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As filed with the Securities and Exchange Commission on November 6, 1997
Registration No. 333-______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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AMERICAN CINEMASTORES INC.
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(Exact name of Registrant as specified in its charter)
Delaware 95-4374952
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 South Eastern Avenue, Commerce, California 90040
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(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive office)
Kathryn Van Ness, Chief Executive Officer
American CinemaStores Inc.
2300 South Eastern Avenue
Commerce, California 90040
(213) 725-4955
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(Name, Address, including zip code, and
telephone number, including area code, of agent for service)
Copy to:
Samuel S. Guzik, Esq.
Guzik & Associates
1800 Century Park East, Fifth Floor
Los Angeles, CA 90067
(310) 788-8600
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Approximate date of proposed sale to the public: From time to time after the
effective date of the Registration Statement.
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If the only securities registered on this Form are being offered pursuant to
dividend or interest reinvestment plans, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(c) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Proposed
Title of each class Proposed maximum
of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered(2) price per share(1) price(1) registration fee
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<S> <C> <C> <C> <C>
Common Stock,
$.00l par value 11,964,000 $1.10 $13,160,460 $3,988
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</TABLE>
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(1) Estimated for the purpose of calculating the registration fee pursuant to
Rule 457(c) on the basis of the high and low price of the Registrant's
Common Stock on November 3, 1997.
(2) Pursuant to Rule 416, there are also being registered such additional
securities as may be issued pursuant to the anti-dilution provisions of the
Options, Warrants and Notes.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN A OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY
STATE.
Subject to completion, dated November 5, 1997
PROSPECTUS
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APPAREL TECHNOLOGIES, INC.
COMMON STOCK
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This Prospectus relates to the resale by the Selling Stockholders
identified herein of (i) an aggregate of 1,223,000 shares of Common Stock, $.001
par value ("Common Stock") of Apparel Technologies, Inc. (the "Company") which
may be acquired by the Selling Stockholders upon the exercise of outstanding
Options and Warrants at exercise prices of between $.25-$2.00 per share, of
which 473,000 were exercisable as of the date of this Prospectus; (ii) an
indeterminate number of shares which may be acquired by the Selling Stockholders
upon conversion of the Company's 6% Convertible Notes (the "6% Notes");
(iii)5,141,000 shares of Common Stock of the Company acquired by certain Selling
Stockholders in private transactions which are being offered for the account of
the Selling Stockholders named herein; and (iv) 1,500,000 shares issued to the
Company's Chief Executive Officer, none of which shares are eligible for resale
until at least June 1998. See "Selling Stockholders and Plan of Distribution."
Although the Company will receive proceeds from the exercise of Options and
Warrants from time to time if and when they are exercised, the Company will not
receive any of the proceeds from the sale of shares by the Selling Stockholders
offered hereby.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
AT PAGE FOUR FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The Common Stock of the Company is traded on the Nasdaq SmallCap Market
under the symbol "APTX." On November 4, 1997, the last reported sales price for
the Company's Common Stock on the Nasdaq SmallCap Market was $1.15."
The date of this Prospectus is November___, 1997
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TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . 2
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION. . . . . . . . . . . . . . 9
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . .15
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . .17
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AVAILABLE INFORMATION
The Company is subject to the informational reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by the Company can be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Regional Offices located at 7 World Trade Center, New
York, New York 10048 and Northwestern Atrium Center, 500 W. Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also
maintains a Web site on the Internet, http://www.sec.gov, that also contains
such reports, proxy statements and other information filed by the Company.
The Company has filed with the Commission a Registration Statement
(together with all amendments and exhibits, the "Registration Statement") on
Form S-3 under the Securities Act of 1933 (the "Securities Act") with respect to
the Common Stock offered pursuant to this Prospectus. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
agreement or other document referred to herein are not necessarily complete and
reference is made to the copy of such agreement or other reference is made to
the Registration Statement and to the exhibits and schedules filed therewith.
Copies of the material containing this information may be obtained from the
Commission upon payment of the prescribed fee.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, all of which are previously filed with the
Commission pursuant to the Securities Exchange Act of 1934, are hereby
incorporated by reference in this Prospectus: (i) the Company's Annual Report on
Form 10-KSB and Form 10-KSB/A for the fiscal year ended May 31, 1997 ("1997 Form
10-KSB"); (ii) the Company's Quarterly Report on Form 10-QSB, for the quarter
ended August 31, 1997; and (iii) the Company's Proxy Statement dated October 11,
1997.
All other reports and documents filed by the Company subsequent to the date
of this Prospectus pursuant to Sections 13(a), 13(c), and 14 or 15(d) of the
Exchange Act prior to the termination of the offering of the Common Stock
covered by this Prospectus shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of those
documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that such statement is modified or
replaced by a statement contained in this Prospectus or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference into this Prospectus. Any such statement so modified or superseded
shall not be deemed, except as so modified or replaced, to constitute a part of
this Prospectus. The Company will provide without charge to each person to whom
a copy of this Prospectus has been delivered, upon the written request of any
such person, a copy of any or all of the documents referred to above that have
been or may be incorporated in this Prospectus by reference, other than exhibits
to such documents. Written requests for such copies should be directed to the
Corporate Secretary, Apparel Technologies, Inc., 2300 South Eastern Avenue,
Commerce, California 90040, (213) 725-4955.
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SUMMARY
THIS PROSPECTUS, WHICH INCLUDES THE DOCUMENTS INCORPORATED HEREIN, CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISK AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH
FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THIS PROSPECTUS, INCLUDING THE DOCUMENTS INCORPORATED HEREIN. AN
INVESTMENT IN THE SHARES OF THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS
DISCUSSED UNDER "RISK FACTORS."
THE COMPANY
Apparel Technologies, Inc. (the "Company") was incorporated in Delaware in
1992 under the name American CinemaStores Inc. and commenced operations in 1993.
Effective September 1997 the Company ceased using the name American
CinemaStores Inc. and began conducting business under its present name. [On
November __, 1997, the Company amended its Certificate of Incorporation to
change its legal name to Apparel Technologies, Inc.]
The former business of the Company involved the operation of retail
"mini-stores" which sold movie related merchandise in lobbies of movie theaters.
In 1994 the Company opened temporary mini-stores offering similar merchandise in
malls. In 1995 the Company established the business of Sierra Fixture & Design,
Inc., which is engaged in the business of the design, manufacturing and
installation of high quality retail fixtures and freestanding kiosks utilized in
shopping malls and retail establishments nationally.
