number are 6780 Caballo Street, Las Vegas,
Nevada 89119; (702) 696-9300.
THE OFFERING
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<S> <C>
Securities Offered(1) . . . . . . . . . . . . . . . . . . This Prospectus covers the sale of
7,247,303 shares of Common Stock to be sold
by certain Selling Stockholders, including
1,527,814 shares of Common Stock which may
be sold after the exercise of warrants and
options.
Number of Shares of Common Stock
Outstanding on September 30, 1995(1) . . . . . . . . . . 13,802,513 shares.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . An investment in the Common Stock involves
a high degree of risk. Prospective
investors should review carefully and
consider the factors described in "Risk
Factors."
</TABLE>
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(1) Unless otherwise indicated, all references in the Prospectus to per
share data and number of shares exclude 5,330,187 shares of Common
Stock issuable upon exercise of outstanding warrants and options,
including options which have been granted under the 1992 Stock Option
Plan. However,
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<PAGE> 7
1,527,814 shares underlying 1,527,814 warrants and options are included in the
shares offered by the Selling Shareholders, but are not included in outstanding
shares. Also does not include an undetermined number of shares of Common Stock
underlying Series C Preferred Stock.
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<PAGE> 8
SUMMARY FINANCIAL INFORMATION
The following tables set forth for the periods indicated selected
financial information for Crown Laboratories, Inc.
Statement of Operations Data:
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
---------------------------------------- -------------------------------
December 31, 1994 December 31, 1993 Sept. 30, 1995 Sept. 30, 1994
----------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Sales(1) . . . . . . $ -0- $ -0- $ -0- $ -0-
Net loss . . . . . . (1,569,979) (660,964) (2,647,836) (845,588)
Net loss per share . (.15) (.09) (.20) (.08)
</TABLE>
Balance Sheet Data:
<TABLE>
<CAPTION>
December 31, 1994 Sept. 30, 1995
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<S> <C> <C>
Working capital . . $ 1,354,684 $ 660,797
Total assets . . . 6,065,044 10,085,705
Total liabilities . 1,355,581 2,807,130
Stockholders' equity 4,709,463 7,278,575
</TABLE>
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(1) In the fourth quarter, the Company has sold approximately $40,000 of
dry mix products in one European country through an affiliate and has
collected a portion of the resulting receivables. Sales of liquid
products will not commence until the Company completes commissioning
of its liquid manufacturing lines in Las Vegas, Nevada. See "Recent
Significant Developments -- Manufacturing Plant."
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<PAGE> 9
RECENT SIGNIFICANT DEVELOPMENTS
MANUFACTURING PLANT
The Company is presently in the process of seeking to commission the
equipment necessary to manufacture its proprietary line of aseptic liquid
products. Commissioning of the equipment is required by the U.S. Food and Drug
Administration. The commissioning process begins with the manufacturer, (in
this case, the Company), working with an independent laboratory, National Food
Laboratories (the Process Authority), to review its manufacturing equipment,
manufacturing procedures, manuals and monitor the bacteriological kill tests
for compliance with the applicable federal regulations. After the samples of
inoculated product (the final test required for certification) are prepared,
they are incubated for a 21 day period and if the test results are favorable,
the Process Authority summarizes and presents their findings to the F.D.A. on
the Company's behalf. The F.D.A. then has 30 working days to respond to the
Company with additional questions or requests for information. In the absence
of such a request, the Company is authorized to produce and market its
products. There can be no assurances that the test samples will pass the test
criteria, or if they do pass, that the F.D.A. will accept the Company's process
and equipment.
Although the equipment manufacturers have warranted that the
purchased equipment has been manufactured to the F.D.A. regulatory
specifications for aseptic packaging and processing equipment, the filler is
the first of its kind manufactured for a U.S. company requiring F.D.A. aseptic
processing approval. The delays in certifying the Company's production
equipment can be attributed to the aseptic filling machine. The machine was
unable to pass certification testing when it was originally shipped from
Germany and received by the Company in February, 1995. Numerous modifications,
primarily related to the installation of monitoring devices to seek to meet
F.D.A. requirements, have been made to the machinery at the request of the
Process Authority. The manufacturer of the aseptic filling machine has filed
for bankruptcy in the German courts. The Company has filed a claim against the
manufacturer of the aseptic filler in the German Bankruptcy Court for damages
caused by the delays in certifying the filler and seeks to have these damages
applied against the $1,730,000 purchase price of the machine. Further, the
Company has filed suit in Las Vegas, Nevada against the manufacturer and its
alter egos and subsidiaries alleging fraud, misrepresentation, and alter ego
among other allegations. To further protect its rights to the machinery and
its related technology, the Company has purchased the blueprints and the rights
to its aseptic filling machine from the German Bankruptcy Court. Standard
Chartered Bank ("Standard") had provided financing to the manufacturer of the
filler machine and Standard has claimed that it has a $1,000,000 security an
interest in the filler machine. Based upon the representations made, the
Company entered into a letter of intent to finance $1,000,000 of such equipment
through Standard, which financing was also to satisfy Standard's claimed
security interest. Prior to entering into any loan documentation, the Company
discovered that Standard cannot provide written evidence of a perfected
security interest. Standard has nevertheless continued to allege that it has a
security interest in the machine and has filed a claim with the German
Bankruptcy Court.
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<PAGE> 10
However, Standard has still not produced documentation supporting its position,
and the Company's claims currently exceed the amount of $1,000,000 which
Standard is allegedly owed. The Company cannot predict the ultimate outcome of
any of the above claims.
While the Company believes that the machinery will ultimately be
certified, there is no assurance that the machinery will receive certification
from the F.D.A. or that the certification will be granted within a specific
time frame. Furthermore, there can be no assurances that if the machinery is
certified, as to when the Company will commence initial production of its
liquid nutritional products; or that the products will meet with acceptance in
the market.
