<PAGE>
Registration No. 333-_________
------------------------------------------------------------------------
------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-------------------------
APPAREL TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 95-4374952
------------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2300 South Eastern Avenue, Commerce, California 90040
-------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive office)
Kathryn Van Ness, Chief Executive Officer
Apparel Technologies, Inc.
2300 South Eastern Avenue
Commerce, California 90040
(213) 725-4955
-------------------------------
(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
-------------------------------
Approximate date of proposed sale to the public: From time to time after the
effective date of the Registration Statement.
<PAGE>
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>
- ---------------------------------------------------------------------------------------------------------------------
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
- ---------------------- ---------------- ------------------ ------------------ -------------------
<S> <C> <C> <C> <C>
Common Stock,
$.00l par value 15,004,016 $0.14 $2,100,562.24 $609.16
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(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 June 17, 1998.
(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
Notes and the Preferred Stock.
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.
-2-
<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 June 17, 1998
PROSPECTUS
- --------------------------------------------------------------------------------
APPAREL TECHNOLOGIES, INC.
COMMON STOCK
- --------------------------------------------------------------------------------
This Prospectus relates to the resale by the Selling Stockholders
identified herein of an indeterminate number of (i) an indeterminate number of
shares of Common Stock, $.001 par value ("Common Stock") of Apparel
Technologies, Inc. (the "Company") which may be acquired by the Selling
Stockholders upon conversion of the $2.0 million aggregate principal amount of
the Company's 6% Notes and payment of interest on the 6% Notes; and (ii) an
indeterminate number of shares of Common Stock which may be acquired by the
Selling Stockholders upon conversion of 900 shares of the Company's Series B
Preferred Stock ("Preferred Stock") and payment of accrued dividends on the
Preferred Stock. See "Selling Stockholders and Plan of Distribution." 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 EIGHT 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 quoted on the NASD OTC Bulletin Board
under the symbol "APTX." On June 17, 1998 the last reported sales price for the
Company's Common Stock on the Bulletin Board was $0.15.
-3-
<PAGE>
The date of this Prospectus is _________ __, 1998
-4-
<PAGE>
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 and Form 10-QSB/A,
for the quarter ended August 31, 1997;
(iii) the Company's Form 10-QSBand Form 10-QSB/A for the quarter ended
November 30, 1997;
(iv) the Company's Form 10-QSB and Form 10-QSB/A for the quarter ended
February 28, 1998;
(v) the Company's Proxy Statement dated October 11, 1997;
(vi) the Company's Proxy Statement dated April 27, 1998;
(vii) the Company's Form 8-K dated June 27, 1997;
(viii) the Company's Form 8-K/A dated June 27, 1997;
(ix) the Company's Form 8-K/A dated July 14, 1997;
(x) the Company's Form 8-K/A dated February 2, 1998;
(xi) the Company's Form 8-K/A dated March 2, 1998;
(xii) the Company's Form 8-K dated December 9, 1997;
(xiii) the Company's Form 8-K/A dated February 9, 1998; and
(xiv) the Company's Form 8-K/A dated March 11, 1998.
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
-5-
<PAGE>
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.
-6-
<PAGE>
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 10, 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. ("Sierra"), 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 created a wholly owned subsidiary, Digital
Group, Inc. ("DGI"), to engage in the development and commercial exploitation
of digital print technology for apparel and sewn products, and it acquired
certain proprietary rights from its founders relating to digital print
technology. 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.
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
-7-
<PAGE>
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.
-8-
<PAGE>
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 Digital Group,
Inc., and undertaking the commercial exploitation of proprietary digital print
technology in the apparel industry and other sewn products. 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 February 28, 1998, of approximately $12 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. Therefore, there can be no assurances that the
Company will be able to avoid continuing operating losses or achieve
profitability.
GENERAL NEED FOR ADDITIONAL CAPITAL AND NO ASSURANCE IT WILL BE AVAILABLE; GOING
CONCERN QUALIFICATION
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 1999 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.
In this regard, the Report of the Company's independent auditors, BDO
Seidman, LLP on the audits of the Company as of the periods dated May 31, 1997
and May 31, 1996, and for each of the two years then ended, which Report appears
in the Company's Form 10-KSB and Form 10-KSB/A of the Company for the fiscal
year ended May 31, 1997, contains an explanatory note regarding the ability of
the Company to continue as a going concern. The note states that because the
Company has incurred a working capital deficiency of $118,699 as of May 31,
1997, and significant losses incurred as of such date, there is substantial
doubt as to the Company's
-9-
<PAGE>
ability to continue as a going concern. The note states that the Company's
future operations are dependent upon generating funds to finance the expansion
of its operations and the repayment of its current liabilities, which funds
management of the Company intends to generate through private placements of debt
and equity and financing. There are no assurances that such placements will be
successfully completed or will be at the times and in the amounts required by
the Company.
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 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.
DEPENDENCE UPON CERTAIN CUSTOMERS
During the nine months ended February 28, 1998, 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 period, the majority of the
Susan Burrowes revenues were derived from sales to a single customer, J.C.
Penney's. The loss of a significant customer may have a material adverse effect
on the financial condition of the Company.
