Preliminary Proxy Statement
SCHEDULE 14A INFORMATION
(AMENDMENT NO. 1)
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant __X__
Filed by a party other than the Registrant _____
Check the appropriate box:
__X__Preliminary Proxy Statement
_____Definitive Proxy Statement
_____Definitive Additional Materials
__X__Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
HOLLY HOLDINGS, INC.
(Name of Registrant as Specified in its Charter)
HOLLY HOLDINGS, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
__X__No filing fee required.
_____$125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i) or 14a-6(j)(2).
_____$500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
_____Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
_____________________________________________________________________
2. Aggregate number of securities to which transaction applies:
_____________________________________________________________________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
_____________________________________________________________________
4. Proposed maximum aggregate value of transaction:
_____________________________________________________________________
_____Check box if any part of the fee is offset as provided by Exchange Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
_____________________________________________________________________
2. Form, Schedule or Registration Statement No.:
_____________________________________________________________________
3. Filing Party:
_____________________________________________________________________
4. Date Filed:
_____________________________________________________________________
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PRELIMINARY
HOLLY HOLDINGS, INC.
200 Monument Road, Suite 10
Bala Cynwyd, PA 19004
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
April 7, 1997
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of HOLLY HOLDINGS, INC., a New Jersey Corporation (the "Company"),
will be held at the Company's offices at 200 Monument Road, Suite 10, Bala
Cynwyd, Pennsylvania on April 30, 1997, at 11:00 a.m., local time, for the
following purposes:
1. To consider and act upon a proposal to issue one-half of one share of
the Company's Common Stock in exchange for one share of the Company's Series D
Preferred Stock and to amend the Company's Certificate of Incorporation
to delete any reference to, or any provision for, the class of authorized
stock designated as Series D Preferred Stock;
2. To transact such other business as may properly be brought before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on March 24, 1997
as the record date for the Meeting. Only holders of record of the Company's
Series D Preferred Stock on the stock transfer books of the Company at the
close of business on that date are entitled to notice of, and to vote at this
Meeting.
Please sign, date and mail the enclosed proxy promptly in the enclosed
postage-paid envelope so that your shares will be represented at the meeting.
THE COMPANY URGES THAT AS MANY STOCKHOLDERS AS POSSIBLE BE
REPRESENTED AT
THE MEETING. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE
MEETING, YOU ARE
URGED TO READ THE ATTACHED PROXY STATEMENT AND THEN FILL IN, DATE,
SIGN AND
RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. IF
YOU ARE
PRESENT IN PERSON AT THE MEETING, YOU MAY VOTE IN PERSON REGARDLESS
OF HAVING
SENT IN YOUR PROXY. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED
AT THE
MEETING AND YOUR PROMPTNESS WILL ASSIST US IN PREPARATIONS FOR THE
MEETING.
By Order of the Board of Directors
Larry S. Berman
Chairman, CEO & Secretary
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PRELIMINARY
Holly Holdings, Inc.
200 Monument Road, Suite 10
Bala Cynwyd, PA 19004
______________________________
PROXY STATEMENT
FOR
SPECIAL MEETING OF SHAREHOLDERS
April 30, 1997
_______________________________
INTRODUCTION
This Proxy Statement is being furnished to shareholders by the Board of
Directors of Holly Holdings, Inc., a New Jersey Corporation (the "Company"), in
connection with the solicitation of the accompanying Proxy for use at a Special
Meeting of Shareholders of the Company (the "Meeting") to be held at the
Company's offices at 200 Monument Road, Suite 10, Bala Cynwyd, Pennsylvania,
on Wednesday, April 30, 1997 at 11:00 a.m., local time, or at any adjournments
thereof.
One of the proposals to be considered at the Meeting involves a
transaction which will cause the Company's Series D Preferred Stock to no
longer be listed on the Boston Stock Exchange or be quoted on an interdealer
quotation system of a national securities association. Accordingly the
recipient of this Proxy Statement is advised that:
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
FAIRNESS OR
MERITS OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
The approximate date on which this Proxy Statement and the accompanying
Proxy will first be sent or given to shareholders is April 7, 1997.