The Company has spent approximately $6.7 million on equipment
acquisition for the manufacturing plant. It has also spent approximately $1.2
million on leasehold improvements for offices and upgrading the production area
to meet minimum standards required for manufacturing, which improvements and
upgrading are essentially complete. The Company has also received $1.9 million
in financing for such equipment and leasehold improvements.
The Company in June, 1995 received approval from the State of Nevada
Health Department to produce its dry mix product line for adult nutritional and
specialty products. In the fourth quarter of 1995, the Company sold $40,000 of
dry mixed products in one European country through an affiliate and has
collected a portion of the resulting receivables.
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<PAGE> 11
The Company has received an option to purchase its current
manufacturing facility in Las Vegas, Nevada for $2,700,000 and intends to
pursue this option. The Company has secured a commitment for a first mortgage
loan of $1,860,000 on the building from an insurance company. The mortgage,
which carries an interest rate of 8.65%, provides for an 18 year amortization
($16,984 per month) with a balloon payment due at the end of ten years at the
insurance company's request. The seller of the property has agreed to accept
153,043 shares of the Company's common stock in lieu of $440,000 of the
purchase price and has agreed to extend a 3 year $300,000 second mortgage to
the Company bearing a 12% annual effective interest rate. The balance of the
purchase price, ($100,000), plus any closing costs will be paid by the Company.
FUNDING
Since September 30, 1994, the Company has raised approximately $8.1
million in net proceeds from the sale of its equity securities. Of such
amount, approximately $3 million was used to complete leasehold improvements at
the manufacturing facility, and for manufacturing equipment and other fixed
assets and the balance was used for working capital, including salaries and
rent.
From January 1, 1995 through September 30, 1995, the Company has
raised approximately $2,400,000 (before offering expenses of $330,000) in
additional equity financing primarily through a private placement of units and
this amount is reflected in the Company's financial statements for such period.
Each unit was purchased for $50,000. A unit consisted of 25,000 shares of
common stock and warrants to purchase 12,500 shares of common stock for $3 per
share. The warrants expire two years from the date of issuance. (Fractional
units have been sold.) In addition, the Company issued to the placement agents
and brokers 2,500 options to acquire shares of the Company's common stock at a
price of $2.40 per share for each unit sold. These options expire five years
from the date of issuance. Such private placement closed as of September 30,
1995.
The Company has also raised $3 million (before expenses of $150,000)
through the issuance of Series C Preferred Stock during the third quarter and
$500,000 thereafter. The Series C Preferred Stock pays no dividends, but
imputes a 6% effective annual interest rate upon conversion into Common Stock
which will be accounted for over the time during which the preferred stock is
outstanding. The conversion rate is determined by the acquisition value of the
preferred stock (plus imputed interest referred to above) and an 18% discount
to the 5 day average market price of the common shares at the time of exercise.
As of September 30, 1995, approximately 29% of the Series C Preferred Stock
issued had been converted into 715,447 shares of Common Stock. To the extent
that the Company uses equity securities to raise additional funds to satisfy
its working capital needs, there will be additional dilution to the Company's
existing shareholders.
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<PAGE> 12
None of the above securities were registered under the Securities Act of 1933
and may not be sold in the United States in absence of such registration or an
exemption therefrom.
FINANCIAL CONDITION
Working capital at September 30, 1995 was $660,797 with $.8 million
in accounts payable attributable to capital expenditures and leasehold
improvements. Since September 30, 1995, the Company has raised an additional
$500,000 from the sale of Series C Preferred Stock. Cash and equivalents
balances were $1.8 million as of September 30, 1995. The Company believes that
it has adequate funds to support its operations until early 1996 or, the
commencement of production of the Company's liquid nutritional products,
whichever comes first. After that time, the Company will require additional
funding to support its working capital needs as it begins to enter the market
or to provide for normal operating expenses if certification has not been
achieved.
The Company had forecasted that it would begin manufacturing its line
of dry mix nutritional and specialty dietary products in April 1995 and that
commissioning of the equipment to manufacture the Company's line of aseptic
liquid products would begin by the second quarter of 1995 and be completed
within a two month time frame. Due to unforeseen delays in finalizing the
installation of all the equipment necessary to manufacture the Company's
products, the commissioning process has been significantly delayed and sales
have yet to commence. As of November 22, 1995, limited quantities of dry mix
product have been sold and the aforementioned liquid products commissioning
process is underway with sales unlikely to commence until the first quarter of
1996.
While the Company believes that its machinery will ultimately be
commissioned and certified, there can be no assurances that the machinery will
receive certification from the F.D.A. or that the certification will be granted
within a specific time frame. Furthermore, there can be no assurances that, if
the machinery is certified, if and when the Company will commence initial
production of its liquid nutritional products or that the products will meet
with acceptance in the market. As a result of these delays, the Company has
been required to raise further funds to sustain operations until the plant
becomes operational and it may require further funds to support working capital
needs as it begins to enter the market or to provide for normal operating
expenses if commissioning continues to be delayed. The Company is presently
exploring possible alternatives for raising additional funds. There can be no
assurances that the Company will be able to secure the necessary financing, or
if a source of funding is identified, that the funding will be on terms and
conditions which are acceptable to the Company.
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<PAGE> 13
RISK FACTORS
INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES CERTAIN
SUBSTANTIAL RISKS AND PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISK FACTORS:
START UP RISK
In order to commence manufacturing liquid products, the Company must
finalize the commissioning of its liquid manufacturing line. Such
commissioning is required by the F.D.A. in connection with its regulation of
all aseptic facilities. For further information on this process, see "Recent
Significant Developments -- Manufacturing Plant". No assurances can be given
as to the time in which such certification will be completed.
