U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1996
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 0-28704
CLASSIC RESTAURANTS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1122431
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3500 PARKWAY LANE, SUITE 435, NORCROSS, GEORGIA 30092
(Address of principal executive offices)
(770)729-9010
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes___X___ No______
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date:
3,498,851 SHARES OF CLASS A COMMON STOCK, NO PAR VALUE
200,000 SHARES OF CLASS B COMMON STOCK, NO PAR VALUE
AS OF DECEMBER 31, 1996
Transitional Small Business Disclosure Format (check one): Yes_____ No ___X__
Exhibit index on page 13 Page 1 of 42 pages
<PAGE>
CLASSIC RESTAURANTS INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheet - December 31, 1996 (unaudited) 3
Statement of Operations - for the three months
ended December 31, 1996 (unaudited) 4
Statement of Cash Flows - for the three months
ended December 31, 1996 (unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II. OTHER INFORMATION 9
<PAGE>
CLASSIC RESTAURANTS INTERNATIONAL, INC
BALANCE SHEET
DECEMBER 31, 1996
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 75,351
Accounts receivable 15,144
Inventory 21,237
Due from affiliates 169,713
Prepaid and other current assets 297,242
--------
Total current assets 578,687
PROPERTY AND EQUIPMENT:
Furniture and equipment 287,108
Leasehold improvements 520,321
Vehicles 6,228
------
Total property and equipment 813,657
Accumulated depreciation (396,470)
417,187
OTHER ASSETS:
Deposits 39,119
Organization costs, net of accumulated
amortization of $8,388 21,612
-------
60,731
TOTAL ASSETS $ 1,056,605
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 222,792
Accrued expenses 25,322
Taxes payable 44,624
Other current liabilities 141,984
--------
Total current liabilities 434,722
NOTES AND LOANS PAYABLE 295,449
STOCKHOLDERS' EQUITY:
Preferred stock, Series A, 20 shares
at $25,000 stated value authorized,
issued and outstanding 500,000
Common stock, Class A, no par value,
1,800,000,000 shares authorized,
3,501,769 shares issued and outstanding 3,422,545
Common stock, Class B, no par value,
200,000,000 shares authorized,
200,000 shares issued and outstanding 200
Accumulated deficit (3,596,311)
Total stockholders' equity 326,434
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,056,605
==========
The accompanying notes are an integral part of this balance sheet.
<PAGE>
<TABLE>
CLASSIC RESTAURANTS INTERNATIONAL, INC
STATEMENTS OF LOSS
(UNAUDITED)
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1996 1996
<S> <C> <C>
Net Sales $ 703,959 $1,115,833
Operating Expenses:
Operating and maintenance 547,639 921,604
General and administrative 444,310 694,941
Depreciation and amortization 35,899 71,789
------- -------
Total Operating Expenses 1,027,848 1,688,334
---------- ----------
Loss From Operations (323,889) (572,501)
---------- ----------
Other Income (expense):
Other income - 7,000
Interest income 201 410
Interest Expense (22,676) (28,902)
--------- ---------
(22,475) (21,492)
--------- ---------
Net Loss $ (346,364) $ (593,993)
========== ===========
Per share information:
Weighted average shares
outstanding
Primary 3,249,512 3,135,719
========= =========
Fully Diluted 3,527,289 3,274,607
========= =========
Net loss per share:
Primary $ (0.11) $ (0.19)
====== ======
Fully Diluted $ (0.10) $ (0.18)
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
CLASSIC RESTAURANTS INTERNATIONAL, INC
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
For the three months For the six months
ended December 31, ended December 31,
1996 1996
---------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (346,363) $ (593,993)
------------ -----------
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities -
Depreciation and amortization 35,899 71,789
Net changes in assets and liabilities -
Increase in accounts receivable (13,948) (11,459)
Increase in inventory (3,610) (5,157)
Increase in prepaid expenses (282,984) (283,297)
(Decrease) and increase in trade accounts payable (33,393) 35,698
Decrease in accrued expenses (10,516) (125,697)
(Decrease) and increase in taxes payable (5,010) 44,624
Increase in other current liabilities 14,848 54,483
------ -------
Total adjustments (298,714) (219,016)
---------- ----------
Net cash used in operating activities (645,077) (813,009)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,962) (10,821)
-------- ---------
Net cash used in investing activities (5,962) (10,821)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of deposits (180) (1,701)
Advances to affiliates (113,325) (117,625)
Payment of advances from stockholders (472,642) (320,641)
Payment of long-term debt (42,999) (42,999)
Proceeds from stock issuance 1,339,388 1,359,388
--------- ----------
Net cash provided by financing activities 710,242 876,422
-------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 59,203 52,592
CASH AND CASH EQUIVALENTS, beginning of period 16,148 22,759
------- -------
CASH AND CASH EQUIVALENTS, end of period $ 75,351 $ 75,351
======= ========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
CLASSIC RESTAURANTS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and Item 310(b) of Regulation SB. They do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a
fair presentation have been included. The results of operations for the periods
presented are not necessarily indicative of the results to be expected for the
full year. For further information, refer to the financial statements of the
Company as of June 30, 1996, and the notes thereto, included in the Company's
Form 10-KSB.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996 the Company had a working capital surplus of $143,965,
compared to a working capital deficiency $976,147 on June 30, 1996. On December
31, 1996, and June 30, 1996, the Company had cash and cash equivalents of
$75,351, and $22,759, respectively. The increase in working capital can be
attributed to a number of items.
In October 1996, the Company completed a private placement of stock for gross
proceeds of $500,000. The proceeds of this offering resulted in an increase in
both cash and working capital. The Company has entered into consulting
agreements with Cambria Investment Group, Ltd. and Continental Capital and
Equity Corporation to assist the Company with its shareholder and public
relations. The Company prepaid these agreements, with cash and stock, which
contributed to the increase in current assets, and working capital. The stock
issued under these agreements was valued at $258,750, which will be amortized
over the life of the agreements. Of the $50,000 in cash which was paid under the
agreements, $23,000 has been included in general and administrative expenses for
the 6 months ended December 31, 1996.
Also, an increase in the amount payable from affiliates increased current assets
and working capital. A portion of the amount due from affiliates is attributed
to the $60,000 earnest money deposits made under the Stock Purchase Agreement
described below under Results of Operations.
A note which was due to an affiliate of the Company, in the amount of $426,141,
was converted into Class A Common Stock, resulting in a reduction of current
liabilities and an increase in working capital and stockholders' equity. Current
liabilities were $434,722 and $1,084,704 on December 31, 1996 and June 30, 1996,
respectively. On December 31, 1996, and June 30, 1996, total liabilities were
$730,171 and $1,084,704, respectively.
6
<PAGE>
The differences in current liabilities and total liabilities between June 30,
1996 and December 31, 1996, are attributable to the reclassification of certain
debts, from current liabilities to notes and loans payable, and the conversion
of the note due to a stockholder into Class A Common Stock.
On December 31, 1996, the Company had total stockholders' equity of $326,434,
contrasted with a stockholders' deficit of $438,961 on June 30, 1996. The
private placement for $500,000, along with the conversion into equity of a note
due to a shareholder and the stock issued under the consulting agreements,
contributed to the increase in stockholders' equity. Also, the Company has sold
subscriptions for Series B Convertible Preferred Stock which, until the Company
is authorized to issue this stock, has been accounted for as equity investments
in Class A Common Shares.
Currently, the Company is dependent upon advances from shareholders and the sale
of stock to meet its financing needs. There is no guaranty that the Company will
be able to obtain additional financing from these sources.
RESULTS OF OPERATIONS
The financial statements of the Company as of December 31, 1996, are not
comparable to the Company's financial statements on December 31, 1995. The
financial statements dated December 31, 1996, are those of the Company and its
wholly-owned operating subsidiary, Classic Restaurants International, Inc., a
Florida corporation, while the financial statements dated December 31, 1995 were
those of what was formerly known as Casinos International, Inc. and its
wholly-owned subsidiary, Great American Casinos, Inc.