In 1995 the Company concluded that the retail cinema store business was not
economically viable and discontinued this business in 1996. In 1996, the
Company determined to embark upon a restructuring of the Company through
strategic acquisitions of businesses.
In June 1997, under new management, the Company acquired Susan Burrowes,
Ltd., which has been engaged in the design, manufacturing and distribution of
missy and women's career apparel since 1978. Their labels include Susan
Burrowes, Just Clothes, Laura Keefer and Independence-TM-.
In September 1997 the Company acquired The Digital Group, a privately owned
company with patents pending on a system of digital print technology for fabric.
This proprietary technology allows the Company to utilize quick turn, quick
response to apparel design, allowing the design to production cycle to be
completed in 40 days rather than the traditional 120 to 180 day response time.
The Company believes that this quick response will allow apparel manufacturers
to react quickly to changes in customer demand. In October 1997 the Company
introduced its Independence-TM- line of digitally printed active sportswear
apparel, which was developed from design to finished product in 40 days,
utilizing the quick response digital print process.
References herein to the "Company" include the Company and its
subsidiaries, unless the context indicates otherwise. The Company's
headquarters are located at 2300 South Eastern Avenue, Commerce, California
90040, and its telephone number is (213) 725-4955.
RISK FACTORS
See "RISK FACTORS" for a discussion of certain factors that investors
should consider carefully in evaluating an investment in the Common Stock
offered hereby. These risk factors include, among other things, a history of
operating losses, the continuing need for additional capital, competition and
other factors.
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RISK FACTORS
THE SHARES OF THE COMPANY'S COMMON STOCK MUST BE CONSIDERED A SPECULATIVE
INVESTMENT INVOLVING A HIGH DEGREE OF RISK. IN ADDITION TO OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER
THE FOLLOWING FACTORS IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
INVESTING IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
LIMITED RELEVANT OPERATING HISTORY
Since 1995 the Company has been engaged in the restructuring and
consolidation of its operations, during which time it discontinued retail
operations and eliminated certain members of management. In June 1997 the
Company retained a new chief executive officer and undertook a new focus and
direction through the acquisition of Susan Burrowes, Ltd. and The Digital Group,
Inc., and undertaking the commercial exploitation of proprietary digital print
technology in the apparel industry. Further, as a result of a management
restructuring which began in 1996, substantially all of the Company's management
has been replaced as of October 1997. Therefore, although the Company's present
management has substantial experience in the apparel industry and the
development of digital print technology and the Susan Burrowes division has
conducted operations since 1978, the Company has a limited relevant operating
history upon which an evaluation of its prospects and performances may be made.
HISTORY OF LOSSES; SIGNIFICANT ACCUMULATED DEFICIT
The Company and its predecessors on a consolidated basis have recognized
net losses in each fiscal year to date. The Company has an accumulated deficit
through August 31, 1997 of approximately $9.2 million. In addition, because the
Company's recent efforts have been directed towards product development and the
introduction of new products, revenues and operating results have been uneven
and may continue to be so during Fiscal 1998 and beyond as the Company
introduces new product lines.
GENERAL NEED FOR ADDITIONAL CAPITAL AND NO ASSURANCE IT WILL BE AVAILABLE
The cash flow generated from the Company's operations to date has not been
sufficient to fund its working capital needs. The Company has relied upon
external sources of financing to maintain its liquidity, principally private and
bank indebtedness and equity financing. The Company expects to fund any
operating shortfall in Fiscal 1998 from cash on hand and available credit
facilities, and will continue to seek external sources of capital to expand its
operations, which sources may include debt and equity financing, and joint
venture arrangements. There are no assurances that such funds will be available
at the times or in the amounts required by the Company. In the event any such
financing involves the issuance of equity securities, existing stockholders may
suffer dilution in net tangible book value per share. The unavailability of
funds when required by the Company could have a material adverse effect on the
Company's financial statements, results of operations and ability to expand its
operations.
HIGHLY COMPETITIVE INDUSTRIES
The industries in which the Company operates are extremely competitive.
Many of its competitors have substantially greater financial resources than the
Company, spend considerably larger sums than the Company on research, new
product development and marketing, and have long-standing customer
relationships. Furthermore, the Company must compete with many larger and
better established companies in the hiring and retention of qualified personnel.
Although the Company believes it has certain advantages over its competitors,
including established customer relationships and its proprietary digital
printing technology, realizing and maintaining such advantages will require the
Company to continue to develop customer
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relationships and will depend on market acceptance of its products. Future
revenues and profits will be dependent to a large extent on the introduction of
new products. Competitive pressures could reduce market acceptance of the
Company's products, and there can be no assurance the Company will have the
financial resources, technical expertise or marketing and support capabilities
to compete successfully in the future.
RAPIDLY CHANGING MARKETS
The apparel industry is highly competitive and fragmented and is subject to
rapidly changing consumer demands and preferences. The Company believes that
its success depends in large part on its ability to anticipate, gauge and
respond to changing consumer demands and fashion trends in a timely manner.
Although the Company believes that the quick response feature of its digital
print technology will provide both the Company and its customers with a
significant competitive advantage for those lines of apparel which utilize this
technology, failure by the Company to identify and respond appropriately to
changing consumer demands and fashion trends could adversely affect consumer
acceptance of the Company's products.
DEVELOPMENT OF DIGITAL PRINT TECHNOLOGY AND APPLICATIONS
The Company believes that there is a substantial market for the application
of its digital print technology. However, the technology and its application
in, and acceptance by, the apparel industry has not yet been established, and
there are no assurances that the Company will be successful in establishing
market acceptance or that these operations will become profitable. Although the
Company anticipates receiving revenues from the application of digital print
technology commencing in the current fiscal year, as of October 31, 1997, the
Company has received no revenues from the operations of the digital print
division.
DEPENDENCE UPON CERTAIN CUSTOMERS
During the first quarter ended August 31, 1997, more than half of the
Company's revenues were derived from the Susan Burrowes division. Their
customers include department stores, such as Macy's, Lord and Taylor and
Merchantile), apparel specialty stores (including: Casual Corner, August Max,
and Lane Bryant), national chain stores (including J.C. Penney's and Sears), and
the mass merchandisers (Wal-Mart). During this same quarter, the majority of
the Susan Burrowes revenues were derived from sales to a single customer, J.C.
Penney's.