Further, once the Company's machinery is certified and on-line, there
is no assurance that the equipment will operate as warranted or represented by
the manufacturers and, thus, whether the capacity of the plant will be as
planned by management of the Company.
Finally, while the Company has begun limited marketing activities, no
assurances will be given that the Company will obtain sufficient customers for
its products.
LIMITED OPERATING HISTORY; OPERATING LOSS
Since inception, the Company principally has been engaged in research
and development of its products. The Company did not have any sales for the
years ended December 31, 1993 and 1994. The Company, together with its
predecessors, Nash Nutritional Products, Inc. and Roe Pharmaceutical Co.,
formerly a majority owned subsidiary, incurred consolidated losses for the
period from March 3, 1980 (inception) to September 30, 1995. At September 30,
1995, the Company's accumulated consolidated deficit was $6,603,714, while
consolidated Stockholders' Equity was $7,278,575. Lack of a liquid products
manufacturing facility has restricted the Company's marketing and sales
efforts. The Company and its operations are subject to the various risks
inherent in the start-up and development of a new business enterprise. Since
the operating history of the Company is limited, there can be no assurance that
the Company will operate profitably.
Working capital at September 30, 1995 was $660,797 with approximately
$800,000 in accounts payable attributable to capital expenditures and leasehold
improvements. Since September 30, 1995, the Company has raised an additional
$500,000 in net proceeds from the sale of Series C Preferred Stock. The
Company is presently seeking long-term financing to support its liabilities.
There is no assurance the Company will be able to secure the necessary
financing on terms and conditions which are acceptable to the Company.
NEED FOR MANUFACTURING FACILITY
The Company had previously produced its dry-mix and liquid dietary
products through contract manufacturers. However, prior arrangements had been
unsatisfactory in respect of timely manufacture and delivery and impact on
costs, particularly for liquid products and no contract manufacturers have been
used since 1992. In order to assure a supply of its liquid and dry-mix
products at a competitive price, management has determined that the Company
must operate its own manufacturing facility to produce both liquid and dry-mix
products. The Company intends to acquire its products only from its own
manufacturing facilities. See "Recent Significant Developments --
Manufacturing Plant".
POSSIBLE NEED FOR ADDITIONAL FINANCING
The Company believes that
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<PAGE> 14
it has adequate funds to support its operations until early 1996 or, the
commencement of production of the Company's liquid nutritional products,
whichever comes first. After that time, the Company will require additional
funding to support its working capital needs as it begins to enter the market
or to provide for normal operating expenses if certification has not been
achieved. The Company is presently exploring its possible alternatives for
raising additional funds. There can be no assurances that the Company will not
require additional funds earlier than set forth above or that the Company will
be able to secure the necessary financing, (or if a source of funding is
identified, that the funding will be on terms and conditions which are
acceptable to the Company).
FUNDING
Through September 30, 1995, the Company has raised approximately $2.4
million (before offering expenses of $330,000) in additional equity financing
primarily through a private placement of the units and this amount is reflected
in accompanying financial statements. Each unit was purchased for $50,000. A
unit consisted of 25,000 shares of common stock and warrants to purchase 12,500
shares of common stock for $3 per share. The warrants expire two years from
the date of issuance. (Fractional units have been sold.) In addition, the
Company issued to the Placement Agent and brokers 2,500 options to acquire
shares of the Company's common stock at a price of $2.40 per share for each
unit sold. These options expire five years from the date of issuance.
The Company has also raised $3 million (before offering expenses of
$150,000) through the issuance of Series C Preferred Stock during the third
quarter and $500,000 thereafter. The Series C Preferred Stock pays no
dividends, but imputes a 6% effective annual interest rate upon conversion
into common stock which will be accounted for over the time during which the
preferred stock is outstanding. The conversion rate is determined by the
acquisition value of the preferred stock (plus imputed interest referred to
above) and an 18% discount to the five day average market price of the common
shares at the time of exercise. As of September 30, 1995, approximately 29% of
the Series C Preferred Stock issued had been converted into 715,447 shares of
Common Stock. To the extent that the Company uses equity securities to raise
additional funds to satisfy its working capital needs, there will be additional
dilution to the Company's existing shareholders.
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<PAGE> 15
LACK OF PRODUCT PROTECTION
The Company regards the formulations of its products to be
proprietary, but presently it has no patent or other protective rights. In
addition, the Company has filed and currently has a patent pending on its
primary liquid product including its process and content. No assurances can be
given that any patent will be issued. Currently, the Company exerts
substantial efforts to protect trade secrets and to keep formulas and related
process know-how confidential. However, there can be no assurance that it will
be successful in these efforts.
The Company has filed to register its trademark and product names for
all of the products it intends to manufacture in the next two years.
RELIANCE UPON KEY PERSONNEL
The Company is largely dependent upon the personal efforts and
abilities of Craig E. Nash, Chairman of the Board of Directors and Chief
Executive Officer, as well as those of Scott O. Nash, Vice-Chairman of the
Board of Directors and President. Craig E. Nash and Scott O. Nash, who are
twin brothers, devote all of their time to the affairs of the Company. The
loss or unavailability of the services of any one of them may have a materially
adverse effect upon the Company. Presently, the Company has accident insurance
in the amount of $1,000,000 for Craig E. Nash and Scott O. Nash, respectively.
The Company does not have insurance for any non-accidental loss.
CONTROL BY EXISTING MANAGEMENT
As of September 30, 1995, officers and directors as a group owned
4,697,513 shares of Common Stock out of 13,802,513 shares or 26.3%, including
3,625,223 shares or 26.4% owned by Craig E. Nash and Scott O. Nash. Thus the
management of the Company, principally Craig E. Nash and Scott O. Nash, are
able to continue to control the policies and affairs of the Company.