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RECORD DATE AND VOTING SECURITIES
Only holders of Series D Preferred Stock of record at the close of
business on March 24, 1997, the record date (the "Record Date") for the
Meeting, will be entitled to notice of, and to vote at, the Meeting and any
adjournment(s) thereof. As of the close of business on the Record Date, there
were 389,975 shares of Series D Preferred Stock, no par value ("Series D
Preferred Stock"), outstanding. There is no other class of securities of the
Company entitled to vote for proposal 1.
The holders of the outstanding shares of Series D Preferred Stock entitled
to cast a majority of votes represented by such shares, present in person or by
proxy, will constitute a quorum at the Meeting for purposes of voting on
proposal 1. The affirmative vote of a majority of the shares of Series D
Preferred Stock entitled to vote is required for the approval of proposal 1.
All votes will be tabulated by the inspector of election appointed at the
Meeting who will separately tabulate affirmative votes, negative votes,
abstentions and broker non-votes. Under New Jersey law, any proxy submitted
and containing an abstention or broker non-vote will not be counted as a vote
cast on any matter to which it relates. Abstentions and broker non-votes will
be counted for purposes of determining whether a quorum is present at the
Meeting.
VOTING OF PROXIES
Shares of Series D Preferred Stock entitled to vote at the Meeting
represented by Proxies, which are properly executed, duly returned and not
revoked, will be voted in accordance with the instructions contained therein.
If no specification is indicated on the Proxy of the holders of Series D
Preferred Stock, the Proxy represented thereby will be voted for the proposal
to amend the Company's Certificate of Incorporation to eliminate the Company's
Series D Preferred Stock. The execution of a Proxy will in no way affect a
shareholder's right to attend the Meeting and vote in person. Any Proxy
executed and returned by a shareholder may be revoked at any time thereafter
if written notice of revocation is given to the Secretary of the Company prior
to the vote to be taken at the Meeting, or by execution of a subsequent proxy
which is presented at the Meeting, or if the shareholder attends the Meeting
and votes by ballot, except as to any matter or matters upon which a vote shall
have been cast pursuant to the authority conferred by such Proxy prior to such
revocation.
SECURITY OWNERSHIP
As of March 24, 1997, the Company is not aware of any person who is the
beneficial owner of more than five percent of the Series D Preferred Stock. No
director or executive officer of the Company has any beneficial interest in any
shares of Series D Preferred Stock. The address for directors and executive
officers of the Company is 200 Monument Road, Suite 10, Bala Cynwyd, PA 19004.
As of March 24, 1997 there were 389,975 shares of Series D Preferred Stock
outstanding.
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PROPOSAL NO. 1
TO APPROVE THE ISSUANCE OF ONE-HALF OF ONE SHARE OF THE
COMPANY'S
COMMON STOCK IN EXCHANGE FOR ONE SHARE OF THE COMPANY'S
SERIES D PREFERRED STOCK AND TO AMEND THE COMPANY'S CERTIFICATE
OF INCORPORATION TO DELETE ANY REFERENCE TO, OR ANY PROVISION
FOR THE CLASS OF AUTHORIZED STOCK DESIGNATED AS
SERIES D PREFERRED STOCK
GENERAL
In November 1994, the Company issued 402,500 shares of Series D 10%
Cumulative Convertible Non-Redeemable Preferred Stock in an underwritten public
offering at $10 per share. At the present time there are 389,975 shares of
Series D Preferred Stock outstanding held by approximately 24 recordholders.
