<PAGE> 1
Pursuant to Rule 424(b)(3)
Registration Number 33-65421
P R O S P E C T U S
February 13, 1996
CROWN LABORATORIES, INC.
COMMON STOCK
($0.001 PAR VALUE)
This Prospectus relates to 2,665,625 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
conversion of Series C Preferred Stock. 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, which proceeds will be used for working
capital. The Company estimates that the expenses of this offering will be
approximately $10,000, 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 February 12, 1996, the last sale price of the
Company's Common Stock, as reported by the AMEX-ECM, was $1 3/4.
________________________________
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.
-1-
<PAGE> 2
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.
-2-
<PAGE> 3
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
<TABLE>
<S> <C>
Securities Offered(1) . . . . . . . . . . . . . . . . . . This Prospectus covers the sale of
2,665,625 shares of Common Stock to be sold
by certain Selling Stockholders, including
280,625 shares of Common Stock which may be
sold after the exercise of warrants and
2,030,000 shares which may be issued upon
conversion of Series C Preferred Stock.
Number of Shares of Common Stock
Outstanding on December 31, 1995(1) . . . . . . . . . . . 14,290,513 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>
- ------------------------
(1) Unless otherwise indicated, all references in the Prospectus to per
share data and number of shares exclude 5,661,230 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, 261,875 shares underlying 261,875 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 258.8 share
of Series C Preferred Stock.
-3-
<PAGE> 4
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
----------------- ---------------
<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>
- --------------
(1) In the fourth quarter, the Company has sold approximately $100,000 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."
-4-
<PAGE> 5
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 began on April 13, 1995 with the
manufacturer, (in this case, the Company), working with 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. National Food
Laboratories is an international food and research and development organization
with laboratories facilities in Dublin, California, Washington, D.C. and
Seattle, Washington and is a wholly-owned subsidiary of the National Food
Processors Association.
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 in June, 1995, filed a claim against the
manufacturer of the aseptic filler in the German Bankruptcy Court (bankruptcy
of Time Pack, GmbH) for damages caused by the delays in certifying the filler
and seeks to have these damages applied against the remaining balance of the
$1,730,000 purchase price of the machine, which claim is pending the decision
of the bankruptcy trustee. Further, the Company in March, 1995, filed suit in
Nevada District Court for the County of Clark, against the manufacturer and its
alter egos and subsidiaries alleging fraud, misrepresentation, and alter ego
among other allegations. The Company is in the process of serving the
complaint, as amended in September, 1995, on the defendants and no defendants
have yet answered the complaint. 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. 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. 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 $7.5 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
-5-
<PAGE> 6
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
equipment purchased and financed included the necessary equipment to
manufacture liquid and dry mixed products, including boilers, tanks, mixers,
processors, fillers and packaging equipment, as well as all related plumbing
and electrical infrastructure.
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
approximately $100,000 of dry mixed products in one European country through an
affiliate and has collected a portion of the resulting receivables.
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,
will carry an interest rate of 8.65% and will provide for an 18 year
amortization ($16,984 per mouth) 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
equity financing 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 of
1995 and $1,000,000 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 Series C Preferred Stock (plus imputed interest
referred to above) and an 18% discount to the 5 day average market price of the
Common Stock at the time of exercise. As of the date hereof, 141.2 shares of
the Series C Preferred Stock issued had been converted into 1,253,447 shares of
Common Stock and 258.8 shares of Series C Preferred Stock are outstanding. 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.
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
$1,000,000 from the sale of Series C Preferred Stock. Cash and equivalents
balances were $1.8 million
-6-
<PAGE> 7
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 February 13, 1996, 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 second 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.
-7-
<PAGE> 8
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, 1994 and 1995 (except for a limited amount of
dry mixed products sold in the fourth quarter of 1995). 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
$1,000,000 in gross 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 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
-8-
<PAGE> 9
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 of 1995 and $1,000,000 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
Stock at the time of exercise. As of the date hereof, 141.2 shares of the
Series C Preferred Stock issued had been converted into 1,253,447 shares of
Common Stock and 258.8 shares of Series C Preferred Stock are outstanding. 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.
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. 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 December 31, 1995, officers and directors as a group owned
4,309,955 shares of Common Stock out of 14,290,513 shares or 30.2%, including
3,525,233 shares or 24.7% 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.