-12-
<PAGE> 16
RISKS OF THE OPTIONS AND WARRANTS
As of September 30, 1995, the Company has outstanding options to
purchase 3,284,499 shares of common stock, and warrants to purchase 1,483,463
shares of common stock. The existence of all of these options and warrants may
have an adverse effect on the terms upon which the Company would be able to
obtain additional capital. Furthermore, it might be expected that the holders
of all of such options and warrants would exercise their options at a time when
the Company could obtain equity capital on terms more favorable than those
provided for by the options and warrants. The shares underlying the warrants
are covered for resale by the Selling Stockholders by this Prospectus. Such
amounts do not include an indeterminate number of shares of Common Stock
underlying the outstanding Series C Preferred Stock.
LIMITED MARKET FOR COMMON STOCK AND REVISIONS TO THE EMERGING COMPANY
MARKETPLACE
The Common Stock is quoted and traded on the American Stock Exchange
Emerging Company Marketplace. The American Stock Exchange recently announced
that it will no longer accept new issuers for the Emerging Company Marketplace,
but will continue trading existing issuers, including the Company. Therefore,
over time the Emerging Company Marketplace will cease to exist. The market for
the Company's Common Stock must be considered limited and there can be no
assurance that a meaningful trading market will develop. Furthermore, prices
quoted may not represent the true value of the Common Stock. Stocks sold by
the Company in private placements have generally been below the then trading
price on the American Stock Exchange.
NO DIVIDENDS LIKELY
Since its inception, the Company has had no earnings and has not paid
any dividends on its Common Stock. Payment of future dividends, if any, will
be determined by the Company's Board of Directors. In the foreseeable future,
the Company intends to retain all of its earnings to finance the development
and expansion of its business.
POTENTIAL ANTI-TAKEOVER EFFECT OF AUTHORIZED PREFERRED STOCK AND CERTIFICATE OF
INCORPORATION
The Company is authorized to issue 5,000,000 shares of $0.001 par
value Preferred Stock with the rights, preferences, privileges and restrictions
thereof to be determined by the Board of Directors of the Company. Preferred
Stock can thus be issued without the vote of the holders of Common Stock.
Rights could be granted to the holders of Preferred Stock which could reduce
the attractiveness of the Company as a potential takeover target, make the
removal of management more difficult, or adversely impact the rights of holders
of Common Stock. Except for Series C Preferred Stock, no Preferred Stock is
currently outstanding.
The Company's Certificate of Incorporation contains certain
provisions designed to require a beneficial owner of over 25% of the Common
Stock to comply with certain provisions (regarding transactions with the
Company and membership on the Board of Directors) or pay certain prices
(usually the highest price paid) for the Common Stock in certain business
combinations involving the beneficial owner. These provisions are in addition
to those provided by Delaware law and apply to Craig Nash and Scott Nash.
SELLING STOCKHOLDERS
The following table shows for each of the Selling Stockholders (i)
the number and percentage of Common Stock of the Company beneficially owned by
each of them as of November 15, 1995, (ii) the number of shares covered by this
Prospectus (including shares of Common Stock underlying options and warrants),
and (iii) the percentage of ownership if all shares of Common Stock were sold.
-13-
<PAGE> 17
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Abbe, Harry 5,000 5,000 0
Ades, Louis 37,500 37,500 0
Ades, Alan 18,750 18,750 0
Altman, Laurence 25,911 15,911 10,000
Altman, Judith 13,910 13,910 0
Altman, Herbert G. 52,410 52,410 0
Altman, Andrea 7,410 7,410 0
Alvarez Family L.C. 18,750 18,750 0
Aymerich, Daniel S. 7,500 7,500 0
Barone, Ronda 37,500 37,500 0
Berkowitz, Arthur M. 54,200 20,000 34,200
Profit Sharing Plan(3)
Berkowitz, Arthur M.(3) and 4,000 4,000 0
Marlene, U/I/T
Berkowitz, Arthur M. 18,468 11,968 6,500
Defined Contribution Plan(3)
Berkowitz, Arthur M.(3)(2) 101,361 32,201 69,160
Betor, Michael and Delores 6,308 6,308 0
Betor, Kristen 202 202 0
Blanchard, Lucius 37,500 37,500 0
Borja, Francisco J. & 9,375 9,375 0
Candace L.