For the three and six months ended December 31, 1996, the Company had net sales
of $703,959 and $1,115,833, respectively. In contrast, net sales for the six
months ended June 30, 1996 were $1,372,352. For the six months ended December
31, 1996, operating expenses were $1,688,334, as compared to $1,800,238 for the
six months ended June 30, 1996. The Company experienced a loss from operations
of $572,501 and a net loss of $593,993, for the six months ended December 31,
1996. In contrast, for the six months ended June 30, 1996, the Company had a
loss from operations of $427,886 and a net loss of $446,467.
Operating expenses for the six months ended December 31, 1996, were $921,604, in
contrast to $1,247,567 for the six months ended June 30, 1996. The Company's
general and administrative expenses were $694,941 and $480,960 for the six
months ended December 31, 1996 and June 30, 1996, respectively. Interest expense
for the six months ended December 31, 1996, was $28,902, compared to $18,881 for
the six months ended June 30, 1996. Due to the seasonality of the Company's
business, and the changes which the Company has undergone during the past year,
the Company does not believe that expenses for the the six months ending
December 31, 1996 and the six months ending June 30, 1996 are comparable.
7
<PAGE>
On October 18, 1996, the Company entered into a Stock Purchase Agreement with
Joseph Rollins to purchase a 67.5% interest in Jocks & Jills Prado, Inc.
("Prado") and a 60.75% interest in Divine Events, Inc. ("Divine"). Prado does
business under the name Frankie's Food - Sports - Spirits, a sports bar located
in Atlanta, Georgia. The Company made an earnest money deposit of $50,000 and
made an additional $10,000 deposit for an extension of the Closing Date.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 2. CHANGES IN SECURITIES.
October 10, 1996, the Company's Board of Directors authorized
the creation of a Series A Convertible Preferred Stock, and
the issuance of 20 shares of the Series A Convertible
Preferred Stock along with a Common Stock Purchase Warrant for
an aggregate price of $500,000. The terms of the Series A
Convertible Preferred Stock, require the Company to redeem the
shares twelve (12) months after issuance, and entitle the
holder to a $25,000 liquidation preference over the holders of
the Company's equity securities. The Series A Preferred Stock
holders are entitled to vote with the Class A Common Stock
holders, and are entitled to the number of votes equal to the
number of shares of Class A Common Stock into which the Series
A Preferred Stock could be converted at the record date for
such a vote, or if no record date is determined, the date of
the vote or the date the written consent of shareholders is
solicited. The Series A Convertible Preferred Stock may be
converted into Class A Common Stock 45 days after issuance.
The number of shares into which the Series A Convertible
Preferred Stock may be converted is calculated by dividing
$25,000 by the "conversion price," which is the lesser of the
closing bid price on the date of subscription, or sixty
percent (60%) of the average closing bid price for a period of
three (3) trading days immediately preceding the date of
conversion. The conversion price may be adjusted from time to
time by the Board of Directors as set forth in the Articles of
Incorporation. No fractional shares will be issued upon
conversion, instead the Company will pay cash equal to the
fair value of the Class A Common Stock as determined by the
Board of Directors. Pursuant to the terms of the Series A
Convertible Preferred Stock, the Company may not amend its
Articles of Incorporation in any manner which would materially
alter or change the powers, preferences, or special rights of
the Series A Convertible Preferred shareholders, without the
approval of such amendment by two-thirds (2/3) of the
outstanding shares of Series A Convertible Preferred Stock,
voting together as a class. Also, the Company is limited in
its redemption, retirement, purchase, or acquisition of any
class or series of common stock, and the issuance of any class
or equity securities. The Company's Articles of Incorporation,
which describe in detail the provisions applicable to the
Series A Convertible Preferred Stock, are attached as an
exhibit to this report.
The purchaser of the Series A Convertible Preferred Stock,
Ocean Funding (BVI), Ltd., is not a U.S. citizen, therefore,
the Company issued these securities pursuant to the exemption
provided by Regulation S. Pursuant to the terms of the Common
Stock Purchase Warrant and the Series A Convertible Preferred
Stock, the Company has set aside and reserved 446,000 shares
of the Company's Class A Common Stock.
9
<PAGE>
The Common Stock Purchase Warrant entitles the holder to
purchase up to 295,000 shares of the Company's Class A Common
Stock. The terms of the Common Stock Purchase Warrant (the
"Warrant") provide that the Company will reserve 295,000
shares of the Class A Common Stock for issuance upon exercise
of the warrant. The Warrant could be exercised, until December
15, 1996, at a price of $1.70 per share, and thereafter at a
price of either $1.70 per share or sixty percent (60%) of the
closing bid for the Class A Common Stock. The terms of the
Warrant also provide for an adjustment in the number of shares
the holder is entitled to purchase, and the purchase price, in
the event the Company subdivides or combines its outstanding
shares of common stock. Subsequent to December, 1996, the
holder exercised its option to purchase 95,238 shares of the
Company's common stock for $ 0.525 per share ($49,999.95).
This stock was issued pursuant to the registration exemption
provided by Regulation S.
The Board of Directors, on October 28, 1996, authorized the
issuance of 130,000 shares of the Corporation's Class A Common
Stock to Continental Capital & Equity Corporation ("CCEC"), in
consideration for CCEC's services. Eighty thousand (80,000) of
these shares were registered on a Form S-8 filed with the
Securities and Exchange Commission. The other 50,000 shares
were not registered, based on the exemption provided by
Section 4(2) of the Securities Act. Management relied upon
this exemption because of the non-public nature of the sale
and the sophistication of CCEC and its directors.
On December 16, 1996, the Company issued 30,000 shares of
Class A Common Stock to Dale McMackin, a shareholder of the
Company, at a price of $2.00 per share. The Company relied on
the registration exemption provided by Section 4(2) of the
Securities Act, due to the non-public nature of the offering.
On December 20, 1996, the Company's Board of Directors
authorized the issuance of 247,759 shares of Class A Common
Stock. These shares were issued as follows:
Employees received 2,250 shares as an annual bonus in
recognition of loyal service and as an incentive to
continue with the Company. These employees were
Arthur Barnes, Ruth Barlow, Joe Camper, Gary Wyatt,
Leo Heitzman, Linda Ruth, and Dawn DeCarlo.
Crown Resources, Inc. ("Crown") received 243,509
shares in payment of $426,140.82 of debt. Crown is
controlled by James Robert Shaw, a director of the
Company.
Jerry W. Carter, a director of the Company, was
issued 2,000 shares of Class A Common Stock, and
1,000 shares of Series B Convertible Preferred Stock,
when authorized, for services rendered to the
Corporation, valued at $18,500.
10
<PAGE>
All of the Class A Common Stock shares were valued at
a $1.75 per share, which was 70% of the current bid
price of $2.50 per share. The Series B Convertible
Preferred Stock will be valued at $15.00 per share.
The Company issued these shares without registration,
based upon the exemption provided by Section 4(2) of
the Securities Act. Management believed this
exemption was available because of the non-public
nature of the transactions and the shares were issued
to employees and directors.
On December 10, 1996, the Board of Directors authorized the issuance of
10,000 shares of Series B Convertible Preferred Stock, for an aggregate
price of $150,000. As of December 31, 1996, subscriptions and payments
for 2,918 shares of Series B Convertible Preferred Stock had been
received by the Company, including the 1,000 shares which were issued
to Jerry W. Carter, as previously mentioned. However, as of December
31, 1996, the Company had not filed an amendment to the Articles of
Incorporation to authorize the Series B Convertible Preferred Stock.
The payments which were received for the Series B Convertible Preferred
Stock have been accounted for as equity investments in Class A Common
Shares, until such time as the Company is authorized to issue the
Series B Convertible Preferred Stock. The Company intends to offer and
sell the Series B Convertible Preferred Stock under the terms of Rule
506 of Regulation D. The Company believes that the sales prior to
December 31, 1996, may qualify for the registration exemption provided
by Section 4(2) given the non-public nature of the offering and that
the subscribers are current shareholders of the Company, with the
exception of Jerry W. Carter, who is a director of the Company.
Pursuant to the terms of the Series B Convertible Preferred Stock, the
Company has set aside and reserved 100,000 shares of Class A Common
Stock.
11
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
ITEM 5. OTHER INFORMATION.
