<PAGE>
As filed with the Securities and Exchange Commission on October 17, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
GRAND HAVANA ENTERPRISES, INC.
(formerly, United Restaurants, Inc.)
(Name of Small Business Issuer in its Charter)
-----------
DELAWARE 95-4428370
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
-----------
1990 WESTWOOD BOULEVARD
LOS ANGELES, CALIFORNIA 90025
(310) 475-5600
(Address, Including Zip Code and Telephone Number of
Principal Executive Offices)
HARRY SHUSTER
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
1990 WESTWOOD BOULEVARD
LOS ANGELES, CALIFORNIA 90025
(310) 475-5600
(Name, Address and Telephone Number
of Agent for Service)
COPIES TO:
GERALD M. CHIZEVER, ESQ.
MADGE S. BELETSKY, ESQ.
RICHMAN, LAWRENCE, MANN, GREENE, CHIZEVER
FRIEDMAN & PHILLIPS
9601 WILSHIRE BOULEVARD
PENTHOUSE
BEVERLY HILLS, CALIFORNIA 90210
(310) 274-8300
(310) 274-2831(FAX)
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please 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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 a prospectus is expected to be made pursuant to Rule 434,
please check the following box.[ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration
Securities to be Registered be Registered Per Share Offering Price Fee(1)
<S> <C> <C> <C> <C>
Common Stock(2) 400,000 $1.57 $628,000 $191
</TABLE>
- --------------------------------------------------------------------------------
(1) Estimated in accordance with Rule 457 solely for the purpose of determining
the registration fee and based on the last sale price as reported by the
National Association of Securities Dealers Inc. on October 14, 1997.
(2) Consists of 400,000 shares of Common Stock which may be offered for the
account of selling stockholders, which includes 230,000 shares of Common
Stock underlying Common Stock purchase warrants at exercise prices ranging
from $.75 to $1.50 per share (the "Warrants"). Pursuant to Rule 416, there
are also being registered such additional shares of Common Stock as may
become issuable as a result of the anti-dilution provisions of the
Warrants.
-----------------------
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 this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
ii
<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 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 such state.
iii
<PAGE>
Subject to Completion, dated October 17, 1997
GRAND HAVANA ENTERPRISES, INC.
400,000 SHARES OF COMMON STOCK
This Prospectus has been prepared for use in connection with the proposed
resale by the selling stockholders described herein (the "Selling
Stockholders"), of an aggregate of up to (i) 170,000 shares (the "Shares") of
the Company's common stock, $.01 par value per share (the "Common Stock"), and
(ii) 230,000 shares of Common Stock underlying Common Stock purchase warrants
with exercise prices ranging from $.75 to $1.50 per share (the "Warrants"). The
Shares and the Common Stock underlying the Warrants (collectively, the
"Securities"), may be offered and sold by the Selling Stockholders from time to
time directly or through agents or to or through broker-dealers. See "Shares
of Selling Stockholders" and "Plan of Distribution." The Company will receive
proceeds from the exercise of the Warrants from time to time if and when they
are exercised. However, the Company will not receive any of the proceeds from
the sale of the shares by the Selling Stockholders. See "Use of Proceeds." The
Securities are being registered under the Securities Act of 1933, as amended
(the "Securities Act"), on behalf of the Selling Stockholders in order to permit
the public sale or other distribution of the Securities.
Unless the context indicates or otherwise requires, references in this
Prospectus to the "Company" are to Grand Havana Enterprises, Inc., a Delaware
corporation, and its subsidiaries.
The Company's Common Stock is quoted on the NASDAQ SmallCap Market (the
"NASDAQ") under the symbol "PUFF". On October 14, 1997, the closing price for
the Common Stock as reported by the NASDAQ was $1.57 per share.
SEE "RISK FACTORS," COMMENCING ON PAGE 5 OF THIS PROSPECTUS, FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SHARES OFFERED HEREBY.
THE SECURITIES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS
OF ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES SHOULD CONFIRM THE EXISTENCE OF
AN EXEMPTION FROM REGISTRATION OR THE REGISTRATION THEREOF UNDER THE SECURITIES
LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR.
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.
Title of each Class of Per unit Price to Proceeds to Issuer or
Security being registered total Public(1) Other Persons(2)(3)
- ------------------------- ----- --------- -------------------
Common Stock(4) 400,000 $1.57 628,000.00
Totals 400,000 0.00
- ------------------------------
(1) Based on the closing price of the Common Stock on the NASDAQ SmallCap
Market on October 14, 1997.
(2) All expenses of this offering are being borne by the Company. The Company
estimates that it will incur approximately $16,691 in registration, legal,
accounting, and listing fees in connection with this offering.
(3) The Company will not receive any of the proceeds from the sale of the
shares being offered by the Selling Stockholders.
(4) Includes 150,000 shares of Common Stock issuable upon exercise of Warrants
having an exercise price of the lesser of $.75 per share or 75% of the
average of the last trade prices for the ten trading days immediately
preceding the exercise of the Warrants, and 80,000 shares of Common Stock
issuable upon exercise of Warrants having an exercise price of $1.50 per
share. See "Use of Proceeds."
THE DATE OF THIS PROSPECTUS IS OCTOBER 17, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy materials and other information as required to be
filed with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy materials and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: 7 World Trade Center, 13th Floor, New York, N.Y.
10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. In addition, such material can be inspected at the offices
of the National Association of Securities Dealers, Inc., at 1735 K Street, N.W.,
Washington, D.C. 20006. The Commission maintains a website that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The Common Stock is
listed on the NASDAQ SmallCap Market, and the reports, proxy statements and
certain other information filed by the Company may be obtained by calling the
NASDAQ Public Reference Room Disclosure Information Group at (800) 638-8241 or
(202) 728-8298.
This Prospectus constitutes a part of the Registration Statement on Form
S-3 (together with all exhibits and amendments thereto, the "Registration
Statement") filed by the Company under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all the information set forth in the
Registration Statement, certain items of which are contained in schedules and
exhibits to the Registration Statement as permitted by the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents
of any agreement, instrument or other document referred to are not necessarily
complete. With respect to each such agreement, instrument or other 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.
