Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported) December 31, 1997
KRANTOR CORPORATION
Delaware 0-19409 22-2993066
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) identification no.)
incorporation or
organization)
10850 Perry Way, Ste. 203, Wexford, Pennsylvania, 15090
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (412) 980-6380
Page 1 of 4 Pages
Exhibit Index on Page 3
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ITEM 5. OTHER EVENTS
RECENT DEVELOPMENTS
CIGAR PRODUCTION AND SALES
DISTRIBUTION RIGHTS
Krantor, through one of its wholly owned subsidiaries (the
"Affiliate")' entered into an exclusive distributorship agreement (the
"Distribution Agreement") with Fabrica De Tabaco Valle Dorado, SA, a Dominican
Republic Corporation,) (the "DR Company") dated December 31, 1997 for the sale
and distribution of premium cigars manufactured in and from tobacco grown in the
Dominican Republic. As a benefit of such agreement, the Affiliate will retain
50% of the profits from the sale of the cigars and will have discretion as to
marketing strategies. The DR Company owns and/or exclusively leases, for at
least the period of the Distribution Agreement, sufficient land and factory
facilities in the Dominican Republic capable of producing premium hand made
cigars at a capacity of at least 500,000 cigars per month. The Affiliate shall
have the right to sell the premium cigars under the several brand names
developed to date by the DR Company, as well as the right to sell brands
developed by the Affiliate to fit market niches which it may locate. The
Distribution Agreement is for a term of twenty-five years with an option for a
second twenty-five years, for worldwide distribution to locations directed by
the Affiliate. The DR Company, which has shipped over one million cigars to the
United States since January 1, 1997, has present tobacco inventory on hand to
produce approximately 3.5 million cigars. The cigars presently marketed by the
DR Company range from hand made short fillers that retail around $2.00 each to
premium hand made long filler cigars that retail as high as $6.00 each. Under
the terms of the Distribution Agreement the Affiliate is to pay the DR Company
for the cigars at cost and to split the profit derived from their resale. In
addition, the Affiliate is to advance the costs needed for the sale, promotion,
marketing, advertising, shipping to customers and all applicable taxes, and
would be responsible for exhibition of the goods at trade shows and other
advertising shows and publicity vehicles, all of which expenses would be
deducted as costs, together with other costs of goods, including but not limited
to delivery expenses, distribution, selling, marketing, tobacco taxes and excise
taxes, before arriving at the "profit" to be split. Management of the Company
believes that the Company's historical inroads into the consumer goods
distribution network will provide advantageous opportunity for establishment and
enhancement of distribution channels for the cigars. There can be, of course, no
assurance that the Affiliate will be successful in marketing cigars.
FACILITIES
The Company has relocated its principal offices to 10850 Perry Way,
Suite 203, Wexford, Pennsylvania, (412) 980-6380 near Pittsburgh, Pennsylvania
and has arranged for warehousing, where necessary, on a contract basis. Such
facility change was accomplished because of the lesser need for larger
facilities in the wake of the Company's entering into its distributorship
arrangement with its Chinese trading partner, the latter company being
responsible for purchasing,
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financing, shipping and handling of goods distributed for them by the Company.
The new principal offices for the Company were established in Pennsylvania,
closer to the domicile of Krantor's president, Henry Platek, which offices
continue to be used principally as a contact point and are fully accessible by
modern telecommunications.
RECENT SALES OF UNREGISTERED SECURITIES
In December 1997 the Company closed on a private placement (the
"Placement") offering of securities under Regulation D Rule 506 of the
Securities Act of 1933, as amended, and received in gross proceeds therefrom
$700,000 (before payment of expenses associated with such offering). The
Placement consisted of the offer and sale of (i) $700,000 of three year term 10%
subordinated convertible debentures convertible into common stock of the Company
at a conversion price of 70% of the average current market price for the
Company's common stock on the five trading days preceding the date of
conversion, and (ii) 350,000 three year term common stock purchase warrants each
exercisable for one share of the Company's common stock at an exercise price of
$1.10 per share. The Placement was sold totally to accredited investors with the
assistance of Baytree Associates Inc., 40 Wall Street, New York, NY, to whom
25,000 shares of common stock of the Company and a five year term common stock
purchase warrant to purchase 70,000 shares at $1.10 per share were issued as and
for a placement fee. Registration rights were provided to all holders of such
securities and none of such securities have been converted/exercised to date,
although the Company has issued 1,228,000 shares of its common stock to the
holders of such securities in escrow (the "Escrow Stock") pending
conversion/exercise with any balance of such Escrow Stock not necessary to
satisfy such conversion/exercise subject to redemption by the Company at such
stock's par value.
REDEMPTION OF PREFERRED STOCK AND SETTLEMENT ON DIVIDENDS
In December 1997, the Company, by agreement with the holder thereof,
redeemed all of its outstanding Preferred Stock and reached agreement regarding
settlement on outstanding accrued dividends thereon, issuing to such holder
400,000 shares of unlegended common stock (as and for redemption), and an option
(the "Option") to purchase 500,000 additional shares of legended common stock
exerciseable at $1.00 per share, together with payment of $350,000 from the
Company to the holder (as settlement on accrued dividends). The Option does not
vest until the Company has reached a pre-tax profit of $1,000,000 and if and
when vested shall be for a five year term. The Preferred Stock was thereafter
re-issued to an affiliate of the Company in recognition of services rendered,
but dividends associated with such stock have been waived and there will be no
acceptance of redemption thereof unless same is done with the written consent of
the Company's full Board of Directors, such alteration in the terms of the
Preferred Stock being agreeable to the new holder evidenced by written agreement
reached with the Company.
ITEM 7. FINANCIAL STATEMENTS PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
No financial statements or exhibits are being provided herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on his behalf by the
undersigned hereunto duly authorized.
KRANTOR CORPORATION
By: /s/ Mitchell Gerstein, Vice Pres.
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Mitchell Gerstein, Vice Pres.
Dated: January 27, 1998