Not Applicable.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS
<TABLE>
<CAPTION>
REGULATION SEQUENTIAL
S-B NUMBER EXHIBIT PAGE
NUMBER
<S> <C> <C>
2 PLAN OF PURCHASE, SALE, REORGANIZATION, ARRANGEMENT, N/A
LIQUIDATION, SUCCESSION
3.1 ARTICLES OF INCORPORATION, AS AMENDED 14
3.2 BYLAWS, AS AMENDED (1) N/A
4.1 ARTICLES OF INCORPORATION (2) N/A
10.1 STOCK PURCHASE AGREEMENT WITH JOCKS & JILLS PRADO, INC. 33
AND DIVINE EVENTS, INC.
10.2 Client Service Agreement with Continental Capital & N/A
Equity Corporation dated October 11, 1996 (3)
10.3 Consulting Agreement with Cambria Investment Group, N/A
Ltd. (3)
11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS (4) N/A
15 LETTER ON UNAUDITED FINANCIAL INFORMATION (4) N/A
18 LETTER ON CHANGE IN ACCOUNTING PRINCIPLES N/A
19 REPORT FURNISHED TO SECURITY HOLDERS N/A
22 PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE OF N/A
SECURITY HOLDERS
23 CONSENTS OF EXPERTS AND COUNSEL N/A
24 POWER OF ATTORNEY N/A
27 FINANCIAL DATA SCHEDULE 41
- ------------
</TABLE>
(1) INCORPORATED BY REFERENCE TO THE EXHIBITS FILED WITH THE COMPANY'S
ANNUAL REPORTS ON FORM 10-KSB FOR THE FISCAL YEARS ENDED JUNE 30, 1995
AND JUNE 30, 1994 AND THE COMPANY'S CURRENT REPORT ON FORM 8-K DATED
JANUARY 31, 1996, COMMISSION FILE NUMBER 033-33556-D.
(2) THE APPLICABLE PROVISIONS OF THE ARTICLES OF INCORPORATION WHICH HAVE
BEEN CHANGED MAY BE FOUND IN EXHIBIT 3.1.
(3) INCORPORATED BY REFERENCE TO THE EXHIBITS FILED WITH THE FORM S-8 FILED
ON NOVEMBER 11, 1996, WITH THE SECURITIES AND EXCHANGE COMMISSION, FILE
NUMBER 333-1609.
(4) SEE PART I - FINANCIAL STATEMENTS.
13
<PAGE>
B) REPORTS ON FORM 8-K:
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CLASSIC RESTAURANTS INTERNATIONAL, INC.
(Registrant)
Date: February 14, 1996 By:/s/Caroline P. Anderson
Caroline P. Anderson
Executive Vice President and
Chief Financial Officer
123196.10Q
14
<PAGE>
EXHIBIT 3.1
ARTICLES OF INCORPORATION, AS AMENDED
15
<PAGE>
[Stamps and notations from the Colorado Secretary of State's Office]
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
[Colorado Secretary of
State file stamp]
OF
REGIONAL EQUITIES CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That these Amended and Restated Articles of Incorporation, which
supersede the original Articles of Incorporation, were adopted by the vote of a
number of shares of Regional Equities Corporation sufficient for approval on
January 5, 1990.
ARTICLE I
NAME
The name of the corporation shall be:
Regional Equities Corporation
ARTICLE II
CAPITAL
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 2,100,000,000 shares, of which
100,000,000 shares shall be shares of Preferred Stock, no par value per share
and 2,000,000,000 shares shall be shares of Common Stock, no par value per
share.
(a) PREFERRED STOCK. The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions of the Preferred
Stock, the establishment of different series of Preferred Stock, and variations
in the relative rights and preferences as between different series shall be
established in accordance with the Colorado Corporation Code by the Board of
Directors.
Except for such voting powers with respect to the election of directors
or other matters as may be stated in the resolutions of the Board of Directors
creating any series of Preferred Stock, the holders of any such series shall
have no voting power whatsoever.
(b) COMMON STOCK. The holders of Common Stock shall have and possess
all rights as shareholders of the corporation, including such rights as may be
granted elsewhere by these Articles of Incorporation, except as such rights may
be limited by the preferences, privileges and voting powers, and the
restrictions and limitations of the Preferred Stock.
Subject to preferential dividend rights, if any, of the holders of
Preferred Stock, dividends upon the Common Stock may be
<PAGE>
declared by the Board of Directors and paid out of any funds legally available
therefor at such times and in such amounts as the Board of Directors shall
determine.
The capital stock, after the amount of the subscription price has been
paid in, shall not be subject to assessment to pay the debts of the corporation.
Any stock of the corporation may be issued for money, property,
services rendered, labor done, cash advances for the corporation, or for any
other assets of value in accordance with the action of the Board of Directors,
whose judgment as to value received in return therefor shall be conclusive and
said stock, when issued, shall be fully paid and nonassessable.
ARTICLE III
NO PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
right to purchase, subscribe for, or otherwise acquire any unissued or treasury
shares of stock of the corporation, or any options or warrants to purchase,
subscribe for or otherwise acquire any such unissued or treasury shares, or any
shares, bonds, notes, debentures, or other securities convertible into or
carrying options or warrants to purchase, subscribe for or otherwise acquire any
such unissued or treasury shares.
ARTICLE IV
CUMULATIVE VOTING
A shareholder of the corporation shall not be entitled to cumulative
voting.
ARTICLE V
REGISTERED OFFICE AND AGENT
The initial registered office of the corporation shall be at 5290 DTC
Parkway, Suite 150, Englewood, Colorado 80111, and the name of the initial
registered agent at such address is Larry D. Harvey. Either the registered
office or the registered agent may be changed in the manner provided by law.
Part of all of the business of said corporation may be carried on in
the State of Colorado or beyond the limits of the State of Colorado, in other
states or territories of the United States and in foreign countries.
-2-
<PAGE>
ARTICLE VI
BOARD OF DIRECTORS
The business and affairs of this Corporation shall be managed by a
Board of Directors which shall have all authority granted to it by the Colorado
Corporation Code. The number of directors may from time to time be increased or
decreased in such manner as shall be provided by the Bylaws of this corporation.
So long as the number of directors shall be less than three, no shares of this
corporation may be issued and held of record by more shareholders than there are
directors. Any shares issued in violation of this paragraph shall be null and
void. In the event there are less than three directors, this provision shall
also constitute a restriction on the transfer of shares.
The initial board of directors of the corporation shall consist of
three directors, and the names and addresses of the persons who shall serve as
directors until the first annual meeting of shareholders or until their
successors are elected and shall qualify are:
M. James Herbic 1210 South Parker Road, Suite 200
Denver, Colorado 80231
James A Hesman 1210 South Parker Road, Suite 200
Denver, Colorado 80231
Larry D. Harvey 5290 DTC Parkway, Suite 150
Englewood, Colorado 80111
ARTICLE VII
INDEMNIFICATION
The corporation shall indemnify any person who is or was a director to
the maximum extent provided by statute.
The corporation shall indemnify any person who is or was an officer,
employee or agent of the corporation who is not a director to the maximum extent
provided by law, or to a greater extent if consistent with law and if provided
by resolution of the corporation's shareholders or directors, or in a contract.
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, fiduciary or agent of the
corporation and who while a director, officer, employee, fiduciary or agent of
the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee, fiduciary or agent of any other
foreign or domestic corporation, partnership, joint venture, trust, other
enterprise or employee benefit plan against any liability asserted
-3-
<PAGE>
against or incurred by him in any such capacity or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under provisions of the statute.
ARTICLE VIII
LIMITATION OF DIRECTOR LIABILITY
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or to its shareholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) for acts specified under Section 7-5-114 of the Colorado
Corporation Code or any amended or successor provision thereof, or (iv) for any
transaction from which the directors derived an improper personal benefit. If
the Colorado Corporation Code is amended after this Article is adopted to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Colorado
Corporation Code, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE IX
CORPORATE OPPORTUNITIES
The officers, directors and other members of management of this
corporation shall be subject to the doctrine of corporate opportunities only
insofar as it applies to business opportunities in which this corporation has
expressed an interest as determined from time to time by the corporation's Board
of Directors as evidenced by resolutions appearing in the corporation's minutes.