TABLE OF CONTENTS
AVAILABLE INFORMATION..........................................................2
DOCUMENTS INCORPORATED BY REFERENCE............................................3
THE COMPANY....................................................................3
RISK FACTORS...................................................................5
SUBSEQUENT EVENTS.............................................................10
USE OF PROCEEDS...............................................................11
PLAN OF DISTRIBUTION..........................................................11
SELLING STOCKHOLDERS..........................................................12
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES..........................................12
EXPERTS.......................................................................12
LEGAL MATTERS.................................................................12
2
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1996, filed pursuant to Section 13(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), containing audited
financial statements for the fiscal year ended September 30, 1996.
(b) The Company's quarterly reports on Form 10-QSB for the fiscal
quarters ended December 29, 1996, March 30, 1997 and June 29, 1997 and all other
reports, if any, filed by the Company pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year ended September 30, 1996.
(c) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A, as filed with the Commission on September
25, 1994, including any amendment or report filed for the purpose of updating
such description.
All documents filed by the Registrant pursuant to Section 13(a), 13(c), 14
and 15(d) of the Exchange Act after the date hereof and prior to the filing of a
post-effective amendment to this registration statement which indicates that all
securities offered hereunder have been sold, or which deregisters all securities
then remaining unsold under this registration statement, shall be deemed to be
incorporated by reference in this registration statement and to be a part hereof
from the date of filing of such documents. Any statement contained in a report
or document shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in a subsequently
filed document which also is or is deemed to be incorporated by reference in
this Prospectus modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of such
person, a copy of any or all of the documents referred to above which have been
or may be incorporated by reference herein (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to Grand Havana
Enterprises, Inc., 1990 Westwood Boulevard, Los Angeles, California 90025, Attn:
Corporate Secretary (telephone (310) 475-5600).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE SELLING STOCKHOLDERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT.
THE COMPANY
Grand Havana Enterprises, Inc. and its subsidiaries (collectively, the
"Company") is engaged primarily in the business of the ownership, operation and
development of private membership restaurants and cigar clubs and of retail
cigar stores. The Company's private membership restaurant and cigar clubs are
known as "Grand Havana Room," and the Company's retail cigar stores,
specializing in premium cigars, humidors, cigar accessories and merchandise are
known as "Grand Havana House of Cigars." The Beverly Hills Grand Havana Room
opened in June 1995, the Washington, D.C. Grand Havana Room and Grand Havana
House of Cigars opened in March 1997, and the New York Grand Havana Room opened
in May 1997. Two additional Grand Havana House of Cigars are scheduled to open
in November 1997, one in Beverly Hills, adjacent to the Company's On Canon
restaurant, and one in Las Vegas in the lobby of Bally's Hotel and Casino. In
addition, the Company has an agreement to operate a Cigar kiosk in the Las Vegas
Hilton. The Company intends to actively pursue the operation of its existing
Grand Havana Room locations and the development of additional Grand Havana Rooms
and Grand Havana House of Cigars in major cities as its principal business
focus.
3
<PAGE>
On May 27, 1993, soon after its incorporation, the Company acquired all of
the issued and outstanding shares of the capital stock of Love's Enterprises,
Inc. When it acquired Love's, Love's operated one Company-owned restaurant and
was the franchisor of an additional 19 Love's restaurants. In December 1996, by
which time the Company operated three Company-owned restaurants and was the
franchisor of an additional 10 restaurants, the Company adopted a formal plan of
discontinuance of its Love's subsidiary. Since December 1996, the Company sold
two of its Company-owned restaurants and the sale of the last two Company-owned
restaurants and all domestic franchise rights should close in the next twelve
months. The only Love's related assets which the Company intends to retain are
the international licensing rights to the Love's restaurants.
In April 1995, the Company opened "On Canon," an upscale Italian restaurant
and bar in Beverly Hills, California, which it continues to operate.
The Company also markets and distributes its own label of premium cigars
under the name "Grand Havana Reserve." The Company is actively seeking other
sources of revenue including, but not limited to, licensing Grand Havana Rooms,
Grand Havana House of Cigars and Love's internationally.
The Company was incorporated under the laws of the State of Delaware on
April 13, 1993 under the name "United Restaurants, Inc." The Company changed
its name to "Grand Havana Enterprises, Inc." in February 1997. The Company's
executive offices are located at, and its mailing address is, 1990 Westwood
Boulevard, 3rd Floor, Los Angeles, California 90025, and its telephone number is
(310) 475-5600.
4
<PAGE>
RISK FACTORS
An investment in the Common Stock being offered hereby involves a
significant degree of risk. The factors discussed below and elsewhere in this
Prospectus could adversely affect the value of the Common Stock. In addition,
the factors discussed below and elsewhere in this Prospectus may constitute
forward-looking statements and, as such, may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements expressed or implied by such forward-looking statements to
differ materially from those expressed in the forward-looking statements. Any
forward-looking statements contained in this Prospectus should not be relied
upon as predictions of future events. Such forward-looking statements can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "could," "seeks" or "anticipates" or the
negative thereof or other variations thereon or comparable terminology, or by
discussions of strategy. Such statements are necessarily dependent on
assumptions, data or methods that may be incorrect or imprecise and they may be
incapable of being realized. The following factors may constitute or include
cautionary, forward-looking statements identifying important factors with
respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to vary materially from the
future results covered in such forward-looking statements. Other factors could
also cause actual results to vary materially from the future results covered in
such forward-looking statements. Actual results in the future could differ
materially from those described in the forward-looking statements or as a result
of the factors set forth below (which list does not purport to be exhaustive)
and the matters set forth in this Prospectus generally. Such factors include,
among other things:
OPERATING LOSSES. The Company has experienced operating losses since its
inception. For its fiscal years ended September 30, 1995 and September 30,
1996, the Company experienced net losses of $1,771,725 and $1,468,044,
respectively. In addition, for the nine-month period ended June 29, 1997, the
Company had a net loss of $1,289,282 and anticipates that it will continue to
experience losses from its operations in the future. Although the Company
believes a significant portion of its negative operating results since inception
is due to the high corporate overhead and development costs incurred in
connection with the Company's expansion (and, with respect to its loss for the
quarter ended June 29, 1997, due to a one-time charge of $587,306 for loss on
disposal of a Love's restaurant), as well as to the high construction costs of
its Washington, D.C. and New York, New York Grand Havana Rooms, there can be no
assurance that the Company will be able to be operated profitably in the future.