-10-
<PAGE>
DEPENDENCE UPON THIRD PARTY MANUFACTURERS
The Company subcontracts virtually all of its manufacturing for Susan
Burrowes and Sierra 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.
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
-11-
<PAGE>
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 over-the-counter 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 60,000,000 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.
-12-
<PAGE>
ISSUANCE OF SHARES OF PREFERRED STOCK
The Company's Board of Directors also has the authority to issue up to
5,000,000 shares of Preferred Stock, of which 900 shares are issued and
outstanding, 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 issued 900 shares of Series B Preferred Stock in February 1998.
These shares are senior to holders of the Common Stock with respect to the
payment of dividends on the Preferred Stock and have a priority over holders
of the Common Stock in the event of the liquidation of the Company. The
Company has no current plans to issue additional 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.
RISK OF LOW PRICED SECURITIES; PENNY STOCK
Effective June 8, 1998, the Company's Common Stock was delisted from the
Nasdaq Stock Market ("Nasdaq"). Since such date the Company's Common Stock has
been traded in the over-the-counter market on the National Association of
Securities Dealers, Inc. OTC Electronic Bulletin Board. 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 than if it were
listed on the Nasdaq Stock Market or a national or regional exchange.
The Company's Common Stock is 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 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. So long as the Common Stock
is characterized as a penny
-13-
<PAGE>
stock, the market liquidity for such securities could be severely affected. 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.
-14-
<PAGE>
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) an indeterminate number of shares of Common Stock which may be
acquired by the Selling Stockholders upon conversion of the $2.0 million
aggregate principal amount of the Company's 6% Notes and payment of interest on
the 6% Notes; (ii) an indeterminate number of shares of Common Stock which may
be acquired by the Selling Stockholders upon conversion of 900 shares of the
Company's Series B Preferred Stock ("Preferred Stock") and payment of accrued
dividends on the Series B Preferred Stock.
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.
No Selling Stockholder has had any material relationship with the Company
or an affiliate of the Company within the past three years.
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
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.
-15-
<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:
-16-
<PAGE>
<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
- ------ ----------------- ------- ---------
NUMBER PERCENT NUMBER PERCENT
------ --------- -------- -------
<S> <C> <C> <C> <C> <C>
Thomson Kernaghan & Co. 15,004,016(1) 39.5%(2) 15,004,016 (1) - -
*Less than one percent.
</TABLE>
(1) Assumes a conversion price of $0.1875 per share for the 6% Notes and
payment of interest and dividends in cash. The actual conversion price for
the 6% Notes is equal to 75% of the market price of the Common Stock during
the five days immediately preceding the date of conversion, subject to
adjustment. Also assumes a conversion price of $0.2075 per share for the
Preferred Stock, the conversion of all Preferred Stock and payment of
dividends in cash. The actual conversion price for the Preferred Stock is
83% of the market price of the Common Stock during the five days
immediately preceding the date of conversion, subject to adjustment.
Therefore, the actual number of shares sold pursuant to this Prospectus
could be more or less than the number shown, depending upon the conversion
price and the dollar amount converted.
(2) Under the terms of the 6% Notes and the Preferred Stock the holder is
prohibited from owning more than 4.99% of the outstanding shares of Common
Stock.
-17-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
As of March 25, 1998, 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,
of which 900,000 Series B Preferred Shares were outstanding. On May 22, 1998,
the Company's shareholders approved an amendment to the Company's Certificate of
Incorporation increasing the number of authorized shares of Common Stock from
30,000,000 to 60,000,000.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders and have no cumulative voting rights.
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
-18-
<PAGE>
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.
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.
-19-
<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, is a
Director of the Company and its General Counsel and owns 75,000 shares of its
Common Stock.
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 (which
contain an explanatory paragraph regarding uncertainties as to the Company's
ability to continue as a going concern) have been so incorporated in reliance
upon the authority of such firm as experts in accounting and auditing. The
financial statements of Susan Burrowes, Ltd. for the year ended February 28,
1997, incorporated by reference in this Prospectus and Registration Statement,
have been audited by Cohn Handler & Co., an Accountancy Corporation, independent
certified public accountants. The financial statements of Cactus Europe SARL for
the ten months ended October 31, 1997, incorporated by reference in this
Prospectus and Registration Statement, have been audited by BDO Gendrot,
independent certified public accountants. Such financial statements have been
so incorporated in reliance upon the authority of such firm as experts in
accounting and auditing.
RECENT MATERIAL CHANGES
DEBT FINANCING
In May 1998 the Company entered into an agreement with a private investor
to loan $2 million to the Company in installments over a 90 day period, which
are evidenced by the 6% Notes. The first installment, in the amount of
$600,000, was funded on May 19, 1998. The loans bear interest at the rate of 6%
per annum and are due and payable in June 2000. The principal amount is
convertible into Common Stock of the Company at a conversion price equal to 75%
of the market price of the Common Price during the five trading days immediately
preceding the date of conversion, subject to conversion. The Company is
entitled to redeem the loans at any time upon payment of the outstanding
principal amount, accrued interest and a redemption premium equal to 25% of the
principal amount redeemed. The shares issuable upon conversion of the 6% Notes
are covered by the Registration Statement to which this Prospectus relates.