When such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors and other members of management of this corporation shall be disclosed
promptly to this corporation and made available to it. The Board of Directors
may reject any business opportunity presented to it and thereafter any officer,
director or other member of management may avail himself of such opportunity.
Until such time as this corporation, through its Board of Directors, has
designated an area of interest, the officers, directors and other members of
management of this corporation shall be free to engage in such areas of interest
on their own and the provisions hereof shall not limit the rights of any
officer, director or other member of management of this
-4-
<PAGE>
corporation to continue a business existing prior to the time that such area of
interest is designated by this corporation. This provision shall not be
construed to release any employee of the corporation (other than an officer,
director or member of management) from any duties which he may have to the
corporation.
ARTICLE X
COMPROMISES WITH CREDITORS
Whenever a compromise or arrangement is proposed by the corporation
between it and its creditors or any class of them, and/or between said
corporation and its shareholders or any class of them, any court of equitable
jurisdiction may, on the application in a summary way by said corporation, or by
a majority of its stock, or on the application of any receiver or receivers
appointed for said corporation, or on the application of trustees in
dissolution, order a meeting of the creditors or class of creditors and/or of
the shareholders or class of shareholders of said corporation, as the case may
be, to be notified in such manner as the said court decides. If a majority in
number, representing at least three-fourths in amount of the creditors or class
of creditors, and/or the holders of the majority of the stock or class of stock
of said corporation, as the case may be, agree to any compromise or arrangement
and/or to any reorganization of said corporation, as a consequence of such
compromise or arrangement, the said compromise or arrangement and/or the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding upon all the creditors or class of creditors, and/or
on all the shareholders or class of shareholders of said corporation, as the
case may be, and also on said corporation.
ARTICLE XI
MEETINGS OF SHAREHOLDERS
Meetings of shareholders shall be held at such time and place as
provided in the Bylaws of the corporation. At all meetings of the shareholders,
one-third of all shares entitled to vote at the meeting shall constitute a
quorum.
ARTICLE XII
VOTING OF SHAREHOLDERS
With respect to any action to be taken by shareholders of this
corporation which pursuant to statute requires the vote of two-thirds of the
outstanding shares entitled to vote thereon, a vote or concurrence of the
holders of a majority of the outstanding shares entitled to vote thereon, or of
any class or series, shall be required.
IN WITNESS WHEREOF, the undersigned each certify under penalty of
perjury that the execution of this instrument is his act and
-5-
<PAGE>
deed, that he had read these Amended and Restated Articles of Incorporation and
knows the contents thereof and the facts stated therein are true.
Date: January 5, 1990 /s/M. James Herbic
M. James Herbic, President
Date: January 5, 1990 /s/Larry D. Harvey
Larry D. Harvey, Secretary
8465:000ART01.MTM
-6-
<PAGE>
[This page includes various markings from the
Colorado Secretary of State's Office]
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
REGIONAL EQUITIES CORPORATION
Pursuant to the provisions of Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Regional Equities Corporation.
SECOND: On October 28, 1994, in the manner provided by the Colorado
Corporation Code, the directors of the corporation passed a
resolution to amend the Articles of Incorporation to change
the name of the corporation to Casinos International, Inc.
THIRD: The amendment does not provide for the exchange of any issued
shares or for a change in the stated capital of the corporation.
Dated this 31st day of October, 1994.
Attest: REGIONAL EQUITIES CORPORATION
/s/Teresa A. Bates BY: /s/Edward L. Bates
Teresa A. Bates, Secretary Edward L. Bates, President
[Markings from the Colorado Secretary of State's Office]
<PAGE>
ARTICLES OF AMENDMENT
TO ARTICLES OF INCORPORATION OF
CASINOS INTERNATIONAL, INC.
Pursuant to the provisions of Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
[Markings from the Colorado
Secretary of State's Office]
FIRST: The name of the corporation is Casinos International, Inc.
SECOND: The following amendment was adopted by the shareholders of the
corporation on September 30, 1994, in the manner prescribed by the
Colorado Corporation Code:
ARTICLE II was amended to read, in its entirety, as follows:
ARTICLE II
CAPITAL
The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is 2,100,000,000 shares, of which
100,000,000 shares shall be shares of Preferred Stock, no par value per share,
1,800,000,000 shares shall be shares of Class A Common Stock, no par value per
share, and 200,000,000 shares shall be shares of Class B Common Stock, no par
value per share.
(a) PREFERRED STOCK. The designations and the powers, preferences and
rights, and the qualifications, limitations or restrictions of the Preferred
Stock, the establishment of different series of Preferred Stock, and variations
in the relative rights and preferences as between different series shall be
established in accordance with the Colorado Corporation Code by the Board of
Directors.
Except for such voting powers with respect to the election of directors
or other matters as may be stated in the resolutions of the Board of Directors
creating any series of Preferred Stock, the holders of any such series shall
have no voting power whatsoever.
(b) COMMON STOCK. The holders of Common Stock shall have and possess
all rights as shareholders of the corporation, including such rights as may be
granted elsewhere by these Articles of Incorporation, except as such rights may
be limited by the preferences, privileges and voting powers, and the
restrictions and limitations of the Preferred Stock.
Subject to preferential dividend rights, if any, of the holders of
Preferred Stock, dividends upon the Common Stock may be declared by the Board of
Directors and paid out of any funds legally available therefor at such times and
in such amounts as the Board of Directors shall determine.
<PAGE>
The capital stock, after the amount of the subscription price has been
paid in, shall not be subject to assessment to pay the debts of the corporation.
Any stock of the corporation may be issued for money, property, services
rendered, labor done, cash advances for the corporation, or for any other assets
of value in accordance with the action of the Board of Directors, whose judgment
as to value received in return therefor shall be conclusive and said stock, when
issued, shall be fully paid and nonassessable.
The shares of all classes of common stock shall be equally entitled to
receive the net assets of the corporation upon dissolution and shall have
unlimited voting rights, provided, however that each share of Class A Common
Stock shall only be entitled to one (1) vote in each matter voted upon by the
shareholders and each share of Class B Common Stock shall be entitled to forty
(40) votes for each matter voted upon by the shareholders; and further provided,
however, that in the event there is outstanding any Class B Common Stock, the
holders thereof shall have the exclusive right to elect the following number of
total directors: (a) if there are an even number of total directors, one-half of
the total number of directors plus one; (b) if there are an odd number of
directors, one-half of the total number of directors plus one-half. Each class
of common stock shall be entitled to receive distributions from time to time,
from legally available funds, as determined by the Board of Directors.
THIRD: All of the corporation's issued and outstanding common stock as of
the date of this amendment shall be considered Class A Common
Stock after the amendment.
FOURTH: The amendment does not provide for the exchange of any issued
shares or for a change in the stated capital of the corporation.
Dated this 1st day of October, 1994.
Attest: CASINOS INTERNATIONAL, INC.
/s/Teresa A. Bates BY:/s/Edward L. Bates
Teresa A. Bates, Secretary Edward L. Bates, President
<PAGE>
MAIL TO: SECRETARY OF STATE FOR OFFICE USE ONLY 002
CORPORATIONS SECTION
1560 BROADWAY, SUITE 200 [box for Colorado
DENVER, CO 80202 Secretary of
(303) 894-2251 State's Office
MUST BE TYPED FAX (303) 894-2242 Markings]
FILING FEE: $25.00
MUST SUBMIT TWO COPIES
ARTICLES OF AMENDMENT
PLEASE INCLUDE A TYPED TO THE
SELF-ADDRESSED ENVELOPE ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Business Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is CASINOS INTERNATIONAL, INC.
SECOND: The following amendment to the Articles of Incorporation was adopted on
JANUARY 24, 1996 ,as prescribed by the Colorado Business
Corporation Act, in the manner marked with an X below:
_____ No shares have been issued or Directors Elected - Action by Incorporators
_____ No shares have been issued but Directors Elected - Action by Directors
_____ Such amendment was adopted by the board of directors where
shares have been issued and shareholder action was not
required.