The Company anticipates that it will continue to experience net operating losses
as it continues working on its ongoing development plans, including the
establishment of additional Grand Havana Rooms. Even after the Company's
development plans are completed, there can be no assurance that the restaurants
and cigar clubs owned by the Company will be able to be operated profitably.
Failure by the Company to operate one or more of its restaurants or cigar clubs
profitably could result in significant operating losses for the Company.
DEPENDENCE ON MANAGEMENT. The Company's success will depend largely upon
the Company's management, in particular, Harry Shuster, the Company's Chairman
of the Board, President and Chief Executive Officer. The Company has entered a
consulting agreement with Mr. Shuster, which agreement is currently renewable on
a year-to-year basis unless either party determines to terminate the agreement.
The loss of the services of Mr. Shuster, or other key management personnel,
could have a material adverse effect on the Company's business and prospects.
CONFLICTS OF INTEREST. The Company relies on the services of the Company's
Chairman, Harry Shuster. However, Mr. Shuster is the Chairman of the Board and
Chief Executive Officer of one other public company, United Leisure Corporation
("ULC"), and the Chairman of the Board of a company that has a registration
statement on file with the Securities and Exchange Commission, United Film
Distributors, Inc. ("UFD"). Mr. Shuster devotes substantial time to the
businesses and affairs of these two other entities. Mr. Shuster also is
involved with several private companies that take up a portion of his time.
Although Mr. Shuster intends to devote such time to the business of the Company
as he deems necessary for its operations, there can be no assurance that Mr.
Shuster will be available to handle any crisis situation that may arise, and if
Mr. Shuster is unavailable, it is possible that the resolutions of such crises
may be less favorable than the resolutions that could have been reached had Mr.
Shuster been available.
In addition to the conflicts with respect to Mr. Shuster's time, there are
also both actual and potential conflicts of interest with respect to financing
and other operational decisions. As of September 30, 1997, the Company owes ULC
a principal amount of $775,000 which, pursuant to the terms of a financing
agreement, as amended, is due March 31, 1998. In addition, ULC has pledged
$875,000 as collateral to support a letter of credit for the Company, which
5
<PAGE>
collateral the Company has agreed to replace in full by March 1998. In
addition, as of September 30, 1997, the Company has borrowed approximately
$357,000 from UFD, which amount is payable on demand. Although the Company
believes that it will be able to meet these repayment obligations when due out
of funds from operations and proceeds from private placements of its securities,
there can be no assurance that this will be the case. Failure by the Company to
meet its repayment obligations when due would result in a default under the
financing agreements to which the Company and its affiliates and parties which
would have a material adverse effect on the business, financial condition and
results of operations of the Company. Harry Shuster, the Chairman of the Board
and Chief Executive Officer of the Company is the Chairman of the Board and
Chief Executive Officer of ULC and the Chairman of the Board of UFD. David M.
Kane, the Chief Financial Officer of the Company, is the Chief Financial Officer
of ULC and UFD.
Delaware law provides that a contract that a corporation enters into in
which its officers and directors have a financial interest (a "Related Party
Contract") is not void or voidable if the material facts as to the relationship
or interest and as to the contract are disclosed or are known to the Board of
Directors, and the Board, in good faith, authorizes the contract or transaction
by the affirmative votes of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum. Delaware law further
provides that a Related Party Contract is not void or voidable if the contract
or transaction is fair to the corporation at the time it is authorized, approved
or ratified by the Board of Directors. Management's policy is to permit the
Company to enter into Related Party Contracts so long as such contracts would
not be void or voidable under Delaware law. Accordingly, with respect to each
of the Related Party Contracts described above, the Company's Board of Directors
is fully aware of the relevant relationships and financial interests involved,
and the disinterested Board member has adopted resolutions, in good faith,
approving each of such Related Party Contracts. Further, the Board of Directors
believes each of the above-described Related Party Contracts was fair as to the
Company at the time it was authorized or ratified by the Board. None of the
Related Party Contracts described above has been submitted to the stockholders
for their approval in the future. Management may enter into additional Related
Party Contracts in the future so long as the Board of Directors is aware of the
relationships and financial interests of the respective officer or director in
the contract and the contract is approved by each disinterested director in good
faith. The Company is not currently aware of any circumstances, other than
recent changes in NASDAQ SmallCap Market continued listing requirements as
discussed below, which would make it change its policy with respect to entering
into Related Party Contracts in the future.
NEW NASDAQ SMALLCAP MARKET CRITERIA. There has been only a limited public
market for, and limited public trading in, the Common Stock, which is traded on
The NASDAQ SmallCap Market under the symbol "PUFF." Continued qualification to
trade on the NASDAQ SmallCap Market is subject to certain qualitative and
quantitative criteria. These criteria were changed on August 22, 1997 and the
Company has until February 22, 1997 to comply with the new criteria. Among the
qualitative criteria are the following: (i) distribution of annual and interim
reports; (ii) a minimum of two independent directors; (iii) an audit committee,
a majority of which are independent directors; (iv) an annual shareholder
meeting; and (v) review of conflicts of interest. The Company currently does
not comply with any of the above-listed qualitative criteria and has until
February 22, 1998 to comply. Although the Company intends to comply with all of
these criteria, failure to comply would result in de-listing from the NASDAQ
SmallCap Market. Additionally, the Company must meet certain quantitative
criteria including a minimum bid price of $1.00 per share and net tangible
assets of $4,000,000. The Company currently is compliance with the quantitative
criteria. However, there can be no assurance that the Company will timely
comply with the qualitative criteria or will continue to comply with the
quantitative criteria. Failure to so comply with all of these criteria may
result in the Company's Common Stock being de-listed from the NASDAQ SmallCap
Market.