TERMINATION OF INVESTMENT BANKING AGREEMENT
In May 1998 the Company unilaterally terminated its investment banking
relationship with First Fidelity Capital, Inc. of Beverly Hills, California.
The election to terminate the relationship was made as a result of serious
breaches by First Fidelity of its agreement with the Company, including its
failure to honor funding commitments of approximately $5 million at the times
and in the amounts agreed to be provided by First Fidelity, dissemination of
confidential, non-public information regarding the Company to third parties, and
conflicts of interest resulting from its representation of certain investors.
The investment banking relationship was originally entered into in April 1997 by
the Company's former management.
DELISTING OF COMMON STOCK
Effective June 8, 1998, the Company's Common Stock ceased to be listed on
The Nasdaq Stock Market as a result of its failure to meet the net tangible
asset and minimum bid price requirements and is currently traded
-20-
<PAGE>
on the OTC Bulletin Board.
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.
-21-
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . .
SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . .
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . .
-22-
<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.
<TABLE>
<S> <C>
SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . $609.16
Blue Sky fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2,000.00
Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . 5,000.00
Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000.00
Printing and engraving expenses . . . . . . . . . . . . . . . . . . . . . 1,000.00
Registrar and Transfer Agent's fees . . . . . . . . . . . . . . . . . . . . . 500.00
Miscellaneous fees and expenses . . . . . . . . . . . . . . . . . . . . . . . 500.00
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,609.16
</TABLE>
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(2) Certificate of Incorporation of Registrant.
4.2(2) Amendment to Certificate of Incorporation.
4.3(1) Bylaws of Registrant.
4.4(1) Form of Warrant.
5.1(3) Opinion of Guzik & Associates.
23.1 Consent of BDO Seidman, LLP, independent certified public
accountants.
23.2 Consent of BDO Genrot
23.3 Consent of Cohn Handler & Co.
___________________________
(1) Incorporated by reference from the Exhibits to the Registration Statement
on Form SB-2 (File No. 033-72490-LA).
<PAGE>
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-3 (File No. 333-39631).
(3) To be filed by amendment.
(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
II-2
<PAGE>
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.
(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 17th day of June, 1998.
APPAREL TECHNOLOGIES, INC.
By /s/ Kathryn Van Ness
-----------------------------------------------
Kathryn Van Ness
President and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Kathryn Van
Ness his true and lawful attorneys-in-fact and agents, each acting alone, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to the Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and all post-effective amendments thereto,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting alone, or his or her substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Kathryn Van Ness President and Director June 17, 1998
- -------------------------------- (Principal Executive Officer,
Kathryn Van Ness Principal Financial Officer )
/s/ Deborah Berini June 17, 1998
- -------------------------------- (Principal Accounting Officer)
Deborah Berini
/s/ Samuel S. Guzik Director June 17, 1998
- --------------------------------
Samuel S. Guzik
/s/ C. Douglas Plank Director June 17, 1998
- --------------------------------
C. Douglas Plank
II-4
<PAGE>
/s/ William Conlin Director June 17, 1998
- ---------------------------------
William P. Conlin
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
4.1(2) Certificate of Incorporation of Registrant.
4.2(2) Amendment to Certificate of Incorporation.
4.3(1) Bylaws of Registrant.
4.4(1) Form of Warrant.
5.1(3) Opinion of Guzik & Associates.
23.1 Consent of BDO Seidman, LLP, independent certified public
accountants.
23.2 Consent of BDO Genrot
23.3 Consent of Cohn Handler & Co.
___________________________
(1) Incorporated by reference from the Exhibits to the Registration Statement
on Form SB-2 (File No. 033-72490-LA).
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-3 (File No. 333-39631).
(3) To be filed by amendment.
(b) Financial Statement Schedules - None
II-6
<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, except for Note 13
which is as of June 17, 1998, 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-KSB
and Form 10-KSB/A of American CinemaStores Inc. for the fiscal year ended May
31, 1997. Our report contains an explanatory paragraph regarding the Company's
ability to continue as a going concern. 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
June 18, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
Apparel Technologies, Inc.
Los Angeles, California
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-3 of our report
dated February 6, 1998, on our audit of the financial statements of Cactus
Europe SARL as of October 31, 1997, and for the ten months then ended, which
report appears in Form 8-K/A of Apparel Technologies, Inc. dated November 25,
1997. We also hereby consent to the reference to us under the heading "Experts"
in the Registration Statement.
BDO Gendrot
Saint Cloud, France
June 17, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF COHN HANDLER & CO.
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 of our report dated May 22, 1997, on our audit of the
financial statements of Susan Burrowes, Ltd. as of February 28, 1997, and for
the year then ended, which report appears in Form 8-K/A of American CinemaStores
Inc. (now known as Apparel Technologies, Inc.) dated July 14, 1997. We also
hereby consent to the reference to our firm under the caption "Experts" in the
Registration Statement.
COHN HANDLER & CO.,
An Accountancy Corporation
Los Angeles, California
June 17, 1998