__X__ Such amendment was adopted by a vote of the shareholders. The
number of shares voted for the amendment was sufficient for
approval.
THIRD: If changing corporate name, the new name of the corporation is
Classic Restaurants International, Inc.
FOURTH: The manner, if not set forth in such amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows: Not applicable
If these amendments are to have a delayed effective date, please list that
date: JANUARY 31, 1996
(Not to exceed ninety (90) days from the date of filing)
CASINOS INTERNATIONAL, INC.
Signature /s/Edward L. Bates
Title EDWARD L. BATES, PRESIDENT
REVISED 7/95
<PAGE>
[Stamp from Colorado
Secretary of State's
Office]
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CLASSIC RESTAURANTS INTERNATIONAL, INC.
[Colorado Secretary of
State file stamp]
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is Classic Restaurants
International, Inc.
SECOND: The amendment to the Articles of Incorporation set forth on
Exhibit A was adopted on October 10, 1996, as prescribed by the Colorado
Business Corporation Act. Such amendment was duly adopted by the board of
directors without shareholder action; shareholder action was not required.
THIRD: This amendment is to be effective upon filing .
CLASSIC RESTAURANTS INTERNATIONAL, INC.
By: /s/James R. Shaw
James R. Shaw, President
<PAGE>
EXHIBIT A
Classic Restaurants International, Inc. (the "Corporation") adds to
Article II of its Articles of Incorporation the following:
SERIES A CONVERTIBLE PREFERRED STOCK
The Corporation designates twenty (20) shares of its Preferred Stock as
Series A Convertible Preferred Stock (the "Series A Preferred Stock"), stated
value $25,000 per share, with the following rights, preferences, and
limitations:
Section 1. NUMBER. The number of shares constituting the Series A
Preferred Stock shall be twenty (20).
Section 2. DIVIDENDS. Holders of the Series A Preferred Stock shall not
be entitled to receive dividends.
Section 3. REDEMPTION. The Series A Preferred Stock shall be redeemable
by the Corporation twelve (12) months after issuance (the "Redemption Date") for
$25,000 per share.
Section 4. LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary liquidations, dissolution, or winding up of the Corporation, the
holders of Series A Preferred Stock shall be entitled to receive from the assets
of the Corporation $25,000 per share, which shall be paid or set apart for
payment before the payment or setting apart for payment of any amount for, or
the distribution of any assets of the Corporation to, the holders of common
stock or any other class of equity securities in connection with such
liquidation, dissolution, or winding up. Each share of Series A Preferred Stock
shall rank on a parity with each other share of Series A Preferred Stock, with
respect to the respective preferential amounts fixed for such series payable
upon any distribution of assets by way of liquidation, dissolution, or winding
up of the Corporation. After the payment or the setting apart of payment to the
holders of Series A Preferred Stock of the preferential amount so payable to
them, the holders of common shares shall be entitled to receive all remaining
assets of the Corporation. The Corporation covenants and agrees that so long as
the Series A Preferred Stock is outstanding, the Corporation shall not issue any
equity securities with a liquidation preference senior to the Series A Preferred
Stock.
Section 5. VOTING RIGHTS. The holders of the Series A Preferred Stock
shall be entitled to vote with the holders of the Class A Common Stock. The
holder of each share of Series A Preferred Stock shall be entitled to the number
of votes equal to the number of shares of Class A Common Stock into which such
share of Series A Preferred Stock could be converted at the record date for
determination of the shareholders entitled to vote on such matters, or, if no
such record date is established, at the date such vote is taken or any written
consent of shareholders is solicited, such votes to be counted together with all
other shares of the Corporation having general voting power and not separately
as a class. Except as otherwise provided by law or provided herein, the holders
of the Series A Preferred Stock shall not be entitled to vote separately as a
class.
A-1
<PAGE>
Section 6. CONVERSION RIGHTS. The holders of the Series A Preferred
Stock shall have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock
shall be convertible without the payment of any additional consideration by the
holder thereof and, at the option of the holder thereof, at any time following
the expiration of the Restrictive Period, as herein defined below. The
Restrictive Period shall be a period of forty-five (45) days following the date
of issuance of the Series A Preferred Stock, which date shall be the same as the
Closing Date as that term is defined in the Subscription Agreement by and
between the Corporation and the holder thereof (the "Subscription Agreement").
Each share of Series A Preferred Stock shall be convertible into such number of
fully paid and nonassessable shares of Class A Common Stock as will be
determined by dividing the amount of $25,000 by the Conversion Price. The
Conversion Price is defined as the lesser of (i) the closing bid price of the
Corporation's Class A Common Stock on the date of signing of the Subscription
Agreement (the "Signing Date," as defined in the Subscription Agreement) or (ii)
sixty percent (60%) of the average closing bid price for a period of three (3)
trading days immediately preceding the date of conversion. The Conversion Price
of the Series A Preferred Stock shall be subject to adjustment from time to time
as provided below.
(b) MECHANICS OF CONVERSION. Before any holder of the Series A
Preferred Stock shall be entitled to convert the same into shares of Class A
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Corporation or of any transfer agent for the
Series A Preferred Stock and shall give written notice (the "Notice of
Conversion") to the Corporation at such office that he elects to convert the
same. The Corporation shall, as soon as practicable thereafter, but not later
than 5 days, issue and deliver at such office to such holder of the Series A
Preferred Stock a certificate or certificates for the number of shares of Class
A Common Stock to which he shall be entitled. The conversion date on the Notice
of Conversion submitted to the Corporation shall be the date of conversion;
however, if the Corporation does not receive the Notice of Conversion from the
holder within five (5) business days of the conversion date on the Notice of
Conversion, the date of conversion shall be deemed to have been the date on
which the Corporation received the Notice of Conversion. The person or persons
entitled to receive the shares of Class A Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Class A Common Stock on such date.
(c) FRACTIONAL SHARES. In lieu of any fractional shares to
which the holder of Series A Preferred Stock would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair value
of one share of Class A Common Stock as determined by the board of directors of
the Corporation. The number of whole shares issuable to each holder upon such
conversion shall be determined on the basis of the number of shares of Class A
Common Stock issuable upon conversion of the total number of shares of Series A
Preferred Stock of each holder at the time of converting into Class A Common
Stock.
(d) ADJUSTMENT OF CONVERSION PRICE. The Conversion Price of the Series
A Preferred Stock shall be subject to adjustment from time to time as follows:
(i) If the Corporation shall issue any Class A Common Stock
other than "Excluded Stock," as defined below, for a consideration per share
less than the Conversion Price in effect immediately prior to the issuance of
such Class A Common Stock (excluding stock dividends, subdivisions, split-ups,
combinations, dividends, or recapitalizations which are covered by subsections
6(d)(iii), (iv), (v), and (vi) below), then, and in each such case, the
Conversion Price in effect immediately after each such issuance shall forthwith
(except as provided in this Section 6(d) be adjusted to a price equal to the
quotient obtained by dividing:
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<PAGE>
(AA) an amount equal to the sum of
(xx) the total number of shares of Class A
Common Stock outstanding (including any shares of
Class A Common Stock issuable upon conversion of the
Series A Preferred Stock, or deemed to have been
issued pursuant to subdivision (C)(2), (3), and (4)
of this clause (i) but excluding shares issuable upon
the exercise of outstanding options or warrants
otherwise deemed to be outstanding pursuant to
subdivision (C)(1) of this clause (i)) immediately
prior to such issuance multiplied by the Conversion
Price in effect immediately prior to such issuance,
plus
(yy) the consideration received by the
Corporation upon such issuance, by
(BB) the total number of shares of Class A Common
Stock outstanding (including any shares of Class A Common
Stock issuable upon conversion of the Series A Preferred Stock
or deemed to have been issued pursuant to subdivision (C)(2),
(3), and (4) of this clause (i) but excluding shares issuable
upon the exercise of outstanding options or warrants otherwise
deemed to be outstanding pursuant to subdivision (C)(1) of
this clause (i)) immediately after the issuance of such Class
A Common Stock.