Bothwell, Roger and Debbie 1,280 1,280 0
Breakstone Associates, Inc. 37,500 37,500 0
Brown, Kay L. 9,375 9,375 0
Campton Profit Sharing Plan 37,500 37,500 0
and Trust
Canali, Amelia 18,750 18,750 0
Cane, Myles(4) 60,000 10,000 50,000
Carrick, Linda A.(3) 89,000 29,000 60,000
Casella, Vince(3) and Thresa 8,000 8,000 0
</TABLE>
-14-
<PAGE> 18
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Casella, Vince(3) 429,120 1.2% 179,126 250,000
Casella, Vince(3) - Keogh 34,064 34,064 0
Charles Slaughter 35,417 35,417 0
Foundation, The
Chastain, Steven G. 7,500 7,500 0
Chirinian, Johny and Cosetti 562,500 562,500 0
Cielsour, Inc. 50,000 50,000 0
Coeur-Barron (4) Family 1993 18,750 18,750 0
Trust, The
Cohen, Lawrence 37,500 37,500 0
Cohen, Dan and Nancy 37,500 37,500 0
Cohn, Irene 4,687 4,687 0
Cohn, David M. 18,750 18,750 0
Cohn, David M. and Jacobs, 18,750 18,750 0
Richard F. P.A. Age Based PSP
DTD 10-1-77
Connors, Denis 16,667 16,667 0
Cranley, Robert E. and Shelly 37,500 37,500 0
Trust
Damerin Trust DTD 12-20-88 18,750 18,750 0
Daniels, Derick, J. 112,500 112,500 0
Delaware Charter Guarantee & 18,750 18,750 0
Trust Co., John P. Kurlinski
IRA
Delaware Charter Guarantee & 37,500 37,500 0
Trust FBO Cranley, Robert, IRA
Demetree, Neil W. Irrevocable 11,250 11,250 0
Trust
Demetree, Mary A. 11,250 11,250 0
Demetree, Nicholas 10,000 10,000 0
Demetree, Tammy 5,499 5,499 0
Demetree, William C., Sr. 11,250 11,250 0
</TABLE>
-15-
<PAGE> 19
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Demetree, William C., Jr. 11,250 11,250 0
Demetree, Shelly 32,384 22,284 10,000
Demetree, Mark C. 95,197 95,197 0
Demetree, Christopher C.(5) 669,075 3.73% 80,343 578,732 3.32%
Demetree, Alexandria 10,000 10,000 0
Demetree, Christopher(5) and 4,000 4,000 0
Shelly
Demetree, Elisa A. 67,941 67,941 0
Demetree, Jack C., Jr. 45,197 45,197 0
Demetree, Jack C., Sr. 37,500 37,500 0
Demetree, Jack C., III 10,000 10,000 0
Demetree-Doherty, Leslie A. 67,941 67,941 0
Dickinson, Phillip W. 37,500 37,500 0
Diskin, Arthur L. 37,500 37,500 0
Domingo, Matthew H. 1,000 1,000 0
Donner, Henry J. 3,333 3,333 0
Donner, Katherine W. Custodian 3,334 3,334 0
for Melissa F. Donner
Dorweiler Family Trust DTD 18,750 18,750 0
11-16-93
Duchowny, Michael 18,750 18,750 0
Eagle Partners 56,250 56,250 0
Eismont, Frank J. and Emily 37,500 37,500 0
Eme, Robert R. 10,000 10,000 0
Farkas, Marian 37,500 37,500 0
Ferber, Nicholas 18,750 18,750 0
Fieldstone, Ron & Linda 37,500 37,500 0
First Securities Trust 4,500 4,500 0
Custodian FBO Cyril Ferber
</TABLE>
-16-
<PAGE> 20
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
First Securities Trust 18,750 18,750 0
Custodian FBO Gamez, Jose
Edgaurdo IRA Account
First Securities Trust 37,500 37,500 0
Custodian FBO Jose Gaviria
First Securities Trust 37,500 37,500 0
Custodian FBO Izuka Relichi
First Securities Trust 37,500 37,500 0
Custodian FBO Melanie Ferber
First Securities Trust 18,750 18,750 0
Custodian FBO Eismont,
Jacqueline, IRA Account
Fletcher, James 4,000 4,000 0
FM Partners 56,250 56,250 0
Fredrick and Amelia Schimper 35,417 35,417 0
Foundation, The
Furst, Joseph K. and Constance 37,500 37,500 0
Furst Associates 150,000 150,000 0
Galofalo, S. & A. 8,000 8,000 0
Galofalo, E. & D. 8,000 8,000 0
Gamez, Jose 9,375 9,375 0
Gaviria, Jose M. and Elsie R. 37,500 37,500 0
Getz, Robert 2,667 2,667 0
Global Health Sciences Fund 726,458 726,458 0
Godfrey, William R. 37,500 37,500 0
Goldblum, Hillel Trust 3,333 3,333 0
Goldblum, Nathaniel Trust 3,333 3,333 0
Goldblum, Rishona Trust 3,333 3,333 0
Goodell, Keith 1,260 1,260 0
Grasso, Salvadore J. 2,000 2,000 0
Hantges, Jamie 37,500 37,500 0
Haramboure, Alfredo P. and 5,167 5,167 0
Diana M.
Harroz, Edward and Susan 2,267 2,267 0
</TABLE>
-17-
<PAGE> 21
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Hefner, Family Trust 37,500 37,500 0
Helinger, Ron 37,500 37,500 0
Herman and Amelia Erhmann 33,333 33,333 0
Foundation
Hooker, Lee Allen(3) 101,478 18,750 82,728
Hyatt, Blair F. and Pamela 3,750 3,750 0
Ibarra, Miguel A. and 7,500 7,500 0
Isabel M.
Invesco Strategic Portfolios 759,792 759,792 0
Inc. Health Sciences Portfolio
Jablonski, James 13,333 13,333 0
Kaplan Associates 18,750 18,750 0
Katz, Sara M. 18,750 18,750 0
Kay, Cynthia for Jana Kay 2,200 2,200 0
Kay, Harold Profit Plan 9,900 9,900 0
Kay, Harold and Cynthia 26,050 26,050 0
Kay, David 2,200 2,200 0
Kouri, Paul 142,494 37,208 105,286
Kouri, Robert 8,472 7,000 1,472
Kurlinski, J. Parker and 18,750 18,750 0
Claire
Lifescience Technology 375,000 375,000 0
Partners
Lincoln Trust Company, 37,500 37,500 0
Custodian FBO Paul Gilbert
Lipsey, Simon and Carol 18,750 18,750 0
Loman, Lawrence(6) and 245,879 1.3% 44,799 201,080 1.1%
Margaret
Lupo, John A. 37,500 37,500 0
Madriz, Alberto 18,750 18,750 0
Mahon, William P. S. and 37,500 37,500 0
Kathleen M. Family Trust DTD
12-16-92
Mathews, Calvin T.(7) 76,434 66,434 10,000
</TABLE>
-18-
<PAGE> 22
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Matin, George 26,405 450 25,955
Matin, Ahmad 12,605 6,671 5,934
McClenahan, Bruce 37,500 37,500 0
Merhi, Mandouh and Ivy Lui 10,082 10,082 0
Milgram, Marc 37,500 37,500 0
MLPF&S Custodian Stanley 33,333 33,333 0
Weithorn
Moore, Raymond A. 5,000 5,000 0
Moster, Mark 11,428 11,428 0
Nachman, Seth 18,750 18,750 0
Nelson, Erven J. and Frankie 37,500 37,500 0
J. Trust
Pasek, Jeffrey Ivan 3,333 3,333 0
Pharmaceutical Medical 75,000 75,000 0
Technology Fund, L.P.