At the annual meeting of shareholders held on December 20, 1996 (the
"Annual Meeting") a majority of the shareholders approved the following: the
election of the board of directors; an amendment to the Company's Certificate
of Incorporation to change the name of the Company to "Holly Holdings, Inc.";
an amendment to the Company's Certificate of Incorporation to reflect a
one-for-ten reverse split of the Company's Common Stock; an amendment to the
Company's Certificate of Incorporation to increase the number of authorized
shares of the Company's Common Stock from 50,000,000 to 150,000,000; the Holly
Holdings 1996 Stock Option Plan; and the selection of Moore, Stephens CPA as
the Company's Independent Certified Public Accountants for the fiscal year
ended March 31, 1997. The Company did not receive a sufficient number of votes
from the holders of the Series D Preferred Stock to approve a proposal to
eliminate the Series D Preferred Stock (such proposal was equivalent to the
terms of proposal 1 herein, after taking into account the one for ten reverse
stock split of the Company's Common Stock). The Certificate of Designation for
the Series D Preferred Stock provides that in order to pass such a proposal, an
affirmative vote of a majority of the outstanding shares of Series D Preferred
Stock is necessary. At the Annual Meeting approximately 80% of the votes
received from the holders of Series D Preferred Stock were in the affirmative,
but this did not constitute a majority of the outstanding shares of Series D
Preferred Stock and thus the matter was not approved.
The Board of Directors has unanimously adopted, subject to the Series D
Preferred stockholders approval, a resolution proposing to recapitalize the
Company by deleting any reference to, or any provision for Series D Preferred
Stock in the Company's Certificate of Incorporation (the "Recapitalization").
The Recapitalization, if approved, will be accomplished by the filing of the
Certificate of Amendment and an exchange offer whereby the Company will
exchange one-half of one share of Common Stock for one share of the Company's
Series D Preferred Stock. Reference is hereby made to the Proposed Certificate
of Amendment annexed hereto as Exhibit A.
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The purpose of this proposal is to simplify the Company's capital
structure, to streamline the Company's voting procedures, to eliminate accrued
dividends which the Company at the present time is not legally permitted to
pay, and to simplify and facilitate the issuance of additional securities, if,
when and to what extent desired by the Company.
As of the Record Date, the Company's authorized capital consists of:
150,000,000 shares of Common Stock, no par value, of which 4,913,355 shares
were issued and outstanding, and 2,000,000 shares of Preferred Stock, of which
450,000 are designated as Series D, and 1,050,000 are designated Series Z.
There were 389,975 shares of Series D Preferred Stock, and 1,013,628 shares of
Series Z Preferred Stock issued and outstanding as of the Record Date.
Neither the Company nor any affiliate has purchased any shares of Series D
Preferred Stock. Accordingly, neither the Company nor any affiliate,
associate, majority owned subsidiary, has any beneficial interest in any
shares of Series D Preferred Stock. The following discussion of Voting
Rights, Dividends and Distributions, and Convertibility of shares of Series D
Preferred Stock is qualified in its entirety by reference to the Company's
Certificate of the Designation, Powers, Preferences and Rights of the Series D
10% Cumulative Convertible Non-Redeemable Preferred Stock filed with the
Secretary of State of the State of New Jersey on October 14, 1994.
VOTING AND APPRAISAL RIGHTS
Holders of the Series D Preferred Stock do not have any voting rights
except for matters in which a vote of the Series D Preferred Stock is required
by law and for matters involving (i) the increase or decrease in the aggregate
number of authorized shares of Series D Preferred Stock, (ii) the increase or
decrease in the par value of the Series D Preferred Stock, or (iii) the
alteration of the preferences, powers or rights of the Series D Preferred
Stock so as to affect them adversely. In the foregoing cases, the holders of
the Series D Preferred Stock, voting as a class, are entitled to one vote per
share, in the same manner as the Common Stock. The holders of the Series D
Preferred Stock are not entitled to appraisal rights.