GEOGRAPHIC CONCENTRATION; UNCERTAINTY OF MARKET ACCEPTANCE. Until
recently, all of the Company's operations, including its Love's restaurants, On
Canon restaurant and initial Grand Havana Room, were in Southern California.
The Company has only recently commenced operations of its Grand Havana Rooms and
Grand Havana House of Cigars in New York, New York, Washington, D.C., and Las
Vegas, Nevada. Consequently, the results achieved to date by the Company's
existing restaurants and cigar clubs may not be indicative of the prospects of
market acceptance of a larger number of restaurants and cigar clubs,
particularly in wider and more geographically dispersed areas with varied
demographic characteristics. The Company has not conducted and does not intend
to conduct formal concept feasibility or market studies with respect to the
operation of its Grand Havana Rooms and Grand Havana House of Cigars in other
markets. Achieving customer awareness and market acceptance, particularly as
the Company seeks to penetrate new markets, will require extensive efforts and
expenditures by the Company. There can be no assurance
6
<PAGE>
that the Company's new Grand Havana Rooms and Grand Havana House of Cigars will
achieve significant market acceptance.
RISKS OF EXPANSION. Since its inception in 1993, the Company has rapidly
expanded through a series of acquisitions and development. The Company's
acquisition of the Love's restaurant chain in 1993 was not as profitable as
anticipated by the Company and the Company adopted a plan of discontinuance of
its Love's restaurants operations in December 1996, and anticipates that all of
its Love's operations, other than its international marketing with respect to
the Love's name, will be discontinued by late October 1997. Although the
Company intends to continue its strategy of aggressive growth, in particular
with respect to the development of new private membership Grand Havana Rooms and
its retail Grand Havana House of Cigars, and will seek to increase significantly
the number of Grand Havana Rooms and Grand Havana House of Cigars, the Company
has no experience in the growth of restaurants, cigar clubs and retail cigar
outlets and/or in managing a large number of restaurants, cigar clubs and retail
cigar outlets which are geographically dispersed. The Company's expansion will
be dependent on, among other things, market acceptance of the Company's private
membership restaurant and cigar club concept, as well as its retail cigar store
concept, the availability of suitable restaurant, cigar club and retail store
sites, timely development and construction of the restaurant, cigar clubs and
retail outlets, the hiring of skilled management and other personnel, the
general ability to successfully manage growth (including monitoring the cigar
clubs, restaurants and retail outlets, controlling costs and maintaining
effective quality controls), and the availability of adequate financing. There
can be no assurance that the Company will be successful in its proposed
expansion. In view of the Company's small restaurant, cigar club and retail
outlet base, the lack of success or closing of any of its restaurants, cigar
clubs and/or retail cigar outlets could have a material adverse effect upon the
Company.
POSSIBLE NEED FOR ADDITIONAL FINANCING. The Company's capital requirements
have been and will continue to be significant. At June 29, 1997, the Company
had cash and cash equivalents of $227,529 and a working capital deficit of
($1,248,120). As a result of its expansion activities, the Company's working
capital has continually been reduced. The Company anticipates that in
connection with its development plans during the next 12 months of operations,
the Company may require additional funds which the Company may raise through the
private placement of securities. In this regard, the Company has recently
concluded a Regulation S Offering of units of its Common Stock and warrants to
purchase Common Stock pursuant to which offering the Company raised aggregate
gross proceeds of approximately $2,650,000. Although management believes that
with its current working capital, the funds raised in the recently concluded
Regulation S offering, the funds to be raised in future private placements of
the Company's securities, and the funds received from operations, the Company
will be able to repay its debts to ULC and UFD, and to operate its business and
to fund the development of its business for at least the next 12 months, there
can be no assurance that the Company will be able to do so. If the Company's
working capital, proceeds from private placements and income from operations are
insufficient to fund its continuing operations and development plans, there can
be no assurance that additional financing will be available to the Company on
acceptable terms, or at all.
NO DIVIDENDS ON COMMON STOCK. The Company has never paid dividends on the
Common Stock and anticipates that for the foreseeable future all earnings, if
any, will be retained for ongoing operations and general corporate purposes.
RESTAURANT INDUSTRY. The restaurant business is often affected by changes
in consumer tastes, national, regional and local economic conditions,
demographic trends, traffic patterns and the type, number and location of
competing restaurants. In addition, factors such as inflation, increased food,
labor and employee benefit costs and availability of experienced management and
hourly employees may also adversely affect the restaurant industry in general
and the Company's On Canon restaurant, and restaurants in its Grand Havana
Rooms, in particular.
COMPETITION. The Company's Grand Havana Rooms will compete with other
clubs that offer private memberships as well as with other restaurants, bars and
other establishments which are open to the public and at which cigar smoking is
permitted. The Company intends to maintain its niche of private membership
cigar clubs which cater to affluent clientele which the Company believes will
enable it to compete effectively with other private membership clubs as well as
with other bars and restaurants that are open to the public and permit the
smoking of cigars. Many of the Grand Havana Rooms' competitors have
substantially greater financial, marketing, personnel and other resources than
the Company, and the Company believes its ability to compete effectively will
continue to depend on its ability to offer an exclusive membership club that
caters to affluent cigar smokers and offers a high quality distinctive
restaurant, smoking lounge and bar.
7
<PAGE>
The restaurant industry is highly competitive with respect to price,
service, food quality and location, and there are numerous well-established
competitors possessing substantially greater financial, marketing, personnel and
other resources than the Company. These competitors include national, regional
and local chains, many of which specialize in or offer products similar to those
offered by the Company. The Company can also be expected to face competition
from numerous other restaurants and food service establishments. Many of the
Company's competitors have achieved significant national, regional and local
brand name and product recognition and engage in extensive advertising and
promotional programs, both generally and in response to efforts by additional
competitors to enter new markets or introduce new products. In addition, there
can be no assurance that consumers will regard the Company's products as
significantly distinguishable from competitive products, that substantially
equivalent products will not be introduced by the Company's competitors or that
the Company will be able to compete successfully.