DEPENDENCE UPON THIRD PARTY MANUFACTURERS
The Company subcontracts virtually all of its manufacturing for Susan
Burrowes, Sierra and Just Jackets divisions to third party manufacturers in the
Los Angeles area. The Company does not have any long-term agreements with any
of these manufacturers. Although the Company believes that its relationships
with its subcontractors are satisfactory and alternative sources are available,
the use of third party manufacturers increases the risk of delay of shipments to
its customers and increases the risk of higher costs if the Company's
manufacturers are not available when required.
RISKS ASSOCIATED WITH ACHIEVING AND MANAGING GROWTH
The Company's business plan calls for rapid growth and expansion.
Implementation of this plan carries certain risks, including the need to expand
to upgrade and expand its information systems, operations and personnel to
respond to increased demand, and the need to attract, retain, develop and manage
an increasing number of employees. Failure to enhance operating control systems
or unexpected difficulties encountered during expansion could materially
adversely affect the Company's financial condition and results of operation.
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FLUCTUATIONS IN OPERATING RESULTS
The Company's quarterly operating results will depend upon the timing of
new product introductions by the Company. The Company's quarterly operating
results may also fluctuate significantly depending on other factors, including
the introduction of new products by the Company's competitors, market acceptance
of the Company's products, adoption of new technologies, and manufacturing costs
and capabilities.
DEPENDENCE ON KEY PERSONNEL
The Company depends to a considerable degree on the continued services of
Kathryn Van Ness, its President, as well as a limited number of highly qualified
employees. The Company has non-competition and secrecy agreements with these
individuals; however, the Company does not maintain life insurance. The loss of
any of these individuals could have a material adverse effect on the Company.
PROTECTION OF PATENTS, TRADEMARKS PROPRIETARY TECHNOLOGY
The Company seeks to protect its proprietary technology by means of patent
protection, trade secrets and unpatented proprietary know-how. The Company also
protects its trademarks through registration wherever possible. Presently, the
Company has no issued patents. No assurance can be given that pending or future
patent applications will issue as patents or that any patents which may be
issued will provide the Company with adequate protection with respect to the
covered products or technology. Moreover, a portion of the Company's
proprietary technology is dependent upon unpatented trade secrets and know-how.
Although the Company enters into confidentiality agreements with individuals and
companies having access to proprietary technology whenever practicable, such
agreements may not provide meaningful protection for this technology in the
event of any unauthorized use or disclosure of such know-how. Further, in cases
where patent protection does not exist, the Company may be exposed to
competitors who independently develop substantially equivalent technology or
otherwise gain access to the Company's trade secrets, know-how or other
proprietary information. In addition, no assurances can be given that the
Company's trademarks will not be challenged or infringed upon by others.
PRICE VOLATILITY
The securities markets have from time to time experienced significant price
and volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market prices of the common stock of many
publicly traded Nasdaq SmallCap companies have in the past been, and can in the
future be expected to be, especially volatile. Announcements of technological
innovations or new products by the Company or its competitors, developments or
disputes concerning patents or proprietary rights, publicity regarding actual or
potential results relating to products under development by the Company or its
competitors, and other external factors, as well as period to-period
fluctuations in the Company's financial results, may have a significant impact
on the market price of the Common Stock.
ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK
The Articles of Incorporation of the Company currently authorize the Board
of Directors to issue up to 30,000,000 shares of Common Stock. The power of the
Board of Directors to issue shares of Common Stock or warrants to purchase
shares of Common Stock is not subject to shareholder approval under Delaware
state law. Any additional issuance of the Company's Common Stock may have the
effect of further diluting the equity interest of shareholders.
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ISSUANCE OF SHARES OF PREFERRED STOCK
The Company's Board of Directors also has the authority to issue up to
30,000,000 shares of Preferred Stock, and to determine the price, and the
rights, preferences, privileges and restrictions, without any further vote or
action by the Company's stockholders. Because the holders of Preferred Stock
may be entitled to vote on certain matters as a class, issuance of Preferred
Stock could have the effect of delaying, deferring or preventing a change of
control of the Company. The rights of the holders of Common Stock will be
subject to, and may be adversely affected by, the rights of the holders of any
Preferred Stock that may be issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire control of the Company. The Company
has no current plans to issue shares of Preferred Stock.
SHARES ELIGIBLE FOR FUTURE SALE
The shares being offered and sold pursuant to this Prospectus, prior to
their registration with the U.S. Securities and Exchange Commission, were
"restricted securities" under the Securities Act of 1933, as amended, and
therefore were not freely tradable except in accordance with Rule 144, upon
compliance with its requirements, including a holding period of not less than
one year and limitations on the amount of securities that may be sold. As a
result of the registration under the 1933 Act of the shares proposed to be sold
by the Selling Stockholders from time to time pursuant to this Prospectus, such
shares may be sold without restriction under the 1933 Act. Sales of substantial
amounts of Common Stock in the public market, or the perception that such sales
may occur, could have a material adverse effect on the market price of the
Common Stock.
FAILURE TO MEET CONTINUED LISTING REQUIREMENTS ON NASDAQ; RISK OF LOW PRICED
SECURITIES; SMALLCAP MARKET; PENNY STOCK
The Company's Common Stock and Warrants are currently listed on the Nasdaq
SmallCap Market (the "SmallCap Market"). The National Association of Securities
Dealers, Inc. has established certain standards for the initial listing and
continued listing of a security on the SmallCap Market. For continued listing on
the SmallCap Market, an issuer must, among other things, maintain at least
$2,000,000 in tangible net assets, a market capitalization of $35 million or net
income of $500,000 in the most recently completed fiscal year or in two of the
last three most recent years. In addition, continued listing requires a minimum
of two market makers and a minimum bid price of $1.00 per share. There are no
assurances that the Company will be able to meet the maintenance requirements in
the future.
If the Company's securities were excluded from Nasdaq, it would adversely
affect the prices of such securities and the ability of the holders to sell
them. Delisting may restrict investors' interest in the Company's securities and
materially adversely affect the trading market and prices for such securities
and the Company's ability to issue additional securities or to secure additional
financing. It is anticipated that if the Company's securities are delisted,
trading, if any, in such securities would be conducted in the over-the-counter
market on the National Association of Securities Dealers, Inc. OTC Electronic
Bulletin Board established for securities that do not meet the Nasdaq listing
requirements, or quoted in what are commonly referred to as the "pink sheets."
As a result, an investor may find it more difficult to dispose of or to obtain
accurate price quotations and volume information concerning the Company's Common
Stock.