Except to the limited extent provided for in clauses (C)(3) and (C)(4) below, no
adjustment of any Conversion Price pursuant to this subsection 6(d)(i) shall
have the effect of increasing such Conversion Price above the Conversion Price
in effect immediately prior to such adjustment. For the purposes of this
subsection 6(d)(i), the following provisions shall be applicable:
(A) In the case of the issuance of Class A
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor after deducting any discounts or commissions paid or incurred
by the Corporation in connection with the issuance and sale thereof.
(B) In the case of the issuance of Class A
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair value thereof as
determined by the board of directors of the Corporation, in accordance with
generally accepted accounting treatment; PROVIDED, HOWEVER, that if, at the time
of such determination, the Corporation's Class A Common Stock is traded in the
over-the-counter market or on a national or regional securities exchange, such
fair market value as determined by the board of directors of the Corporation
shall not exceed the aggregate "Current Market Price" (as defined below) of the
shares of Class A Common Stock being issued.
(C) In the case of the issuance of (i)
options to purchase or rights to subscribe for Class A Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible into or exchangeable
for Class A Common Stock (other than Excluded Stock), or (iii) options to
purchase or rights to subscribe for such convertible or exchangeable securities
(other than Excluded Stock):
(1) the aggregate maximum number of
shares of Class A Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Class A Common Stock shall be deemed to have
been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
clauses (A) and (B) above),
A-3
<PAGE>
if any, received by the Corporation upon the issuance of such options or rights
plus the minimum purchase price provided in such options or rights for the Class
A Common Stock covered thereby;
(2) the aggregate maximum number of
shares of Class A Common Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities, or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof, shall be deemed to
have been issued at the time such securities were issued or such options or
rights were issued and for a consideration equal to the consideration received
by the Corporation for any such securities and related options or rights
(excluding any cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in clauses (A) and (B) above);
(3) upon any change in the number
of shares of Class A Common Stock deliverable upon exercise of any such options
or rights or conversion of or exchange for such convertible or exchangeable
securities, or upon any change in the minimum purchase price of such options,
rights, or securities, other than a change resulting from the anti-dilution
provisions of such options, rights, or securities, the Conversion Price shall
forthwith be recomputed to reflect such change; and
(4) on the expiration date of any
such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or right related to such convertible
or exchangeable securities, the Conversion Price shall forthwith be readjusted
to such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Class A Common Stock (and convertible or exchangeable securities which
remain in effect) actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such convertible or exchangeable securities
or upon the exercise of the options or rights related to such convertible or
exchangeable securities, as the case may be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Class A Common Stock
issued and outstanding on the date this document is filed with the Colorado
Secretary of State;
(B) all shares of Series A Preferred Stock
and the Class A Common Stock into which such shares are convertible;
(C) any shares reissued after repurchase by
the Corporation from officers, employees, directors, or consultants upon
termination of services as provided by the terms of stock repurchase agreements
approved by the board of directors provided such shares are reissued to
officers, employees, directors, or consultants pursuant to approval by the board
of directors of the Corporation; and
(D) all shares of Class A Common Stock
issued or issuable in connection with capital asset leases or borrowings for the
acquisition of capital assets pursuant to approval by the board of directors of
the Corporation.
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<PAGE>
(iii) If the number of shares of Class A Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Class A Common Stock or by a subdivision or split-up of
shares of Class A Common Stock, then, on the date such payment is made or such
change is effective, the Conversion Price of the Series A Preferred Stock shall
be appropriately decreased so that the number of shares of Class A Common Stock
issuable on conversion of any shares of the Series A Preferred Stock shall be
increased in proportion to such increase of outstanding shares.
(iv) If the number of shares of Class A Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Class A Common Stock, then, on the effective date of
such combination, the Conversion Price of the Series A Preferred Stock shall be
appropriately increased so that the number of shares of Class A Common Stock
issuable on conversion of any shares of the Series A Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(v) In case the Corporation shall declare a cash
dividend upon its Class A Common Stock payable otherwise than out of retained
earnings or shall distribute to holders of its Class A Common Stock shares of
its capital stock (other than Class A Common Stock), stock, or other securities
of other persons, evidences of indebtedness issued by the Corporation or other
persons, assets (excluding cash dividends) or options or rights (excluding
options to purchase and rights to subscribe for Class A Common Stock or other
securities of the Corporation convertible into or exchangeable for Class A
Common Stock), then, in each such case, the holders of shares of the Series A
Preferred Stock shall concurrent with the distribution to holders of Class A
Common Stock, receive a like distribution based upon the number of shares of
Class A Common Stock into which such Series A Preferred Stock is then
convertible.
(vi) In case, at any time after the date hereof, of
any capital reorganization or any reclassification of the stock of the
Corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), or the consolidation or merger of the Corporation
with or into another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any change in
the Class A Common Stock), or of the sale or other disposition of all or
substantially all the properties and assets of the Corporation, the shares of
Series A Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale, or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the Corporation
or otherwise to which such holder would have been entitled if immediately prior
to such reorganization, reclassification, consolidation, merger, sale, or other
disposition he had converted his shares of such Series A Preferred Stock into
Class A Common stock. The provisions of this clause (vi) shall similarly apply
to successive reorganizations, reclassifications, consolidations, mergers,
sales, or other dispositions.
(vii) All calculations under this Section 6 shall be
made to the nearest whole cent or to the nearest one hundredth (1/100) of a
share, as the case may be.
(viii) For the purpose of any computation pursuant to
this Section 6(d), the "Current Market Price" at any date of one share of Class
A Common Stock shall be deemed to be the average of the highest reported bid and
the lowest reported offer prices on the preceding business day as furnished by
the National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); PROVIDED, HOWEVER, that if the Class A Common Stock is not traded
in such manner that the quotations referred to in this clause (viii) are
available for the period required hereunder, Current Market Price shall be
determined in good faith by the board of directors of the Corporation, but if
challenged by the holders of more than 50% of the outstanding Series A Preferred
Stock, then as determined by an independent appraiser selected by the
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<PAGE>
board of directors of the Corporation, the cost of such appraisal to be borne
equally by the Corporation and the challenging parties.
(e) MINIMAL ADJUSTMENTS. No adjustment in the Conversion Price
need be made if such adjustment would result in a change in the Conversion Price
of less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
(f) NO IMPAIRMENT. The Corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue, or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 6
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of Series A Preferred Stock
against impairment.
(g) CERTIFICATE AS TO ADJUSTMENT. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 6,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the acts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Series A Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate of such series at the time in effect,
and (iii) the number of shares of Class A Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of
such holder's shares of Series A Preferred Stock.
(h) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Class A Common Stock solely for the purpose of effecting
the conversion of the shares of Series A Preferred Stock such number of its
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Series A Preferred Stock; and
if at any time the number of authorized but unissued shares of Class A Common
Stock shall not be sufficient to effect the conversion of all then outstanding
shares of Series A Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Class A Common Stock to such number of shares
as shall be sufficient for such purpose.
(i) NO REISSUANCE OF CONVERTED SHARES. No shares of Series A
Preferred Stock which have been converted into Class A Common Stock after the
original issuance thereof shall ever again be reissued and all such shares so
converted shall upon such conversion cease to be a part of the authorized shares
of the Corporation.
(j) NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any rights to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Corporation
shall mail to each holder of Series A Preferred Stock at least twenty (20) days
prior to such record date, a notice specifying the date on which any such record
is to be taken for
A-6
<PAGE>
the purpose of such dividend or distribution or right, and the amount and
character of such dividend, distribution, or right.
(k) NOTICES. Any notice required by the provisions of this
Section 6 to be given to holders of shares of Series A Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
Section 7. REACQUIRED SHARES. Any shares of Series A Preferred Stock
acquired by the Corporation in any manner whatsoever shall be retired and
canceled promptly after the acquisition thereof and may not be reissued.
Section 8. RANK. The Series A Preferred Stock shall rank, with respect
to the distribution of assets, senior to any and all other series of any other
class of Preferred Stock.