-9-
<PAGE> 10
RISKS OF THE OPTIONS AND WARRANTS
As of December 31, 1995, the Company has outstanding options to
purchase 4,185,667 shares of common stock, and warrants to purchase 1,475,563
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 or in
another 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. On December 19, 1995,
a separate registration statement was declared effective by the Securities and
Exchange Commission which provides for the resale by the selling shareholders
named therein of up to 7,247,305 shares of Common Stock. Sales of substantial
shares of Common Stock under such registration statement or pursuant to this
Prospectus could have a material adverse effect on the price of the Common
Stock. 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 January 15, 1996, (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.
-10-
<PAGE> 11
<TABLE>
<CAPTION>
Number of
Number of Shares
Shares Covered
Beneficially by this
Selling Stockholder Owned(1) Prospectus(2)
------------------------------- ------------- --------------
<S> <C> <C>
Ades, Alan 28,125 9,375
Ades, Louis 56,250 18,750
Album N.V. 75,000 75,000
Autocare Corp. 18,750 18,750
Colon, Jesus 9,375 9,375
Cook, James C. and Stacy 37,500 37,500
Fuller, Allen B. First
Security Trust FBO 18,750 18,750
The Gifford Fund Ltd.(3) 2,118,000 2,030,000
Internal Medicine Corp. 112,500 112,500
Kayton, Mathew S. 7,500 7,500
Leal, Leandro and Jeanne 9,375 9,375
Martinez-Souss, Hector 9,375 9,375
The Research Works, Inc. 75,000 75,000
Rivera, Ignacio 37,500 37,500
Robinson, Forrest and Linda 18,750 18,750
Rubin, Santiago 18,750 18,750
Salem, Edward 18,750 18,750
Saplicki, William 9,375 9,375
Scott, Edwin E. 37,500 37,500
Silverman, Judith E. 37,500 37,500
Southwest Securities Inc. FBO
Frank T. Jordan IRA 18,750 18,750
Van Brocklin, Finley G. Jr. &
Semmes R. 37,500 37,500
</TABLE>
- ---------------------------------
(1) Includes shares underlying warrants and Series C Preferred Stock
currently exercisable or convertible and exercisable or convertible
within sixty days of January 15, 1996.
(2) Includes shares underlying warrants or Series C Preferred Stock
whether or not currently exercisable or convertible.
(3) Holder of Series C Preferred Stock. The Series C Preferred Stock is
convertible into Common Stock at the acquisition price of the Series C
Preferred Stock divided by 82% of the market price (as defined) when
converted. For purposes hereof, a $1.00 market price has been
assumed, which results in 2,030,000 shares
-11-
<PAGE> 12
being registered for the holders of Series C Preferred Stock. If the
market price at the time of conversion is less than $1.00, the number
of shares will be in excess of 2,030,000 shares, and said excess
shares will not be covered by this Prospectus. If then eligible such
excess shares may be sold pursuant to Rule 144.
Except for The Gifford Fund Ltd. (which owns beneficially
approximately 12.9% of the outstanding Common Stock), none of the Selling
Shareholders own beneficially over 1% of the Common Stock and none will own any
Common Stock upon the sale of all Common Stock covered by this and a prior
Registration Statement.
PLAN OF DISTRIBUTION
The shares may be sold by the Selling Stockholders (including shares
received upon exercise of warrants or conversion of Series C Preferred Stock).
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 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.
-12-
<PAGE> 13
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 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.
-13-
<PAGE> 14
<TABLE>
<S> <C>
======================================================= =======================================================
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 CROWN
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A LABORATORIES, INC.
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.
COMMON STOCK
_______________________
----------------------
PROSPECTUS
----------------------
TABLE OF CONTENTS
Page
----
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . 2
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . 2
PROSPECTUS SUMMARY . . . . . . . . . . . . . . . . . 3
RECENT SIGNIFICANT DEVELOPMENTS . . . . . . . . . . . 5
RISK FACTORS . . . . . . . . . . . . . . . . . . . . 8
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . 10
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . 12
February 13, 1996
LEGAL OPINION
EXPERTS . . . . . . . . . . . . . . . . . . . . . . 13
======================================================= =======================================================
</TABLE>
-14-