Moreover, if the Common Stock is delisted from the SmallCap Market and the
trading price of the Common Stock is less than $5.00 per share, such securities
would likely be subject to the low priced security or so-called "penny stock"
rules that impose additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and accredited
investors. For any transaction
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involving a penny stock, unless exempt, the rules require, among other things,
the delivery, prior to the transaction, of a disclosure schedule required by the
Securities and Exchange Commission relating to the penny stock market. Such
rules also require that the broker determine, based upon information obtained
from the investor, that transactions in penny stocks are suitable for the
investor, and require the broker to obtain the written consent of the investor
prior to effecting the penny stock transaction. The broker-dealer must also
disclose the commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. If the Common
Stock should subsequently become characterized as a penny stock, the market
liquidity for such securities could be severely affected. In such an event, the
regulations relating to penny stocks could limit the ability of broker-dealers
to sell such securities and, thus, the ability of shareholders to sell their
shares in the secondary market.
ABSENCE OF DIVIDENDS
The Company has never paid cash dividends on its Common Stock and does not
expect to pay any cash dividends in the foreseeable future. The Company
currently intends to retain any future earnings for use in its business. The
Company is not a party to any agreements which restrict its ability to pay
dividends in the future.
EFFECT OF ANTI-TAKEOVER PROVISIONS
The Company is subject to the anti-takeover provisions of Section 203 of
the Delaware General Corporation Law, which prohibits the Company from engaging
in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person first becomes
an "interested stockholder," unless the business combination is approved in a
prescribed manner. The application of Section 203 could also have the effect of
delaying or preventing a change in control of the Company.
FORWARD-LOOKING STATEMENTS
When used in this Prospectus and the documents incorporated herein by
reference, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify, in certain circumstances, forward-looking
statements. Such statements are subject to a number of risks and uncertainties
that could cause actual results to differ materially from those projected,
including the risks described in this "Risk Factors" section. Given these
uncertainties, prospective investors are cautioned not to place undue reliance
on such statements. The Company also undertakes no obligation to update these
forward-looking statements.
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SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
All of the shares of Common Stock of the Company covered by this Prospectus
which may be offered and sold from time to time are being sold for the account
of the selling stockholders named in the table below under "Shares of Common
Stock Offered by Selling Stockholders (the "Selling Stockholders"). The shares
which may be offered and sold from time to time by the Selling Stockholders
include: (i) 750,000 shares issuable upon the exercise of outstanding options
exercisable at $.25 per share, none of which are presently exercisable; (ii)
53,000 shares issuable upon the exercise of outstanding warrants exercisable at
$1.68 per share; (iii) 420,000 shares issuable upon the exercise of outstanding
warrants exercisable at $2.00 per share; (iv) an indeterminate number of shares
issuable upon conversion of the $2.6 million principal amount of 6% Notes, plus
accrued interest; (v) 1,500,000 shares of Common Stock issued to the Company's
President, which vest ratably in three equal annual installments commencing June
1998; (vi) 5,041,000 shares of Common Stock previously issued by the Company in
private placements conducted in June 1997 between $.25-$.50 per share; and
(vii) 100,000 shares of Common Stock issued to a former officer in connection
with the termination of his employment in October 1997. Except as noted above
as to 750,000 shares issuable upon the exercise of Options at $.25 per share,
all of the Warrants and Options are presently exercisable.
The shares of Common Stock offered by the Selling Stockholders may be
offered for sale from time to time at market prices prevailing at the time of
sale or at negotiated prices, and without payment of any underwriting discounts
or commissions except for usual and customary selling commissions paid to
brokers or dealers. This Prospectus has been prepared so that future sales of
the shares of Common Stock by the Selling Stockholders will not be restricted
other than as set forth herein. In connection with any sales, the Selling
Stockholders and any brokers participating in such sales may be deemed to be
"underwriters" within the meaning of the Securities Act.
Pursuant to rules promulgated under the Exchange Act, a Selling Stockholder
who is neither affiliated nor directly or indirectly acting in concert with the
issuer or with any other Selling Stockholder will be required to observe the
appropriate "cooling off" period and other restrictions only prior to the
individual stockholder's distribution and until such distribution ends or the
shares are withdrawn from registration. Conversely, a Selling Stockholder who
is affiliated or acting in concert with the issuer or another Selling
Stockholder will be required to observe the appropriate "cooling off" period and
other restrictions under Regulation M with respect to all offers and sales by
affiliated persons.
Except as set forth below, no Selling Stockholder has had any material
relationship with the Company or an affiliate of the Company within the past
three years. Kathryn Van Ness was appointed as a Director, President and Chief
Executive Officer of the Company in June 1997. As part of an employment
agreement entered into between the Company and Ms. Van Ness effective June 1997,
she is entitled to receive 1,500,000 shares of Common Stock and 750,000 shares
of Common Stock upon exercise of Options with an exercise price of $.25 per
share. Both the Options and the shares vest ratably over three years,
commencing June 1998. First Fidelity Capital, Inc. received 420,000 warrants
exercisable at $2.00 per share as part of an agreement entered into with First
Fidelity Capital, Inc. in April 1997 to act as a financial consultant to the
Company on an exclusive basis for a period of five years. Christopher J. Ebert,
a former officer and director of the Company, received 100,000 shares of Common
Stock as part of an employment termination agreement whereby Mr. Ebert
relinquished the right to receive 250,000 shares of Common Stock.
The shares of Common Stock sold for the account of the Selling Stockholders
may be sold in one or more of the following transactions: (a) block trades in
which the broker or dealer so engaged will attempt to sell such shares as agent
but may position and resell a portion of the block as principal to facilitate
any transaction, (b) purchases by a broker or dealer as principal and resale
by such broker or dealer for its account pursuant to this Prospectus, and (c)
ordinary brokerage transactions and transactions in which the broker solicits
-9-
<PAGE>
purchasers. In effecting sales, brokers and dealers engaged by Selling
Stockholders may arrange for other brokers or dealers to participate. Brokers
or dealers will receive commissions or discounts from Selling Stockholders in
amounts to be negotiated (and, if such broker-dealer acts as agent for the
purchaser of such shares, from such purchaser). Broker-dealers may agree with
the Selling Stockholders to sell a specified number of such shares at a
stipulated price per share, and, to the extent such a broker-dealer is unable to
do so acting as agent for a Selling Stockholder, to purchase as principal any
unsold shares at the price required to fulfill the broker-dealer commitment to
such Selling Stockholder. Broker-dealers who acquire such shares as principals
may thereafter resell such shares from time to time in transactions (which may
involve crosses and book transactions and which may involve sales to and through
other broker-dealers, including transaction, of the nature described above) in
the over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated transactions or
otherwise, at market prices prevailing at the time of sale or at negotiated
prices, and in connection with such resales may pay to or receive from the
purchasers of such shares commissions as described above.