TRADEMARKS AND SERVICE MARKS. The Company believes that its present and
proposed trademarks and service marks have significant value and are important
to the marketing of its restaurants and products. There can be no assurance,
however, that the Company's marks do not or will not violate the proprietary
rights of others, that the Company's marks would be upheld if challenged or that
the Company will not be prevented from using its marks, any of which could have
an adverse effect on the Company. In addition, there can be no assurance that
the Company will have the financial resources necessary to enforce or defend its
trademarks and service marks.
FOOD AND BEVERAGE REGULATION. The Company's restaurants, including the
restaurants in the Company's Grand Havana Rooms, are subject to numerous
federal, state and local laws regulating their business, including health,
sanitation, safety standards, alcoholic beverage control and fire regulations.
The development and construction of additional restaurants, including those
within the Company's Grand Havana Rooms, will be subject to compliance with
applicable zoning, land use and environmental regulations. Each of the
Company's On Canon restaurant, and its currently operational Grand Havana Rooms,
has appropriate licenses from regulatory authorities allowing them to sell
liquor, beer and wine, and each restaurant has food service licenses from local
health authorities. The failure of a restaurant to obtain or retain liquor or
food service licenses could have a material adverse effect on its operations.
Difficulties in obtaining or failures to obtain the required licenses or
approvals could delay or prevent the development of a new restaurant in a
particular area.
Alcoholic beverage control regulations require each of the Company's
restaurants to apply to a state authority and, in certain locations, county and
municipal authorities, for a license and permit to sell alcoholic beverages on
the premises. Typically, licenses must be renewed annually and may be revoked
or suspended for cause at any time. Alcoholic beverage control regulations
relate to numerous aspects of the daily operations of the Company's restaurants,
including minimum age of patrons and employees, hours of operation, advertising,
wholesale purchasing, inventory control and handling, and storage and dispensing
of alcoholic beverages. The Company has not encountered any material problems
relating to alcoholic beverage licenses to date; however, the failure to receive
or retain, or a delay in obtaining, a liquor license in a particular location
could adversely affect the Company's ability to obtain such a license elsewhere.
The Company is subject in California, and may be subject in certain other
states, to "dram-shop" statutes, which generally provide a person injured by an
intoxicated person the right to recover damages from an establishment that
wrongfully served alcoholic beverages to the intoxicated person. The Company
carries comprehensive general liability insurance which it believes is
consistent with coverage carried by other entities in the restaurant industry.
Even though the Company is covered by insurance, a judgment against the Company
under a dram-shop statute in excess of the Company's liability coverage could
have a material adverse effect on the Company. The Company has never been the
subject of a "dram-shop" claim.
CONTROL BY MANAGEMENT. Following completion of this offering, Harry
Shuster, the Chairman of the Board, President and Chief Executive Officer of the
Company, and Harvey Bibicoff, a director of the Company, will beneficially own,
in the aggregate, approximately 18.2% of the outstanding shares of Common Stock
of the Company (not including warrants to purchase 433,333 shares of Common
Stock beneficially owned by Mr. Shuster). In addition, ULC, a public company of
which Harry Shuster is the Chairman of the Board and Chief Executive Officer,
will own approximately 8% of the outstanding shares of Common Stock of the
Company. Accordingly, such persons will have significant influence over the
outcome of all matters submitted to the stockholders for approval, including the
election of Directors of the Company.
8
<PAGE>
TOBACCO INDUSTRY REGULATION. Cigars and other tobacco products are subject
to regulation in the United States at the federal, state and local levels.
Federal law has required health warnings on cigarettes since 1965; however,
there is currently no federal law requiring that cigars or pipe tobacco carry
such warnings. However, California requires "clear and reasonable" warnings to
consumers who are exposed to chemicals known to the state to cause cancer or
reproductive toxicity, including tobacco smoke and several of its constituent
chemicals. Violations of this law, known as Proposition 65, can result in a
civil penalty not to exceed $2,500 per day for each violation.
The majority of states, including California, restrict or prohibit smoking
in certain pubic places and restrict the sale of tobacco products to minors.
Local legislative and regulatory bodies have also increasingly moved to curtail
smoking by prohibiting smoking in certain buildings or areas or by requiring
designated "smoking" areas. Any future regulations that in any way limit or
prohibit the smoking of cigars in the Company's Grand Havana Rooms would have a
material adverse effect on the business, operations and financial condition of
the Company.
Cigars and pipe tobacco have long been subject to federal, state and local
excise taxes, and such taxes have frequently been increased or proposed to be
increased, in some cases significantly, to fund various legislative initiatives.
Enactment of significant increases in or new federal, state or local excise
taxes may result in significantly increasing the price of cigars which could
result in decreased sales of cigars at the Company's Grand Havana Rooms, and a
decrease in the number of persons who smoke cigars which could cause a reduction
in memberships at the Grand Havana Rooms.
A variety of bills relating to tobacco issues have been recently introduced
in the Congress of the United States, including bills that would have (i)
prohibited the advertising and promotion of all tobacco products and/or
restricted or eliminated the deductibility of advertising expenses; (ii)
increased labeling requirements on tobacco products to include, among other
things, addiction warnings and lists of additives and toxins; and (iii) shifted
regulatory control of tobacco products and advertisements from the U.S. Federal
Trade Commission to the U.S. Food and Drug Administration. There can be no
assurance as to the ultimate content, timing or effect of any additional
regulation of tobacco products by any federal, state, local or regulatory body,
and there can be no assurance that any such legislation or regulation would have
a material adverse affect on the Company's business, operations and financial
condition.