Philbrick, Jack and Ann 8,945 8,945 0
R.K. Grace(8) 113,688 113,688 0
Razook, G.A. 1,000 1,000 0
Reilly Capital Management 37,500 37,500 0
Group Ltd.
Resnick, Trevor and Jennifer 37,500 37,500 0
Resnick, Hyman and Marock, 18,750 18,750 0
Elfreda
Roeder, Robert P. 75,000 75,000 0
Rosenthal, Lawrence 72,900 6,000 66,900
Ross, Jessica 400 400 0
Russell, John and Pandora 1,260 1,260 0
Schaff, Willber A. and Judy 37,500 37,500 0
Schabacker, James 3,781 3,781 0
Schlager, Ron 6,124 1,124 5,000
Schlau, Marc 29,333 29,333 0
Scott, Donald P. and 75,000 75,000 0
Mildred H.
</TABLE>
-19-
<PAGE> 23
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Scuderi, Gaetano J. 9,375 9,375 0
Shadid, Ned 1,000 1,000 0
Simon, Ralph and Carletta 5,545 5,545 0
Simon, Sydney 280 280 0
Simon, Ralph, Jr. 1,500 1,500 0
Smith, Newton and Mary Ellen 480 480 0
Stanley, Ronald 37,500 37,500 0
Steiner, Anita Trust 3,334 3,334 0
Strochak, Debra G. 18,750 18,750 0
Swartz, Harold F. 18,750 18,750 0
Swavely, Robert and Ann 10,452 10,452 0
Swimmer, Leonard and Bobbi 37,500 37,500 0
Tapia, Eduardo J. and Zenia C. 15,000 15,000 0
Temple, Donald 9,375 9,375 0
Thomas, Lillie C.(6) 219,033 1.23% 31,114 187,419 1.04%
Tolkin, Bradley J. 37,500 37,500 0
Tom, Michael(9) and Marte 97,500 97,500 0
Trust
Tom, Paul 2,000 2,000 0
Tom, Michael(9) and Marte 15,467 15,467 0
Tom, Curtis 8,000 8,000 0
Tuchman, Roberto 18,750 18,750 0
Tuffanelli Family Trust 37,500 37,500 0
Tuffanelli, Shirley Jean Trust 37,500 37,500 0
Turken, Jack 18,750 18,750 0
Tyndall, Robert A. and 37,500 37,500 0
Sydney N. Family Trust
Uribe, John W. 37,500 37,500 0
Vendette, Vince and D. 20,500 20,500 0
Vendette, Vince 80,000 80,000 0
</TABLE>
-20-
<PAGE> 24
<TABLE>
<CAPTION>
Number of Number of
Number of Shares Shares
Shares Covered Owned
Beneficially Percent of by this After Percent of
Selling Stockholder(1) Owned(1) Class* Prospectus(2) Offering(1) Class*
------------------------------- -------------- ------------ --------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Vendette Group Corp. 34,063 34,063 0
Wagman, Jack M. and Normae S. 18,750 18,750 0
Family Trust
Wall Street Consultants, a 118,000 118,000 0
Nevada limited partnership(8)
Wallace, John 16,000 16,000 0
Weiner, Richard 6,667 6,667 0
Weiner, Mathew 3,334 3,334 0
Wetterling, James E. Jr. and 37,500 37,500 0
Dawn
Zahn, Spencer 18,750 18,750 0
Zuardo, Russell and Betty 37,500 37,500 0
Zych, Gregory A. and 18,750 18,750 0
Jacqueline L.
- ----------------------------
</TABLE>
* If over one percent
(1) Includes shares underlying warrants and options currently exercisable
and exercisable within sixty days of November 15, 1995.
(2) Includes shares underlying warrants whether or not currently
exercisable.
(3) Director of the Company.
(4) A former director or employee of the Company.
(5) Director and National Account Executive of the Company.
(6) Employee of the Company.
(7) Former Director and former President of the Company.
(8) Broker/dealers who received options from the Company in connection
with private placements.
(9) Former chief financial officer, controller and auditor of the Company.
PLAN OF DISTRIBUTION
The shares may be sold by the Selling Stockholders (including shares
received upon exercise of warrants). Such sales may be made on the AMEX-ECM,
in privately negotiated transactions, or otherwise, at market prices or at
negotiated prices. The shares may be sold by one or more of the following
methods: (a) a block trade in which the broker or dealer so engaged will
attempt to sell the shares as agent but may position and resell a portion of
the block as principal in order to consummate the transaction; (b) purchase by
a broker or dealer as principal, and the resale by such broker or dealer for
its account pursuant to this Prospectus, including resale to another broker
-21-
<PAGE> 25
or dealer; or (c) ordinary brokerage transactions and transactions in which the
broker solicits purchasers. In effecting sales, brokers or dealers engaged by
the Selling Stockholders may arrange for other brokers or dealers to
participate. Any such brokers or dealers may receive commissions or discounts
from the Selling Stockholders in amounts to be negotiated immediately prior to
the sale. Such brokers or dealers and any other participating brokers or
dealers may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended. Any gain realized by such a broker or dealer on the
sale of shares which it purchases as a principal may be deemed to be
compensation to the broker or dealer in addition to any commissions paid to the
broker by the Selling Stockholders.