-10-
<PAGE>
Listed below are the names of each selling stockholder (the "Selling
Stockholders"), the total number of shares owned and the number of shares to be
sold in this offering by each Selling Stockholder, and the percentage of Common
Stock owned by each Selling Stockholder before and after this Offering:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF SHARES OF
COMMON STOCK TO COMMON STOCK
SHARES OF BE OFFERED FOR OWNED OF
COMMON STOCK SELLING RECORD AFTER
OWNED OF RECORD STOCKHOLDER'S COMPLETION OF
NAME PRIOR TO OFFERING** ACCOUNT** OFFERING
- ---- ----------------- ------- --------
<S> <C> <C> <C> <C> <C>
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
Allied Capital
Enterprises 800,000 (1) 3.7 800,000 (1) * *
Limited
Banque Franck, 300,000 (1) 1.4 300,000 (1) * *
S.A.
Continental Blue
Limited 800,000 (1) 3.7 800,000 (1) * *
DH Limited 800,000 (1) 3.7 800,000 (1) * *
Christopher J. 100,000 * 100,000 * *
Ebert
First Fidelity
Capital, Inc. 420,000 1.9 420,000 * *
Robert and
Thelma Gault 400,000 1.8 400,000 * *
Intercoast Capital 800,000 (1) 3.7 800,000 (1) * *
Leonard Makowka 200,000 * 200,000 * *
Arnold Simon 400,000 * 400,000 * *
William T.
Richardson, 41,000 * 41,000 * *
Trustee
Thomson
Kernaghan & Co. 2,400,000 (1) * 2,400,000 (1) * *
Kathryn Van Ness 2,250,000 10.3 2,250,000 * *
Wall Street
Consultants 53,000 * 53,000 * *
Wales Securities
Limited 800,000 (1) * 800,000 (1) * *
</TABLE>
-11-
<PAGE>
NUMBER OF
SHARES OF SHARES OF
COMMON STOCK TO COMMON STOCK
SHARES OF BE OFFERED FOR OWNED OF
COMMON STOCK SELLING RECORD AFTER
OWNED OF RECORD STOCKHOLDER'S COMPLETION OF
NAME PRIOR TO OFFERING** ACCOUNT** OFFERING
- ---- ----------------- ------- --------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
-12-
<PAGE>
NUMBER OF
SHARES OF SHARES OF
COMMON STOCK TO COMMON STOCK
SHARES OF BE OFFERED FOR OWNED OF
COMMON STOCK SELLING RECORD AFTER
OWNED OF RECORD STOCKHOLDER'S COMPLETION OF
NAME PRIOR TO OFFERING** ACCOUNT** OFFERING
- ---- ----------------- ------- --------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
-13-
<PAGE>
NUMBER OF
SHARES OF SHARES OF
COMMON STOCK TO COMMON STOCK
SHARES OF BE OFFERED FOR OWNED OF
COMMON STOCK SELLING RECORD AFTER
OWNED OF RECORD STOCKHOLDER'S COMPLETION OF
NAME PRIOR TO OFFERING** ACCOUNT** OFFERING
- ---- ----------------- ------- --------
NUMBER PERCENT NUMBER PERCENT
------ ------- ------ -------
- -------------------------
*Less than one percent.
**Assumes the exercise of all Options
(1) Assumes a conversion price of $1.00 per share and the conversion of all 6%
Notes. The actual conversion price is equal to 80% of the market price of
the Common Stock during the five days immediately preceding the date of
conversion. Therefore, the actual number of shares sold could be more or
less than the number shown, depending upon the conversion price and the
dollar amount converted.
-14-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of November 3, 1997, the authorized capital stock of the Company
consisted of 30,000,000 shares of Common Stock, par value $.001 per share, of
which 20,642,387 were issued and outstanding, and 5,000,000 shares of Preferred
Stock, none of which were outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Common stockholders are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors out of funds legally available therefor. The Common Stock
has no preemptive or conversion rights or other subscription rights and there
are no redemptive or sinking funds provisions applicable to the Common Stock.
All outstanding shares of Common Stock are fully paid and nonassessable, and all
the shares of Common Stock offered by the Company hereby will, when issued, be
fully paid and nonassessable.
PREFERRED STOCK
Pursuant to the Certificate of Incorporation, the Company is authorized to
issue "blank check" preferred stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the shareholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of preferred
stock. The issuance of preferred stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, could, among
other things, adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium or otherwise adversely affect the market price of the Common Stock.
ANTI-TAKEOVER PROVISIONS
The Company is subject to Section 203 of the Delaware General Corporation
Law ("Section 203"). In general, Section 203 prohibits certain publicly held
Delaware corporations from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date of the
transaction in which the person or entity became an interested stockholder,
unless the business combination is approved in a prescribed manner. For
purposes of Section 203, "business combination" is defined broadly to include
mergers, asset sales and other transactions resulting in a financial benefit to
the interested stockholder. An "interested stockholder" is any person or entity
who, together with affiliates and associates, owns (or within the three
immediately preceding years did own) 15% or more of the Company's voting stock.
The provisions of Section 203 requiring a super majority vote to approve certain
corporate transactions could enable a minority of the Company's stockholders to
exercise veto powers over such transactions and could have the effect of
delaying or preventing a change in control of the Company without further action
by the stockholders.
EXCULPATION AND INDEMNIFICATION PROVISIONS
Section 145 of the General Corporation Law of the State of Delaware
provides for the indemnification of officers and directors under certain
circumstances against expenses incurred in successfully defending against a
claim and authorizes Delaware corporations to indemnify their officers and
directors under certain circumstances against expenses and liabilities incurred
in legal proceedings involving such person because of their being or having been
an officer or director.
-15-
<PAGE>
Section 102(b) of the Delaware General Corporation Law permits a
corporation, by so providing in its certificate of incorporation, to eliminate
or limit a director's liability to the corporation and its stockholders for
monetary damages arising out of certain alleged breaches of their fiduciary
duty. Section 102(b)(7) provides that no such limitation of liability may
affect a director's liability with respect to any of the following: (i) breaches
of the director's duty of loyalty to the corporation or its stockholders; (ii)
acts or omissions not made in good faith or which involve intentional misconduct
of knowing violations of law; (ii) liability for dividends paid or stock
repurchased or redeemed in violation of the Delaware General Corporation Law; or
(iv) any transaction from which the director derived an improper personal
benefit. Section 102(b)(7) does not authorize any limitation on the ability of
the corporation or its stockholders to obtain injunctive relief, specific
performance or other equitable relief against directors.