DIVIDENDS AND DISTRIBUTIONS
The holders of the shares of the Series D Preferred Stock are entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, cumulative dividends at the annual
rate of $1.00 per share, in preference to dividends on Junior Securities (the
Common Stock and all such equity securities of the Company to which the Series
D ranks prior). No dividends are paid to the Series D Stockholders unless all
accrued and unpaid dividends on all outstanding shares of Senior Securities
have been or will be declared and paid or set apart for payment, without
interest. Each such dividend is fully cumulative and accrues (whether or not
declared), without interest. As of the Record Date, $140,875 of dividends
have been paid to holders of Series D Preferred Stock and approximately
$800,000 of dividends have been accrued, but not declared or paid.
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Upon voluntary or involuntary liquidation, dissolution or winding up of
the Company, the holders of Series D Preferred shares are entitled to a return
of an amount in cash equal to $10.00 for each share outstanding, plus an amount
in cash equal to all accrued but unpaid dividends thereon (aggregating
approximately $800,000 or $2.05 per share), before any payment shall be made
or any assets distributed to the holders of any of the Junior Securities,
provided, however, that the holders of outstanding shares of Series D Preferred
Stock shall not be entitled to receive such liquidation payment until the
liquidation payments on all outstanding shares of Senior Securities, if any,
shall have been paid in full.
CONVERTIBILITY
Currently, the Series D Preferred Stock is convertible, at the holders
option, into one-fifth of one fully paid, non-assessable share of the Company's
Common Stock.
EFFECTS OF THE RECAPITALIZATION ON THE HOLDERS OF SERIES D PREFERRED
STOCK
If the Recapitalization is approved, each outstanding share of Series D
Preferred Stock will be converted into one-half share of Common Stock (or each
two shares of Series D Preferred Stock outstanding shall be converted into one
share of Common Stock) from and after the effective time of the amendment
effectuating the Recapitalization. Accordingly, holders of the Series D
Preferred Stock will automatically become holders of Common Stock, and as such
will lose the special rights and preferences of the Series D Preferred Stock as
discussed above, including any right to accrued but undeclared dividends. The
Company's Transfer Agent will be directed to treat certificates representing
shares of the Series D Preferred Stock as representing shares of Common Stock
from and after the effective time of the Recapitalization and new certificates
will be issued in the form of certificates representing shares of Common Stock
upon the presentation of Series D Preferred Stock Certificates presented for
transfer or exchange.
CERTAIN MARKET INFORMATION
The Company's Series D Preferred Stock is currently traded on the NASDAQ
SmallCap Market and Boston Stock Exchange under the respective symbols "HOPRP"
and "HOPP".
The following table sets forth the high and low bid prices for such
security as reported by the NASDAQ SmallCap Market during the quarter ended as
indicated:
Period High Low
December 31, 1994 $16 $11
1995
March 31, 1995 16 10
June 30, 1995 15 1/4 10
September 30, 1995 12 5 1/2
December 31, 1995 8 2 1/4
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1996
March 31, 1996 6 2 5/8
June 30, 1996 4 1/2 2 3/4
September 30, 1996 2 3/4
December 31, 1996 2 3/8
Effective March 10, 1997 the Series D Preferred Stock was delisted from
the Nasdaq Small Cap Stock Market ("Nasdaq"). The delisting was due to the
failure to maintain the minimum bid price of $1.00 which is required by Nasdaq
for continued listing. Furthermore, the Series D Preferred Stock did not meet
Nasdaq's alternative listing criteria (the "Alternative Criteria") which
provides that an issuer shall not be required to maintain the $1.00 per share
minimum bid price if it maintains market value of public float of $1,000,000
and $2,000,000 in capital and surplus. The Company's capital and surplus
exceeds $2,000,000, but on February 28, 1997, the last day the Series D
Preferred Stock was traded, the closing bid price was $0.38, which multiplied
by the number of outstanding shares (389,975) equals a public float of $148,191
which is below the $1,000,000 needed to maintain a listing pursuant to the
Alternative Criteria.