RULE 144 SALES; FUTURE SALES OF COMMON STOCK. As of October 1, 1997, the
Company had outstanding 11,799,306 shares of Common Stock and had reserved for
issuance an aggregate of 8,359,217 which may be issued in connection with the
exercise of outstanding options and warrants. Of the shares of outstanding
Common Stock, 2,012,500 shares were registered in the Company's initial public
offering and 1,066,000 were registered for resale by the Company in a previous
registration and are freely tradeable. Of the shares of Common Stock reserved
for issuance upon the exercise of options and warrants, 625,000 shares of Common
Stock underlying these options and warrants were registered in a previous
registration. In addition, included in the outstanding shares of Common Stock
are 3,229,267 shares of Common Stock recently sold in the Company's Regulation S
Offering, which securities generally may come back into the United States and
trade without further registration after a 40-day period has elapsed from the
date of sale. Most of the remaining 5,493,539 shares of Common Stock and shares
of Common Stock underlying outstanding options and warrants are "restricted
securities" as that term is defined under Rule 144 of the Securities Act and may
be sold in compliance with Rule 144 of the Securities Act. Ordinarily, under
Rule 144, a person who is an affiliate of the Company (as that term is defined
in Rule 144) and has beneficially owned restricted securities for a period of
one year may, every three months, sell in brokerage transactions an amount that
does not exceed the greater of (i) 1% of the outstanding class of such
securities or (ii) the average weekly trading volume of trading in such
securities on all national exchanges and/or reported through the automated
quotation system of a registered securities association during the four weeks
prior to the filing of a notice of sale by a securities holder. A person who is
not an affiliate of the Company who beneficially owns restricted securities is
also subject to the foregoing volume limitations but may, after the expiration
of two years, sell unlimited amounts of such securities under certain
circumstances. Possible or actual sales of the Company's outstanding Common
Stock by certain of the present stockholders, in compliance with Regulation S,
under Rule 144, as well as the sale of the shares by the Selling Stockholders in
this offering, may have a depressive effect on the price of the Company's Common
Stock and could impair the Company's ability to raise capital through the sale
of its equity securities.
In addition, pursuant to this Offering, an aggregate of 400,000 shares of
Common Stock, including 230,000 additional shares of Common Stock issuable upon
exercise of the Warrants may be sold. The sale of such securities could have a
further depressive effect on the price of the Common Stock and could further
impair the Company's ability
9
<PAGE>
to raise capital through the sale of its equity securities. The Company has
also previously registered for resale the Common Stock underlying options to
purchase an aggregate of 626,500 shares of Common Stock which have been or may
be granted pursuant to the Company's 1996 Stock Option Plan as well as the
common stock underlying options to purchase an aggregate of 25,000 shares of
Common Stock granted to a consultant of the Company. The sale of any of the
foregoing shares could have a further depressive effect on the price of the
Common Stock and on the Company's ability to raise capital through the sale of
equity securities.
VOLATILITY OF MARKET PRICE FOR THE COMMON STOCK. The market price for the
Common Stock prior to the date hereof has been highly volatile. Factors such as
the Company's operating results and announcements by the Company or its
competitors may have a significant impact on the market price for the Common
Stock. Additionally, in recent years, the stock market has experienced a high
level of price and volume volatility and market prices for the stock of many
companies have experienced wide price fluctuations not necessarily related to
the operating performance of such companies.
"PENNY STOCK" REGULATIONS. The Commission has adopted regulations which
generally define a "penny stock" to be any equity security that has a market
price (as defined) of less than $5.00 per share or an exercise price of less
than $5.00 per share, subject to certain exceptions. If the securities offered
hereby are removed from NASDAQ SmallCap Market, the Company's securities may be
considered "penny stock" and thereby become subject to rules that impose
additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and must have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a disclosure schedule prepared by the
Commission relating to the penny stock market. The broker-dealer also must
disclose the commission 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. Consequently,
the "penny stock" rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of purchasers in this offering
to sell the Company's Common Stock.
FUTURE ISSUANCES OF STOCK BY THE COMPANY. As of October 1, 1997, the
Company had outstanding 11,799,306 shares of Common Stock out of a total of
22,000,000 shares of Common Stock authorized. In addition, the Company has
reserved for issuance an aggregate of 8,359,217 shares of Common Stock pursuant
to the exercise of options and warrants, including an aggregate of 2,012,500
shares of Common Stock reserved for issuance upon exercise of the Company's
public Class A Warrants, 2,012,500 shares of Common Stock reserved for issuance
upon exercise of the Company's public Class B Warrants, 525,000 shares of Common
Stock reserved for issuance upon exercise of warrants held by the underwriters
in the Company's initial public offering, 1,614,634 shares of Common Stock
reserved for issuance in connection with the Company's recently concluded
Regulation S Offering, 626,500 shares of Common Stock reserved for issuance for
options granted or to be granted in connection with the Company's 1996 Stock
Option Plan and 1,568,083 shares reserved for issuance pursuant to the exercise
of warrants granted by the Company in previous private placements and to various
consultants. Accordingly, as of October 1, 1997, an additional 1,841,477 shares
of Common Stock (not including shares reserved for issuance) remain available
for future issuances by the Company. These shares, which are not issued or
reserved for issuance, may be issued without any action or approval of the
Company's stockholders. On October 7, 1997, the Board of Directors of the
Company and the holders of a majority of the issued and outstanding shares of
the Common Stock of the Company approved an amendment to the Certificate of
Incorporation of the Company which would increase the authorized shares of
Common Stock of the Company from 22,000,000 to 50,000,000. The Company
anticipates that the amendment will become effective on or about November 15,
1997, approximately 20 days after an information statement with respect to the
amendment is sent to the stockholders of the Company who did not consent to the
action taken by the amendment. Although there are no present plans, agreements
or undertakings involving the issuance of shares, any such issuance could be
used as a method of discouraging, delaying or preventing a change in control of
the Company or could dilute the public ownership of the Company. In the past 12
months, the Company has raised capital through the private placement of a
significant amount of its securities and may continue to do so in the future.