Article Nine of the Company's Certificate of Incorporation and the
Company's By-laws provide that all persons who the Company is empowered to
indemnify pursuant to the provisions of Section 145 of the General Corporation
law of the State of Delaware (or any similar provision or provisions of
applicable law at the time in effect), shall be indemnified by the Company to
the full extent permitted thereby. The foregoing right of indemnification is
not deemed to be exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors, or otherwise.
Article Ten of the Company's Certificate of Incorporation provides that no
director of the Company will be personally liable to the Company or its
stockholders; (i) for any monetary damages for breaches of fiduciary duty of
loyalty to the Company or its stockholders': (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of the General Corporation of Law of the State of
Delaware; or (iv) for any transaction from which the director derived an
improper personal benefit.
Insofar as indemnification for liabilities under the Act may be permitted
to directors, officers or persons controlling the Company pursuant to the
foregoing provisions, the Company has been informed that in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Act and is therefore unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
Continental Stock Transfer & Trust Company, New York, New York.
-16-
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Guzik & Associates,
Los Angeles, California. Samuel S. Guzik, Esq., a principal of this firm, has
been nominated to serve as a Director of the Company.
EXPERTS
The consolidated financial statements of the Company and subsidiaries for
the years ended May 31, 1997, and May 31, 1996, incorporated by reference in
this Prospectus and Registration Statement, have been audited by BDO Seidman,
LLP, independent certified public accountants. Such financial statements and
schedules have been so incorporated in reliance upon the authority of such
firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement under the Securities Act of 1933, as amended, with
respect to the Common Stock offered hereby. This Prospectus does not contain
all the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock, reference is hereby made to such Registration Statement, exhibit
and schedules. Statements contained in this Prospectus regarding the contents
of any contract or other document are not necessarily complete with respect to
each such contract or document filed as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, may be inspected without charge at the Commission in
Washington, D.C. and copies of such material may be obtained from such upon
payment of the fees prescribed by the Commission.
No dealer, salesman or other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus. If given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or solicitation of an offer to buy any securities
other than the shares of Common Stock to which it relates or an offer or
solicitation to any person in any jurisdiction where such an offer or
solicitation would be unlawful. Neither delivery of this Prospectus nor sale
made hereunder shall under any circumstances create an implication that
information contained herein is correct as of any time subsequent to its date.
-17-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses payable by the Registrant in
connection with the sale and distribution of the securities being registered
hereby. All amounts are estimated except the Securities and Exchange Commission
registration fee.
SEC registration fee . . . . . . . . . . . . . . . . . $ 3,988.00
Blue Sky fees and expenses . . . . . . . . . . . . . . 2,000.00
Accounting fees and expenses . . . . . . . . . . . . . 5,000.00
Legal fees and expenses . . . . . . . . . . . . . . . 15,000.00
Printing and engraving expenses . . . . . . . . . . . 1,000.00
Registrar and Transfer Agent's fees . . . . . . . . . 500.00
Miscellaneous fees and expenses . . . . . . . . . . . 500.00
Total . . . . . . . . . . . . . . . . . . . . . . . . $28,988.00
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). The Registrant has entered into
agreements with its directors to provide indemnity to such persons to the
maximum extent permitted under applicable laws.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
4.1 Certificate of Incorporation of Registrant.
4.2 Form of Proposed Amendment to Certificate of Incorporation.
4.3(1) Bylaws of Registrant.
4.4(1) Form of Warrant.
5.1(2) Opinion of Guzik & Associates.
23.1 Consent of BDO Seidman, LLP, independent certified public
accountants.
23.2(2) Consent of Guzik & Associates (included in Exhibit 5.1)
- ---------------------------
(1) Incorporated by reference to the Exhibits to the Registration Statement on
Form SB-2 (File No. 033-72490-LA).
(2) To be filed by amendment.
II-1
<PAGE>
(b) Financial Statement Schedules - None
ITEM 17. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement.
(iii) To include any additional or changed material information on
the plan of distribution.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this action do
not apply if the registration statement is on Form S-3, Form S-8 or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a
new registration statement of the securities offered, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities being registered which remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE>
(c) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Commerce, State of
California, on the 4th day of November, 1997.
AMERICAN CINEMASTORES, INC.
By /s/ Kathryn Van Ness
--------------------------------
Kathryn Van Ness
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
/s/ Kathryn Van Ness President and Director November 4, 1997
- ------------------------ (Principal Executive Officer,
Kathryn Van Ness Principal Financial Officer and
Principal Accounting Officer)
II-4
<PAGE>
EXHIBIT INDEX
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
4.1 Certificate of Incorporation of Registrant.
4.2 Form of Proposed Amendment to Certificate of Incorporation.
4.3(1) Bylaws of Registrant.
4.4(1) Form of Warrant.
5.1(2) Opinion of Guzik & Associates.
23.1 Consent of BDO Seidman, LLP, certified public accountants.
23.2(2) Consent of Guzik & Associates (included in Exhibit 5.1)
- ---------------------------
(1) Incorporated by reference to the Exhibits to the Registration Statement on
Form SB-2 (File No. 033-72490-LA).
(2) To be filed by amendment.
(b) Financial Statement Schedules - None
II-5
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF INCORPORATION
OF
AMERICAN CINEMASOUNDS INC.
FIRST: The name of the Corporation is:
American CinemaSounds Inc.
SECOND: The address of the Corporation's registered office in the State
of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, County
of Kent. The name of its registered agent at such address is The Prentice-Hall
Corporation System, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the laws of the General
Corporation Law of the State of Delaware.
FOURTH: The total number of shares of capital stock which the Corporation
shall have authority to issue is Three Thousand (3,000) shares of Common Stock,
par value $.01 per share.
FIFTH: The name and address of the sole incorporator
<PAGE>
is as follows:
NAME ADDRESS
---- -------
Ralph D. Mosley, Jr. 405 Lexington Avenue
New York, New York 10174
SIXTH: Unless required by law or determined by the chairman of the
meeting to be available, the vote by stockholders on any matter, including the
election of directors, need not be by written ballot.
SEVENTH: The Corporation reserves the right to increase or decrease its
authorized capital, stock, or any class or series thereof, and to reclassify the
same, and to amend, alter, change or repeal any provision contained in the
Certificate of Incorporation under which the Corporation is organized or in any
amendment thereto, in the manner now or hereafter prescribed by law, and all
rights conferred upon stockholders in said Certificate of Incorporation or any
amendment thereto are granted subject to the aforementioned reservation.