Accordingly effective March 10, 1996 the Series D Preferred Stock is only
traded on the OTC - Bulletin Board and the Boston Stock Exchange, under the
respective symbols "HOPRP" and "HOPP".
PURPOSE OF RECAPITALIZATION
The outstanding shares of Series D Preferred Stock constitute a very
small proportion of the Company's capital structure. Notwithstanding the
small size of this class of securities, the Board of Directors believes that
the existence of the Series D Preferred Stock together with the accrued but
unpaid dividend has a disproportionate negative impact upon the ability of the
Company to raise additional equity capital. It is believed that the
simplification of the capital structure resulting from the proposed
elimination will facilitate the issuance of additional equity securities and,
to the extent thought desirable by the Board of Directors , enable the
Company to raise capital through the issuance of such additional equity
securities more efficiently and economically. There can be no assurance that
any offering will be attempted or, if attempted, that it will be successful.
The elimination of the Series D Preferred Stock will also streamline and lessen
the cost of shareholder votes on items which would otherwise require a class
vote by holders of the Series D Preferred Stock.
The Board of Directors considered several alternatives to the
Recapitalization including offering a lesser number of shares of Common Stock
in exchange for Series D Preferred Stock and proposing a cash redemption. The
Company is not presently in a position to pay what the Board of Directors
deems to be a reasonable cash redemption.
TAX CONSEQUENCES
If the proposal regarding the elimination of the Series D Preferred Stock
and its exchange into Common Stock is approved, the conversion of the Series D
Preferred Stock into Common Stock pursuant to the Amended Certificate of
Incorporation would be treated as a recapitalization under Section 368 of the
Internal Revenue Code. Accordingly, neither the Company nor its shareholders
would recognize gain or loss for federal income tax purposes, except that a
shareholder who receives cash in lieu of fractional shares would be taxed on
the receipt of the cash as though same were a dividend (ordinary income). Each
shareholder's basis in, and holding period for, his shares of Series D
Preferred Stock prior to the conversion would carry over to the Common Stock
received upon the conversion.
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The foregoing is only a brief summary of the anticipated tax effects of
the proposed reclassification under current federal law. Shareholders are
encouraged to consult with their own tax advisors regarding the effects of
these transactions under applicable federal, state, local and foreign tax
laws and regulations.
FAIRNESS OF THE RECAPITALIZATION
The Board of Directors believes the Recapitalization is fair to holders
of the Series D Preferred Stock and Common Stock taken as a whole. The
principal factors considered in determining the fairness of the
Recapitalization are the historical and current market prices of the Series D
Preferred Stock. Such factors as net book value, going concern value, and
liquidation value, were not given significant weight because the Company's net
tangible book value at December 31, 1996 was $2,166,059 and a substantial
portion of that book value is subject to a claim of senior security holders of
the Company's subsidiary, Country World Casinos, Inc .
The shares of Series D Preferred Stock trade on the OTC - Bulletin
Board and the Boston Stock Exchange . Without the changes contemplated by
the Recapitalization, each share of Series D Preferred Stock is convertible
into one-fifth of one share of Common Stock (which at the closing bid price of
the Common Stock on March 7, 1997 equals $0.3875 ). If the holders of
the Series D Preferred Stock approve the Recapitalization, each share of Series
D Preferred Stock would be converted into one-half of one share of Common Stock
(which at the closing bid price of the Common Stock on March 7, 1997 has a
market value of $0.9687 ). However, there is no assurance that the current
market price will be sustained. In making this analysis, the Board of
Directors did not rely on any report, opinion or appraisal of any third party
and the Board of Director is not aware of any firm offer made by any person
during the 18 month period preceding the date of this Proxy Statement for any
merger or consolidation of the Company into or with any such person, the sale
or transfer of any substantial part of the assets of the Company, or control
securities of the Company, other than the issuance of Series Z Convertible
Preferred Stock to certain officers and directors of the Company.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
For the reasons set forth above, the Board of Directors recommends that
holders of Series D Preferred Stock vote FOR the proposed Recapitalization of
the Series D Preferred Stock (Proposal No.1).