10
<PAGE>
POSSIBLE ADVERSE EFFECTS OF AUTHORIZATION OF PREFERRED STOCK. The
Company's Restated Certificate of Incorporation authorizes the issuance of a
maximum of 3,000,000 shares of Preferred Stock on terms that may be fixed by the
Company's Board of Directors without further stockholder action. The terms of
any series of Preferred Stock, which may include priority claims to assets and
dividends, and special voting rights, could adversely affect the rights of
holders of the Common Stock. To date, no Preferred Stock has been issued and
the Company has no current plans to issue such Preferred Stock. The issuance of
such Preferred Stock could make the possible takeover of the Company or the
removal of management of the Company more difficult, discourage hostile bids for
control of the Company in which stockholders may receive premiums for their
shares of Common Stock, or otherwise dilute the rights of holders of Common
Stock and the market price of the Common Stock.
SUBSEQUENT EVENTS
In October 1997, the Company completed a Regulation S offering of 3,229,267
units, to a total of 10 investors, each unit consisting of one share of Common
Stock and a warrant to purchase 1/2 share of Common Stock exercisable at $1.50
per share of Common Stock for aggregate gross proceeds to the Company of
approximately $2,650,000. In connection with this offering, the Company paid a
placement fee to the selling agent of 10%, a non-accountable expense allowance
of 3%, and, in addition, delivered a warrant to purchase 600,000 shares of
Common Stock exercisable at $.85 per share as a finder's fee. This offering was
exempt from registration under the Act pursuant to Regulation S promulgated
thereunder.
The Company anticipates that the closing of the sale of the final
Company-owned Love's restaurants and all of the Company's remaining rights as a
franchisor of Love's restaurants will occur in the next twelve months.
Thereafter, the only assets of the Love's restaurants owned by the Company will
be right to license the Love's name internationally.
USE OF PROCEEDS
Assuming exercise of all of the Warrants, the net proceeds from this
Offering to be received by the Company from the issuance of the 230,000 shares
of Common Stock covered by this Prospectus and issuable upon exercise of the
Warrants is estimated to be $232,500. Although the closing sales price of the
Common Stock was $1.57 on October 14, 1997, there can be no assurance that the
price will remain above the exercise prices of $.75 and $1.50. The Company
believes that the exercise of the Warrants will depend on the market price of a
share of Common Stock at the time of exercise and its relation to the respective
exercise prices. Accordingly, there can be no assurance that any of the
Warrants will be exercised and the Company may not receive any proceeds from
this Offering. The Company will not receive any proceeds from the sale of
shares of Common Stock offered by the Selling Stockholders.
The Company currently anticipates that it will use the net proceeds from
this Offering, if any, to fund working capital requirements and general
corporate purposes. Pending application of the proceeds, the Company intends to
place the funds in interest-bearing investments such as bank accounts,
certificates of deposit and United States Government obligations.
PLAN OF DISTRIBUTION
The shares of Common Stock are being sold for the Selling Stockholders' own
accounts. The Company will not receive any of the proceeds from such sales of
Common Stock, except proceeds received by the Company upon the exercise of the
Warrants. See "Use of Proceeds."
The Selling Stockholders may sell the shares of Common Stock from time to
time through dealers or brokers in transactions on the NASDAQ SmallCap Market at
prices then prevailing, or directly to one or more purchasers in negotiated
transactions at negotiated prices, or in a combination thereof. The Selling
Stockholders and any dealers or brokers that participate in such distribution
may be deemed "underwriters" within the meaning of the Securities Act any and
commissions or discounts received by any such dealer or broker may be deemed
"underwriting compensation."
The Common Stock of the Company is traded on the NASDAQ SmallCap Market
under the symbol "PUFF."
The costs of registering the shares of Common Stock will be paid by the
Company.
11
<PAGE>
There can be no assurances that the Selling Stockholders will sell any or
all of the Securities offered hereunder.
SELLING STOCKHOLDERS
The following table sets forth the names of the Selling Stockholders, the
number of shares of the Company's Common Stock beneficially owned by the Selling
Stockholders, the number of shares that may be sold by the Selling Stockholders
in this Offering, and the number of shares of Common Stock to be owned by the
Selling Stockholders, and the percentage of Common Stock to be owned by the
Selling Stockholders, assuming all of the shares of Common Stock are sold in
this Offering.
<TABLE>
<CAPTION>
Before Offering After Offering
--------------- --------------
Number of Shares Number of Shares Number of Shares Percent of
Beneficially to Be Sold in Beneficially Outstanding
Owned(1) Offering Owned Shares
----- -------- ----- ------
<S> <C> <C> <C> <C>
Dana Bashor 230,000(2) 230,000 0 *
Westminster Capital Corp. 150,000(3) 150,000 0 *
Gerald M. Chizever(4) 30,000 5,000 25,000 *
Allan B. Duboff(4) 11,000 5,000 6,000 *
Madge S. Beletsky(4) 5,000 5,000 0 *
Howard J. Kern(4) 5,000 5,000 0 *
</TABLE>
- --------------------------
* Less than 1%
(1) As of October 1, 1997 there were 11,799,306 shares of Common Stock
outstanding.
(2) Includes 150,000 shares of Common Stock issuable upon exercise of the
Warrants.
(3) Includes 80,000 shares of Common Stock issuable upon exercise of the
Warrants.
(4) The stockholder is an attorney with the law firm that is preparing the
Registration Statement of which this Prospectus forms a part.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITIES
Article SEVENTH of the Company's Restated Certificate of Incorporation and
Article VI of the Company's Bylaws provide for indemnification of its directors
and officers to the fullest extent permitted by Delaware law. Insofar as
indemnification for liabilities arising under the Securities 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 Securities Act and is therefore unenforceable.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-KSB of the Company for the year ended September 30,
1996 have been incorporated in reliance on the report of Hollander, Gilbert &
Co., independent certified public accountants, given upon the authority of said
firm as experts in auditing and accounting.