EIGHTH: The Board of Directors shall have the power at any time, and from
time to time, to adopt, amend and repeal any and all By-Laws of the Corporation.
NINTH: All persons who the Corporation is empowered
<PAGE>
to indemnify pursuant to the provisions of Section 145 of the General
Corporation Law of the State of Delaware (or any similar provision or provisions
of applicable law at the time in effect), shall be indemnified by the
Corporation to the full extent permitted thereby. The foregoing right of
indemnification shall not be deemed to be exclusive of any other rights to which
those seeking indemnification may be entitled under any by-law, agreement, vote
of stockholders or disinterested directors, or otherwise. No repeal or
amendment of this Article NINTH shall adversely affect any rights of any person
pursuant to this Article NINTH which existed at the time of such repeal or
amendment with respect to acts or omissions occurring prior to such repeal or
amendment.
TENTH: No director of the Corporation shall be personally liable to the
Corporation or its stockholders for any monetary damages for breaches of
fiduciary duty as a director, provided that this provision shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
<PAGE>
violation of law; (iii) under Section 174 of the General Corporation Law of the
State of Delaware; or (iv) for any transaction from which the director derived
an improper personal benefit. No repeal or amendment of this Article TENTH
shall adversely affect any rights of any person pursuant to this Article TENTH
which existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
The undersigned incorporator hereby affirms that the statements made herein
are true under penalties of perjury, and is hereby executing this Certificate of
Incorporation this 2nd day of June, 1992.
(L.S.)
---------------------------
RALPH D. MOSLEY, JR.
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CINEMASOUNDS INC.
-------------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-------------------------------------------
The Undersigned, President and Secretary of AMERICAN CINEMASOUNDS INC. (the
"Corporation"), a corporation existing under the laws of the State of Delaware,
does hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has been
amended as follows by striking out the whole of Article FIRST thereof as it now
exists and inserting in lieu and instead thereof a new Article FIRST, reading as
follows:
"FIRST: The name of the Corporation is:
AMERICAN CINEMA STORES INC."
SECOND: That the Certificate of Incorporation of said
<PAGE>
Corporation has been further amended as follows by striking out the whole of
Article FOURTH thereof as it now exists and inserting in lieu and instead
thereof a new Article FORTH, reading as follows:
"FOURTH: the total number of shares of capital stock which the
Corporation shall have authority to issue is Three Hundred Thousand
(300,000) shares of Common Stock, $.01 par value per share.
THIRD: That such amendments have been duly adopted by the unanimous
written consent of all of the stockholders entitled to vote in accordance with
the provisions of Section 228 of the Delaware General Corporation Law.
IN WITNESS HEREOF, we have signed this Certificate as of this 9th day of
February, 1993.
-------------------------
Steve Natale, President
ATTEST:
- -------------------------
Michael Loshin, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CINEMASOUNDS INC.
-------------------------------------------
Adopted in accordance with the provisions
of Section 241 of the General Corporation
Law of the State of Delaware
-------------------------------------------
The undersigned, being the sole incorporator of AMERICAN CINEMASOUNDS INC.
(the "Corporation"), a corporation existing under the laws of the State of
Delaware, does hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has been
amended as follows by striking out the whole of Article FIRST thereof as it now
exists and inserting in lieu and instead thereof a new Article FIRST, reading as
follows:
"FIRST: The name of the Corporation is:
AMERICAN CINEMA STORES INC."
SECOND: That the Certificate of Incorporation of said Corporation has been
further amended as follows by striking
<PAGE>
out the whole of Article FOURTH thereof as it now exists and inserting in lieu
and instead thereof a new Article FORTH, reading as follows:
"FOURTH: the total number of shares of capital stock which the
Corporation shall have authority to issue is Three Hundred Thousand
(300,000) shares of Common Stock, $.01 par value per share.
THIRD: That the Corporation has not received any payment for any of its
stock and that such amendments have been duly adopted by the written consent of
the sole incorporator of the Corporation in accordance with the provisions of
Section 241 of the General Corporation Law of the State of Delaware.
The undersigned incorporator affirms, under the penalties of perjury, that
the foregoing instrument is the act and deed of the Corporation and the facts
stated therein are true.
Dated: February 9, 1993
------------------------
Ralph D. Mosley, Jr.
Sole Incorporator
<PAGE>
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
OF AMERICAN CINEMA STORES INC.
It is hereby certified that:
1. The name of the corporation is American Cinema Stores Inc.
2. The Certificate of Amendment of Certificate of Incorporation of
American CinemaSounds Inc. changing the name to American Cinema Stores Inc. and
increasing the total number of authorized shares of capital stock to 300,000
shares of Common Stock, $.01 par value, which was filed with the Secretary of
State of Delaware on February 10, 1993, is hereby corrected.
3. The defect to be corrected in said instrument is as follows:
The sole incorporator of the Corporation was mistaken about the status of
the issuance of capital stock of the Corporation at the time he filed the
aforementioned amendment. The Corporation had received payment for a portion of
its stock prior to February 9, 1993. Therefore, the amendment, which was
approved by the stockholders in accordance with Section 228 of the Delaware
Corporation Law as of February 8, 1993, should have been adopted in accordance
with Section 242 and not Section 241 as filed.
4. The instrument in its corrected form attached hereto as Exhibit A
shall be the Certificate of Amendment of the Certificate of Incorporation as
filed on February 10, 1993.
Dated: April 1, 1993
---------------------------
Steve Natale, President
ATTEST:
- ---------------------------
Michael Loshin, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CINEMASTORES INC.
-------------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-------------------------------------------
WE, the President and Secretary of American CinemaStores Inc. (the
"Corporation"), a corporation existing under the laws of the State of Delaware,
do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has
been amended as follows by striking out the whole of Article FIRST thereof as it
now exists and inserting in lieu and instead thereof a new Article FIRST,
reading as follows:
"FIRST: The name of the Corporation is:
American CinemaStores Inc."
SECOND: That the Certificate of Incorporation of said Corporation has
been further amended as follows by striking
<PAGE>
out the whole of Article FOURTH thereof as it now exists and inserting in lieu
and instead thereof a new Article FOURTH, reading as follows:
"FOURTH: the total number of shares of capital stock which the
Corporation shall have authority to issue is Fifteen Million
(15,000,000) shares of Common Stock, $.001 par value per share."