Upon being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the purchase by a
broker or dealer, a supplemental prospectus will be filed pursuant to Rule
424(c) of the Securities Act of 1933, disclosing (i) the name of such Selling
Stockholder and of the participating broker-dealers(s); (ii) the number of
shares involved; (iii) the price at which such shares were sold; and (iv) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable.
The shares covered by this Prospectus may be sold under Rule 144
rather than this Prospectus if they qualify for sale under Rule 144. Certain
of such shares may currently qualify for sale under Rule 144. The Company will
not receive any portion of the proceeds of the shares sold by the Selling
Stockholders, but will receive funds upon the exercise of warrants, which
funds, if any, will be used for working capital. There is no assurance that
any of the Selling Stockholders will sell any or all of the shares of Common
Stock offered by them.
The Selling Stockholders have advised the Company that during the
time they are engaged in distribution of Common Stock covered by this
Prospectus, they will comply with Rules 10b-5 and 10b-6 under the Exchange Act,
and pursuant thereto: (i) will not engage in any stabilization activity in
connection with the Company's securities; (ii) will furnish each broker through
which Common Stock covered by this Prospectus may be offered the number of
copies of this Prospectus which are required by each broker; and (iii) will not
bid for or purchase any securities of the Company or attempt to induce any
person to purchase any of the Company's securities other than as permitted
under the Exchange Act. Selling Stockholders who may be an "affiliated
purchaser" of the Company as defined in Rule 10b-6 have been further advised
that pursuant to Exchange Act Release 34-23611 (September 11, 1986), they must
coordinate their sales under this Prospectus with each other and the Company
for purposes of Rule 10b-6.
LEGAL OPINION
The validity of the issuance of the shares of Common Stock offered
hereby will be passed upon for the Company by Jeffer, Mangels, Butler & Marmaro
LLP.
EXPERTS
The audited consolidated financial statements as of and for the years
ended December 31, 1994 and 1993 incorporated by reference in this Prospectus
and elsewhere in the Registration Statement have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said report.
In June, 1993, Michael Tom, certified public accountant, became
Controller of the Company and on October 1, 1993, the Company retained Arthur
Andersen LLP as its independent public accountants. Mr. Tom was Chief
Financial Officer of the Company until June 1995. The change in independent
public accountants was approved by the Board of Directors. For the Company's
fiscal years ended December 31, 1992 and 1991, the financial statements did not
contain an adverse opinion or a disclaimer of opinion nor were they qualified
or modified as to uncertainty, audit scope, or accounting principles by Michael
Tom, C.P.A., except for an explanatory paragraph as to the Company's ability to
continue as a going concern. During the two fiscal years ended December 31,
1992 and 1991, and through the date of his resignation, there were not any
disagreements with
-22-
<PAGE> 26
Michael Tom, C.P.A. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of Michael Tom, C.P.A.,
would have caused him to make a reference to the subject matter of the
disagreements in connection with his report, nor were there any "reportable
events" as defined by the Securities and Exchange Commission. During the two
fiscal years ended December 31, 1992 and 1991, and until the date of their
retention, the Company had not consulted with Arthur Andersen LLP, on the
application of accounting principles to a specified transaction, or the type of
audit opinion that might be rendered on the Company's financial statements or
any disagreements or reportable events.
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH
THE OFFER MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY THE SECURITIES OFFERED HEREBY TO ANY PERSON IN
ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE
UNLAWFUL. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . 2
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RECENT SIGNIFICANT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>
================================================================================
CROWN
LABORATORIES, INC.
COMMON STOCK
-----------------
PROSPECTUS
-----------------
December __, 1995
================================================================================
-23-
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses in connection
with the offering described in this Registration Statement. None of such
expenses will be paid by the Selling Stockholders.
<TABLE>
<CAPTION>
Total
-----
<S> <C>
Registration Fee Under Securities Act of 1933 . . . . . . . . $ 3,023
Photocopying . . . . . . . . . . . . . . . . . . . . . . . . 1,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . 9,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . 15,000
Blue Sky Fees and Expenses (including related legal fees) . . 8,500
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 477
-------
Total . . . . . . . . . . . . . . . . . . . . . . . $37,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Delaware General Corporation Law Section 145 provides that the
Registrant may indemnify any officer or director who was made a party to a suit
because of his position, including derivative suits, if he was acting in good
faith and in a manner he reasonably believed was in the best interest of the
Registrant, except, in certain circumstances, for negligence or misconduct in
the performance of his duty to the Registrant. If the director or officer is
successful in his suit, he is entitled to indemnification for expenses,
including attorney's fees. The Company's Certificate of Incorporation
eliminates director liability to stockholders or the Company for monetary
damages arising out of certain breaches by the directors of their fiduciary
duty of care. The duty of care refers to the fiduciary duty of directors to be
sufficiently diligent and careful in considering a transaction or taking or
refusing to take some corporate action. Finally, Registrant's By-Laws provide
for indemnification of Registrant's officers and directors, except in case of
gross negligence or willful misconduct, if they are a party to an action
because they were an officer or director.
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
3(a) Certificate of Incorporation, as amended(1)
3(b) By-Laws, as amended(2)
4(f) See Exhibit 3(a) and (b)
5(a) Opinion of Jeffer, Mangels, Butler & Marmaro LLP(3)
24(a) Consent of Jeffer, Mangels, Butler & Marmaro LLP (contained in Exhibit 5(a))
24(b) Consent of Arthur Andersen LLP (included as page II-6)(3)
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_________________
(1) Previously filed as exhibits to a Form 10-KSB/A-1 of Registrant for
the December 31, 1994 fiscal year.
(2) Previously filed as exhibits to a Form 8-K of Registrant for September
24, 1991.
(3) Filed herewith.
ITEM 17. UNDERTAKINGS
(a) The registrant as a small business issuer registering
securities under Rule 415 of the Securities Act will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration statement to
include any additional or changed material information on the plan of
distribution.