Section 9. AMENDMENT. The Articles of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences, or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of at least
two-thirds (2/3) of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
Section 10. PROTECTIVE PROVISIONS. In addition to any other rights
provided by law, so long as shares of Series A Preferred Stock shall be
outstanding, the Corporation shall not, without obtaining the vote or written
consent of the holders of a majority of the outstanding shares of Series A
Preferred Stock:
(a) amend or repeal any provision of, or add any provision to,
the Corporation's Articles of Incorporation or bylaws if such action would
materially alter or change the rights, preferences, privileges, or powers of, or
the restrictions provided for the benefit of, the Series A Preferred Stock;
(b) authorize or issue any class or series of equity
securities having any preference or priority as to voting or distribution of
assets upon liquidation, merger or otherwise which is superior to or on a parity
with any such preference or priority of the Series A Preferred Stock; or
(c) apply any of its assets to the redemption, retirement,
purchase, or acquisition, directly or indirectly, of any shares of any class or
series of common stock, except pursuant to Section 4 and except from employees,
advisors, officers, directors, and consultants of, and persons performing
services for, this Corporation or its subsidiaries on terms approved by the
board of directors upon termination of employment or association.
Section 11. EQUITY SECURITIES. "Equity Securities" shall mean
securities of any class of stock, whether preferred or common, and any debt
securities which are convertible into security of any class of stock, whether
preferred or common.
3:seriesa.prf
A-7
<PAGE>
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT WITH JOCKS & JILLS PRADO, INC. AND DIVINE EVENTS, INC.
33
<PAGE>
STOCK PURCHASE AGREEMENT
THIS AGREEMENT entered into on the 18th day of October, 1996 (the
"Agreement Date"), by and among Joseph Rollins (the "Seller"), Jocks & Jills
Prado, Inc. ("Prado"), Divine Events, Inc. ("Divine"), and Classic Restaurants
International, Inc. ("Purchaser").
WHEREAS, the Seller owns 67.5% of the issued and outstanding common
stock of Prado (the "Prado Stock") and 60.75% of the issued and outstanding
common stock of Divine (the "Divine Stock" and with the Prado Stock, the
"Stock"); and
WHEREAS, the Seller has agreed to sell all of the Stock to the
Purchaser, and the Purchaser has agreed to purchase all of the Stock from the
Seller, on the terms and conditions set forth herein; and
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is acknowledged by the parties, and in consideration of the
mutual covenants set forth herein, the parties hereby agree as follows:
1. PURCHASE AND SALE OF STOCK. Subject to the terms and conditions set
forth in this Agreement, Seller agrees to sell, convey, transfer, assign and
deliver to Purchaser, and Purchaser agrees to purchase from Seller, all of the
Stock.
2. PURCHASE PRICE. The purchase price for the Stock shall be $1,800,000
(the "Purchase Price"). The Purchaser shall pay the Purchase Price at Closing in
cash.
3. EARNEST MONEY DEPOSIT. Within two days of execution of this
Agreement, the Purchaser shall deposit $50,000 (the "Earnest Deposit") in with
the Seller. In addition, each time the Purchaser requests a thirty day extension
of the Closing Date pursuant to Paragraph 7 herein, the Purchaser shall
simultaneously pay to the Seller an additional $10,000 as an additional Earnest
Deposit. In the event Closing occurs, the Earnest Deposit shall be applied to
the Purchase Price. In the event Closing does not occur, then the Earnest
Deposit shall be disposed of pursuant to Paragraph 11 herein.
4. BROKER'S FEE. The parties acknowledge that National Restaurant
Brokers, Inc. ("Broker") has acted as a broker in this transaction and will be
due a brokerage fee in the event Closing occurs under this Agreement. The Seller
shall be responsible for $112,500 of the Broker's fee, and the Purchaser shall
be responsible for any amount over $112,500. Other than Broker, there are no
brokers involved in this transaction. Seller represents to Purchase that, other
than the Broker, neither Seller, Prado nor Divine have engaged any broker or
agent in regard hereto or to the sale and purchase of the Property or the Stock,
and Seller hereby agrees to indemnify Purchaser and hold Purchaser harmless
against all liability, loss, cost, damage and expense (including, without
limitation, attorneys' fees and cost of litigation) Purchaser shall ever suffer
or incur because of any claim by any broker or agent claiming by, through or
under Seller, Prado or Divine, whether or not meritorious, for any fee,
commission or other compensation with respect hereto or to the sale and purchase
of the Property or the Stock provided herein.Purchaser represents to Seller that
it has not engaged any broker or agent in regard hereto or to the sale and
purchase of the Property or the Stock, and Purchaser hereby agrees to indemnify
Seller and hold Seller harmless against all liability, loss, cost, damage and
expense (including, without limitation, attorneys' fees and cost of litigation)
[initials and date] [initials and date]
<PAGE>
Seller shall ever suffer or incur because of any claim by any broker or agent
claiming by, through or under Purchaser, whether or not meritorious, for any
fee, commission or other compensation with respect hereto or to the sale and
purchase of the Property or the Stock provided herein.
5. CLOSING COSTS. The Seller shall pay all normal and customary closing
costs, including the fees of Broker and all recording costs and transfer taxes,
if applicable. Each party shall bear their own legal, accounting and auditing
costs, and in particular any costs incurred by the Purchaser to obtain an audit
of the financial statements of Prado or Divine, as well as any other costs
incurred by the Purchaser for due diligence, shall be borne exclusively by the
Purchaser.
6. DUE DILIGENCE BY PURCHASER. Promptly after execution of this
Agreement, the Seller, Prado and Divine shall provide the Purchaser, and its
engineers, accountants, attorneys, agents and representatives with:
a) unaudited financial statements for Prado and Divine (which include a
balance sheet, statement of income and expenses, and statement of cash
flows) for the years ended December 31, 1995, and December 31, 1994,
and for the six months ended June 30, 1996;
b) copies of any liens, claims, encumbrances or lease agreements
affecting the assets of Prado or Divine;
c) access to all corporate books and records of Prado and Divine on
reasonable notice during normal business hours;
d) access to all other books and records of Prado and Divine on
reasonable notice during normal business hours;
e) access to inspect all physical locations at which Prado and Divine
conduct business on reasonable notice during normal business hours.
The Purchaser shall have the right until November 30, 1996 to terminate
this Agreement in the event its due diligence indicates that the Seller has
materially breached any of the representations and warranties contained in
paragraph 9 of this Agreement.
7. CLOSING DATE. The transactions contemplated by this Agreement shall
occur on or before November 30, 1996 (the "Closing Date"), in the offices of
Mottern & Van Gelderen, 2200 Century Parkway, Suite 200, Atlanta, Georgia 30345
(hereinafter, the "Closing"), unless another date and time is subsequently
agreed to by the parties; provided, however, that the Purchaser shall have the
right to extend the Closing for three thirty (30) day periods upon written
notice to Seller and payment of $10,000 as an additional Earnest Deposit
pursuant to Paragraph 3 herein.
8. UNDERTAKINGS BY PRADO AND DIVINE PRIOR TO THE CLOSING DATE. Between
the Agreement Date and the Closing Date, Prado and Divine shall not and the
Seller shall not cause Prado and Divine to:
a) transfer any assets, incur any obligation or engage in any
transaction other than in the ordinary course of business;
2
[initials and date] [initials and date]
<PAGE>
b) change the compensation or benefits of, or pay any bonus to, any
officer, director or employee other than in the normal course of
business;
c) terminate any registration or license, or allow any such
registration or license to lapse;
d) declare or pay any dividend, or redeem any capital stock; provided
that Prado and Divine may declare one or more dividends provided their
combined net worth is not less than $1,323,467.01 as of the Closing
Date.