LEGAL MATTERS
The validity of the shares of Securities offered hereby will be passed upon
for the Company by Richman, Lawrence, Mann, Greene, Chizever, Friedman &
Phillips, Beverly Hills, California ("Richman Lawrence"). Certain attorneys
with Richman Lawrence beneficially own an aggregate of approximately 120,000
shares of Common Stock, of which 20,000 shares of Common Stock are being offered
herein by the Selling Stockholders.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a schedule of the estimated expenses (all of which will be
borne by the Company) incurred in connection with the offering of the securities
registered hereby, other than underwriting discounts and commissions, if any.
All of the amounts shown are estimates, except the SEC Registration Fee.
SEC registration fee . . . . . . . . . . . . . . . $ 191.00
Blue Sky fees and expenses . . . . . . . . . . . . 2,000.00*
Accounting fees and expenses . . . . . . . . . . . 2,000.00*
Legal fees and expenses. . . . . . . . . . . . . . 10,000.00*
Miscellaneous. . . . . . . . . . . . . . . . . . . 2,500.00*
--------
Total. . . . . . . . . . . . . . . . . . . . . . . $ 16,691.00*
------------
------------
-----------------
* estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
grants corporations the right to limit or eliminate the personal liability of
their directors in certain circumstances in accordance with provisions therein
set forth. Article SEVENTH of the Company's Restated Certificate of
Incorporation, filed in the Office of the Secretary of State of the State of
Delaware on August 31, 1993, provides for the elimination of personal liability
of a Director to the corporation or its stockholders for monetary damages for
the breach of the Director's fiduciary duty to the fullest extent allowable
under Section 102(b)(7).
Section 145 of the General Corporation Law of the State of Delaware grants
corporations the right to indemnify their directors, officers, employees and
agents in accordance with the provisions therein set forth. Article VI of the
Company's Bylaws, provides for indemnification of such persons to the fullest
extent allowable under applicable law. In addition, the Company has entered
into Indemnity Agreements with each of its Directors, which generally provide
contractual indemnity protection which is coextensive with the indemnity
provisions of the General Corporation Law of the State of Delaware and the
Company's Bylaws.
ITEM 16. EXHIBITS.
See the Exhibit Index which is incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, 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, as amended (the "Securities Act"):
(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;
(iii) To include any additional or changed material
information on the plan of distribution not previously disclosed in
the Registration Statement or any material change to such information
in the Registration Statement.
II-1
<PAGE>
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
section 13 or 15(d) of the Exchange Act that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 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 Exchange
Act) 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the Registrant's Articles of Incorporation, By-Laws 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 Securities 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
Securities Act and will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on this 17th day of
October, 1997.
GRAND HAVANA ENTERPRISES, INC.
By /s/ Harry Shuster
---------------------------------------
Harry Shuster
Chairman of the Board, President
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Harry Shuster and Harvey Bibicoff, and each of
them, his attorney-in-fact with power of substitution for him in any and all
capacities, to sign any amendments, supplements, subsequent registration
statements relating to the offering to which this Registration Statement
relates, or other instructions he deems necessary or appropriate, and to file
the same, with exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact or his substitute may 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 by the following persons in the
capacities and on this 17th day of October, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Harry Shuster Chairman of the Board, President and Chief Executive Officer
- ----------------------------------- (Principal Executive Officer)
Harry Shuster
/s/ David M. Kane Chief Financial Officer (Principal Accounting and Financial
- ----------------------------------- Officer)
David M. Kane
/s/ Harvey Bibicoff Director
- -----------------------------------
Harvey Bibicoff
/s/ Stanley Shuster Vice President and Director
- -----------------------------------
Stanley Shuster
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit Page
No. Description No.
(5) Opinion of Richman, Lawrence, Mann, Greene, Chizever, Friedman &
Phillips.
(23)-1 Consent of Richman, Lawrence, Mann, Greene, Chizever, Friedman
and Phillips (included in Exhibit 5).
(23)-2 Consent of Hollander, Gilbert & Co., independent public
accountants.
(24) Powers of Attorney (included on the signature page in Part II of
this Registration Statement).
<PAGE>
[LETTERHEAD OF RICHMAN, LAWRENCE, MANN, GREENE,
CHIZEVER, FRIEDMAN & PHILLIPS]
Exhibit 5
October 17, 1997
Grand Havana Enterprises, Inc.
1990 Westwood Boulevard
Los Angeles, California 90025
Ladies and Gentlemen:
We have been requested by Grand Havana Enterprises, Inc., a Delaware
corporation (the "Company"), to render our opinion in connection with the
registration under the Securities Act of 1933, as amended, and the public
offering by each of the Selling Stockholders named in the Registration Statement
(as defined below), of up to 400,000 shares of common stock of the Company
("Common Stock") consisting of (i) 170,000 shares of Common Stock (the "Shares")
and (ii) 230,000 shares of Common Stock (the "Warrant Shares") underlying
certain Common Stock purchase warrants (the "Warrants").
We have examined the Company's Registration Statement on Form S-3 in
the form to be filed with the Securities and Exchange Commission on or about
October 17, 1997 (the "Registration Statement"). We have examined such further
documents as we have deemed necessary as a basis for the opinion hereafter
expressed.
Based on the foregoing, we are of the opinion that, the Shares and the
Warrant Shares have been duly authorized, and, upon exercise of the Warrants as
provided for in the instruments evidencing the same, and payment of the exercise
price for the Warrant Shares, both the Shares and the Warrant Shares will be
validly issued, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
RICHMAN, LAWRENCE, MANN, GREENE,
CHIZEVER, FRIEDMAN & PHILLIPS
By: /s/ Gerald M. Chizever
<PAGE>
Consent of Independent Accountants
To the Board of Directors
Grand Havana Enterprises, Inc.
We consent to the incorporation by reference in Form S-3 of Grand Havana
Enterprises, Inc., of our report dated October 25, 1996 relating to the
consolidated financial statements of Grand Havana Enterprises, Inc. and its
subsidiaries, and to the reference to our Firm under the caption "Experts" in
the Prospectus.
/s/ HOLLANDER, GILBERT & CO.
-------------------------------------
Hollander, Gilbert & Co.
Los Angeles, California
October 14, 1997