S-1
<PAGE> 28
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions in Item 15 hereof, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless, in the opinion of its counsel, the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
S-2
<PAGE> 29
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in the
City of Las Vegas, Nevada on the 30th day of November 1995.
CROWN LABORATORIES, INC.
By: s/Craig E. Nash
--------------------------------------
CRAIG E. NASH, Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby constitutes
and appoints Craig E. Nash or Scott O. Nash as his true and lawful
attorney(s)-in-fact, each with full power of substitution to execute in the
name and on behalf of such person, individually and in each capacity stated
below, and to file, any and all amendments to this Registration Statement,
including any and all post-effective amendments.
In accordance with the requirements of the Securities Act of 1933, as
amended, this Registration Statement was signed by the following persons in the
capacities and on the dates indicated.
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<CAPTION>
Signature Title Date
--------------------------------- ------------------------------------------------ ---------------------
<S> <C> <C>
s/Craig E. Nash Chief Executive Officer and Chairman of the November 30, 1995
--------------------------------- Board of Directors
CRAIG E. NASH
s/Scott O. Nash President and Vice Chairman of the Board of November 30, 1995
--------------------------------- Directors
SCOTT O. NASH
s/Scott E. Hilley Vice President Finance November 29, 1995
---------------------------------
SCOTT E. HILLEY
s/Christopher Demetree Director November 27, 1995
---------------------------------
CHRISTOPHER DEMETREE
s/Vincent J. Casella Director November 30, 1995
---------------------------------
VINCENT J. CASELLA
s/Lee Allen Hooker Director November 21, 1995
---------------------------------
LEE ALLEN HOOKER
s/Arthur M. Berkowitz Director November 24, 1995
---------------------------------
ARTHUR M. BERKOWITZ
s/Linda Carrick Director November 24, 1995
---------------------------------
LINDA CARRICK
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S-3
<PAGE> 30
CONSENT OF COUNSEL
The consent of Jeffer, Mangels, Butler & Marmaro LLP is contained in
their opinion, Exhibit 5(a).
S-4
<PAGE> 31
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
March 28, 1995 included in Crown Laboratories, Inc.'s Form 10-KSB/A2 for the
year ended December 31, 1994 and to all references to our Firm included in this
registration statement.
New York, New York ARTHUR ANDERSEN LLP
November 30, 1995
S-5
<PAGE> 32
<TABLE>
<CAPTION>
Exhibit Page No.
- ------- --------
<S> <C>
5.1 Opinion of Jeffer, Mangels, Butler & Marmaro LLP
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<PAGE> 1
EXHIBIT 5.1
[JEFFER, MANGELS, BUTLER & MARMARO LLP LETTERHEAD]
September 8, 1995 55822-0001
Crown Laboratories, Inc.
6780 Caballo Street
P.O. Box 96205
Las Vegas, Nevada 89119
Re: Crown Laboratories, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
Crown Laboratories, Inc., a Delaware corporation (the "Company"),
proposes to file a Form S-3 Registration Statement (the "Registration
Statement") for the sale of 4,301,712 shares of the Company's Common Stock,
$0.001 par value (the "Shares") by certain selling stockholders of the Company
identified in the Registration Statement, including 1,559,064 Shares to be
issued upon exercise of Warrants.
In rendering the following opinion, we have examined and relied only
upon the documents, certificates of officers of the Company as are specifically
described below. In our examination, we have assumed the genuineness of all
signatures, the authenticity, accuracy and completeness of the documents
submitted to us as originals, and the conformity with the original documents of
all documents submitted to us as copies. Our examination was limited to the
following documents and no others:
1. Certificate of Incorporation of the Company, as amended to
date;
2. By-Laws of the Company, as amended to date;
3. Resolutions adopted by the Board of Directors of the Company
authorizing the Shares and the Warrants;
4. The Registration Statement, together with all amendments
thereto, exhibits filed in connection therewith and incorporated therein by
reference and form of prospectus contained therein including all documents
incorporated therein by reference;
5. A Certificate of Good Standing for the Company from the
Delaware Secretary of State;
6. The form of the Warrants; and
7. A Certificate from Officers of the Company as to certain
factual matters.
We have not undertaken, nor do we intend to undertake, any independent
investigation beyond such documents and records, or to verify the adequacy or
accuracy of such documents and records.
Based upon and subject to the foregoing, it is our opinion that the
outstanding Shares are, and the Shares to be issued upon exercise of the
Warrants, when issued in accordance with the terms of the Warrants will be,
legally-issued, fully-paid and nonassessable shares of common stock of the
Company.
We hereby consent to the filing of this opinion as an exhibit in the
Registration Statement; to the filing of this opinion in connection with such
filings of applications as may be necessary to register, qualify or establish
eligibility for an exemption from registration or qualification of the Shares
under the blue sky laws of any state or other jurisdiction although we express
no opinion as to compliance with any securities laws herein; and to the
reference to this Firm in the prospectus under the heading "Legal Opinion". In
giving this consent, we do not admit that we are in the category of persons
whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission promulgated thereunder.
<PAGE> 2
Crown Laboratories, Inc.
September 8, 1995
Page 9
The opinion set forth herein are based upon the federal laws of the
United States of America, the laws of the State of California and the corporate
laws of the State of Delaware all as now in effect. We express no opinion as
to whether the laws of any particular jurisdiction apply, and no opinion to the
extent that the laws of any jurisdiction other than those identified above are
applicable to the subject matter hereof.
The information set forth herein is as of the date of this letter. We
disclaim any undertaking to advise you of changes which may be brought to our
attention after the effective date of the Registration Statement.
Very truly yours,
JEFFER, MANGELS, BUTLER & MARMARO LLP