THIRD: That such amendments have been duly adopted by the unanimous
written consent of all of the stockholders entitled to vote in accordance with
the provisions of Section 228 of the Delaware General Corporation Law.
IN WITNESS WHEREOF, we have signed this Certificate this 2nd day of April,
1993.
--------------------------
Steve Natale, President
ATTEST:
- ---------------------------
Michael Loshin, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CINEMASTORES INC.
-------------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-------------------------------------------
WE, the President and Secretary of American Cinemastores, Inc. (the
"Corporation"), a corporation existing under the laws of the State of
Delaware, do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has
been amended as follows by striking out the whole of Article FOURTH thereof
as it now exists and inserting in lieu and instead thereof a new Article
FOURTH, reading as follows:
"FOURTH: The total number of shares of capital stock which the
Corporation shall have authority to issue is twenty million
(20,000,000) shares, of which fifteen million (15,000,000) shares
shall be Common Stock, par value $.001 per share, and five million
(5,000,000) shares shall be Preferred Stock, par value
<PAGE>
$.01 per share.
The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation is hereby
expressly authorized to provide, by resolution or resolutions duly
adopted by it prior to issuance, for the creation of each such series
and to fix the designation and the powers, preferences, rights,
qualifications, limitations and restrictions relating to the shares of
each such series.
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, determining the
following:
(a) the designation of such series, the number of shares to
constitute such series and the stated value, if different from the par
value thereof;
(b) whether the shares of such series shall have voting rights,
in addition to any voting rights provided by law, and, if so, the
terms of such voting rights, which may be general or limited;
(c) the dividends, if any, payable on such series, whether any
such dividends shall be cumulative, and, if so, from what dates, the
conditions and dates upon which such dividends shall be payable, and
the preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or any
other series of Preferred Stock;
(d) whether the shares of such series shall be subject to
redemption by the Corporation, and, if so, the times, prices and other
conditions of such redemption;
(e) the amount or amounts payable with respect to the shares of
such series upon, and the rights of the holders of such series in,
the voluntary or involuntary liquidation, dissolution or winding up,
or upon any distribution of the assets, of the Corporation;
<PAGE>
(f) whether the shares of such series shall be subject to the
operation of a retirement or sinking fund and, if so, the extent to
and manner in which any such retirement or sinking fund shall be
applied to the purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms and provisions
relating to the operation thereof;
(g) whether the shares of such series shall be convertible into,
or exchangeable for, shares of stock of any other class or other
securities and, if so, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same,
and any other terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective
while any shares of such series are outstanding upon the payment of
dividends or the making of other distributions on, or upon the
purchase, redemption or other acquisition by the Corporation of,
shares of Common Stock or shares of stock of any other class or any
other series of Preferred Stock;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the Corporation or upon the issuance of any additional
stock, including additional shares of such series or any other series
of Preferred Stock or of any other class; and
(j) any other powers, preferences and relative, participating,
optional and other special rights, and any qualifications, limitations
and restrictions thereof.
The powers, preferences and relative, participating, optional and
other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding.
All shares of any one series of Preferred Stock shall be identical
in all respects with all other shares of such series, except that
<PAGE>
shares of any one series issued at different times may differ as to
the dates from which dividends thereof shall be cumulative.
SECOND: That such amendment has been duly adopted by the written
consent of the holders of a majority of the issued and outstanding stock of
the Corporation entitled to a vote in accordance with the provisions of
Section 228 of the Delaware General Corporation Law. Notice of the taking
of the foregoing action without a meeting by less than unanimous written
consent has been given in accordance with Section 228 of the Delaware
General Corporation Law to those stockholders who have not consented in
writing.
IN WITNESS WHEREOF, we have signed this Certificate this 18
day of November, 1993.
------------------------------
Steven Natale, President
ATTEST:
- -------------------------------
Gil Champion, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
AMERICAN CINEMASTORES INC.
-------------------------------------------
Adopted in accordance with the provisions
of Section 242 of the General Corporation
Law of the State of Delaware
-------------------------------------------
The Undersigned, President of American CinemaStores Inc. (the
"Corporation"), a corporation existing under the laws of the State of
Delaware, does hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has
been amended as follows by striking out the first paragraph of Article
FOURTH thereof as it now exists and inserting in lieu and instead thereof a
new first paragraph of Article FOURTH, reading as follows:
<PAGE>
"FOURTH: The total number of shares of capital stock with
the Corporation shall have authority to issue is thirty-five
million (35,000,000), of which 30,000,000 shares shall be
classified as common stock, having a par value $0.001 per share,
and 5,000,000 shares shall be classified as Preferred stock,
having a par value $0.01 per share."
SECOND: That at the annual meeting of stockholders, duly called and
held, upon notice, in accordance with Section 222 of the Delaware General
Corporation Law, such amendment was duly adopted in accordance with the
provisions of Section 242 of the Delaware General Corporation Law by
the affirmative vote of the holders of a majority of the stock entitled to
vote at such meeting.
IN WITNESS WHEREOF, I have signed this Certificate this as of the
25th day of October, 1996.
/s/ Steven Natale
-------------------------
Steven Natale, President
<PAGE>
EXHIBIT 4.2
CERTIFICATE OF AMENDMENT
OF CERTIFICATE OF INCORPORATION
OF AMERICAN CINEMASTORES INC.
(Under Section 242 of the General Corporation Law)
AMERICAN CINEMASTORES INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that:
FIRST: The name of the Corporation is AMERICAN CINEMASTORES INC.
SECOND: The Certificate of Incorporation of the Corporation is hereby
amended by striking out Article "FIRST" thereof in its entirety and by
substituting in lieu of said Article the following provisions:
"FIRST: The name of the corporation is: Apparel Technologies, Inc."
THIRD: The Amendment to the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 222 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
6th day of November, 1997.
-------------------------------
Kathryn Van Ness, Chairman of
the Board and Chief Executive Officer
ATTEST:
- -------------------------
Samuel S. Guzik,
Secretary
<PAGE>
EXHIBIT 23.1
CONSENT OF BDO SEIDMAN, LLP
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 of our report dated August 18, 1997, on our audits of the
consolidated financial statements of American CinemaStores, Inc. as of May 31,
1997, and May 31, 1996, and for each of the two years then ended, which report
appears in Form 10-K and Form 10-K/A of American CinemaStores Inc. for the
fiscal year ended May 31, 1997. We also hereby consent to the reference to our
firm under the caption "Experts" in the Registration Statement.
/s/ BDO SEIDMAN, LLP
Los Angeles, California
November 5, 1997