9. REPRESENTATIONS AND WARRANTIES OF THE SELLER, PRADO AND DIVINE. The
Seller, Prado and Divine warrant and represent, to the best of their knowledge
after due investigation, as of the Agreement Date and the Closing Date, that:
a) Prado is a validly formed corporation in good standing under the
laws of the State of Georgia, and all franchise taxes and fees required
to maintain it in good standing have been paid;
b) Divine is a validly formed corporation in good standing under the
laws of the State of Georgia, and all franchise taxes and fees required
to maintain it in good standing have been paid;
c) the Seller, Prado and Divine are authorized to execute, deliver and
perform this Agreement according to its terms;
d) the Prado Stock constitutes 67.5% of the issued and outstanding
capital stock of Prado;
e) the Divine Stock constitutes 60.75% of the issued and outstanding
capital stock of Divine;
f) the Stock is not encumbered by any lien, claim or encumbrance, and
will be sold, assigned, conveyed and transferred to the Purchaser free
of any lien, claim, debt, or obligation whatsoever;
g) Prado and Divine are operating in full compliance with the laws,
rules and regulations of any and all regulatory agencies having
jurisdiction over Prado and Divine;
h) there is no claim, judgment, complaint or lawsuit pending or
threatened against Prado, Divine or the Seller, except as disclosed on
Exhibit "A" attached hereto;
i) Prado and Divine are not in default or past due with respect to an
obligation except as disclosed on Exhibit "A" attached or local agency;
j) the Seller, Prado or Divine have not filed bankruptcy under Title
11. U.S. Code. or any other debt relief law, have not had a receiver
appointed, have not made an assignment for the benefit of creditors,
and have not been found or adjudicated insolvent by any court or
tribunal;
3
[initials and date] [initials and date]
<PAGE>
k) the financial statements provided to the Purchaser pursuant to
Paragraph 6(a) of this Agreement are prepared according to GAAP and
accurately reflect the assets, liabilities and financial condition of
Prado and Divine as of the date(s) thereof.
10. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants as of the date of this Agreement, and as the Closing
Date, the following:
a) the Purchaser is a validly formed corporation in good standing under
the laws of the State of Colorado, and all franchise taxes and fees
required to maintain the Purchaser in good standing have been paid;
b) the Purchaser is authorized to execute, deliver and perform this
Agreement according to its terms.
11. TERMINATION OF AGREEMENT. In the event of a termination of this
Agreement due to the exercise by Purchaser of its right to terminate the
Agreement in paragraph 6 herein, then neither party shall have any liability to
the other, including particularly for any incidental or consequential damages
which each may have incurred or suffer as consequence of the party's entry into
this Agreement, and the Earnest Deposit shall be promptly refunded to the
Purchaser in full. In view of the difficulty of determining Seller's damages in
the event of default by Purchaser if Closing does not occur because of
Purchaser's default (as distinguished from the exercise by Purchaser of an
express right to cancel or terminate as provided in paragraph 6 herein or the
failure of any of the conditions to Closing to be satisfied or waived), Seller
shall be entitled to retain the Earnest Deposit as full and complete liquidated
damages, and not as a penalty and, thereupon, no party shall have any further
obligation or liability hereunder nor any other remedy at law or in equity. If
the Closing does not occur on account of Seller's default by (i) failing to
provide any documents reasonably necessary to effectuate the transactions
contemplated by this Agreement, (ii) voluntarily encumbering or causing title
defects to occur after the Agreement Date and failing to remove or satisfy such
encumbrances or title defects on or before Closing, or (iii) breaching any
warranty or representation set forth herein in a material respect, then the
Earnest Deposit shall be promptly refunded to the Purchaser and the Purchaser
shall be entitled to pursue any and all remedies afforded by law or in equity,
including but not limited to: (1) the right to have this Agreement specifically
enforced against Seller, and (2) the right to sue Seller for damages resulting
to Purchaser.
12. MISCELLANEOUS PROVISIONS.
a) NO WAIVERS. No failure or delay on the part of any party in
exercising any right, power, privilege or remedy arising hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, privilege or remedy preclude any other or
future exercise thereof or the exercise of any other right, power,
privilege or remedy. No notice to or demand on any party in any case
shall entitle it to any other or further notice or demand in similar or
other circumstances.
b) MULTIPLE COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall constitute an original.
c) HEADINGS; INTERPRETATION. Section headings have been inserted in
this Agreement as a matter of convenience and for reference only and it
is agreed that such section headings are
4
[initials and date] [initials and date]
<PAGE>
not a part of this Agreement and shall not be used in the
interpretation of any provision of this Agreement. Whenever used
herein, the singular shall include the plural, the plural shall include
the singular.
d) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall incur to the benefit of the parties hereto and their respective
successors and assigns, except as otherwise provided herein. Except as
provided in the preceding sentence, there are no third party
beneficiaries.
e) GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereunder shall be governed by and interpreted in accordance
with the laws of Georgia.
f) MODIFICATIONS. No modification, amendment or waiver of any provision
of this Agreement, nor any consent to any departure by any party from
the terms hereof, shall be effective unless the same be in writing and
signed by all parties hereto.
g) ENTIRE AGREEMENT. This Agreement constitutes the entire and complete
agreement between the parties hereto and all prior agreements,
understandings, obligations or statements by and between the parties
concerning the subject matter hereof will be merged into and be
superseded by this Agreement and shall be of no further force and
effect. There are no third-party beneficiaries to this Agreement,
either intended or unintended.
h) SURVIVAL. This Agreement and the representations, warranties and
covenants contained herein shall survive consununation of the
transactions herein contemplated for a period of four (4) years.
i) ATTORNEY'S FEES. In the event any party hereto files a lawsuit in
connection with this Agreement, then the party which prevails in such
action shall be entitled to recover, in addition to all other remedies
and damages, reasonable attorney's fees and costs of court incurred in
such lawsuit.
j) NOTICES. All notices required or permitted hereunder, and under any
instrument delivered pursuant hereto, shall be given in writing, and
shall be deemed to have been given and received upon the earlier to
occur of: (a) the actual receipt of any such notice by the intended
recipient; and (b) the third business day following deposit of any such
notice enclosed in a wrapper with postage prepaid, properly addressed
to the intended recipient at its address set forth below, as a
certified item, return receipt requested, in an official depository of
and under the care and custody of the United States Postal Service. The
parties' address for notice shall be as follows:
If to the Purchaser:
James Robert Shaw
Classic Restaurants International, Inc.
3500 Parkway Lane, Suite 435
Norcross, Georgia 30092
(770) 729-9010
5
[initials and date] [initials and date]
<PAGE>
and
Robert J. Mottern
Mottern & Van Gelderen
2200 Century Parkway
Suite 200
Atlanta, Georgia 30345
(404) 329-0606
If to Seller, Prado or Divine:
Joseph R. Rollins
Rollins & Associates, P.C.
1201 Peachtree Street, N.E.
400 Colony Square, Suite 1500
Atlanta, Georgia 30361
(404) 692-7967
Any party hereto may change its address for notice set forth herein by
giving the other parties at least 10 days advance written notice of such change
of address.
IN WITNESS WHEREOF, the parties have set their hands and seals the date
set forth above.
/s/Joseph R. Rollins
By: Joseph Rollins, Individually
JOCKS & JILLS PRADO, INC., a Georgia
corporation
/s/Joseph R. Rollins
By: Joseph R. Rollins
Its: President
DIVINE EVENTS, INC., a Georgia corporation
/s/Joseph R. Rollins
By: Joseph R. Rollins
Its: President
6
[initials and date] [initials and date]
<PAGE>
CLASSIC RESTAURANTS INTERNATIONAL
INC., a Colorado corporation
/s/James Robert Shaw
By: James Robert Shaw, Chairman
7
[initials and date] [initials and date]
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET, INCOME STATEMETN, STATEMENT OF CASH FLOW, AND THE NOTES THERETO, FOUND ON
PAGES 3 THROUGH 6 OF THE COMPANY'S FORM 10-QSB DATED DECEMBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 75,351
<SECURITIES> 0
<RECEIVABLES> 15,144
<ALLOWANCES> 0
<INVENTORY> 21,237
<CURRENT-ASSETS> 547,187
<PP&E> 813,657
<DEPRECIATION> 396,470
<TOTAL-ASSETS> 1,025,105
<CURRENT-LIABILITIES> 434,722
<BONDS> 0
500,000
0
<COMMON> 3,391,045
<OTHER-SE> (3,596,311)
<TOTAL-LIABILITY-AND-EQUITY> 1,025,105
<SALES> 0
<TOTAL-REVENUES> 1,115,833
<CGS> 0
<TOTAL-COSTS> 1,688,334
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,902
<INCOME-PRETAX> (593,993)
<INCOME-TAX> 0
<INCOME-CONTINUING> (593,993)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (593,993)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.18)
</TABLE>