REQUIRED SHAREHOLDER VOTE
Approval of the proposed Recapitalization of the Series D Preferred Stock
will require the affirmative vote of a majority of the outstanding shares of
the Series D Preferred Stock entitled to vote at this Meeting.
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ANNUAL REPORT
All holders of Series D Preferred Stock of record as of March 24, 1997
have been sent, a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996. Such report contains certified consolidated
financial statements of the Company for the fiscal year ended March 31, 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto:
RESULTS OF OPERATIONS
CERTAIN STATEMENTS INCLUDED HEREIN OR INCORPORATED BY REFERENCE
CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE
SECURITIES
LITIGATION REFORM ACT OF 1995 (THE "REFORM ACT"). THE COMPANY DESIRES
TO TAKE
ADVANTAGE OF CERTAIN "SAFE HARBOR" PROVISIONS OF THE REFORM ACT
AND IS
INCLUDING THIS SPECIAL NOTE TO ENABLE THE COMPANY TO DO SO.
FORWARD-LOOKING
STATEMENTS INCLUDED OR INCORPORATED BY REFERENCE IN THIS PART
INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH WOULD
CAUSE THE
COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL OR OPERATING) OR
ACHIEVEMENTS
TO DIFFER MATERIALLY FROM THE FUTURE RESULTS, PERFORMANCE
(FINANCIAL OR
OPERATING) OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD
LOOKING
STATEMENTS.
GENERAL
The Company experienced a substantial loss for the year ended March 31,
1996, such loss was attributable primarily to its woodworking business, which
was conducted through its wholly owned subsidiary, HollyWood Manufacturing,
Inc. ("HollyWood"). The Company explored ways to reduce losses in this
business, including divesting itself of its woodworking business while
continuing the sales operations. The Company held discussions with potential
purchasers of its woodworking business. An offer was presented but, the
potential buyer was unable or unwilling to consummate a transaction.
Accordingly, the Company was unsuccessful in its attempts to divest itself of
its woodworking business and consequently, ceased ongoing operations of the
woodworking business to reduce any further losses. The Company dismissed the
entire staff and management of its woodworking operation and liquidated its
assets. The lease for the facility housing HollyWood expired on December 31,
1995 at which time the Company vacated the premises. The Company used the
funds raised through the liquidation of assets and collection of outstanding
receivables to satisfy a secured credit facility with Riviera Finance of
Chicago, Illinois.
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In April 1996, the company moved its wholly owned subsidiary, Navtech
Industries, Inc. ("Navtech"), from Blanding, Utah to Shiprock, New Mexico.
The move allowed Navtech to operate from one facility totaling 54,000 square
feet in lieu of three separate facilities totaling 20,000 square feet. This
enables the company to operate with greater efficiency and substantial less
cost through consolidation of functions, elimination of transportation and
reduction in management and supervisory staff. In its new location in
Shiprock, New Mexico, Navtech is located on the Navajo Reservation which
allows for rebates in employing Native Americans, reduced energy costs and a
forgiveness of rent payments on the new facility until such time as the move
and refurbishing costs to the building are fully paid. It is estimated that
this process will take approximately 10 years. It is anticipated that the new
facility will allow Navtech to expand its revenues substantially.
Additionally, during the Company's first quarter of 1996 (April - June) the
Company changed the management of Navtech with a smaller and more qualified
group of professionals to carry out Navtech's plan and meet targeted budgets
for the upcoming year. The nine months results for this subsidiary show a
significant turnaround to its income statement as compared to a $2 million
loss last year.
In late October 1995, Country World petitioned the U.S. Bankruptcy Court
for the District of Colorado for protection under the rules of Chapter 11 of
the Bankruptcy Code in order to stop the foreclosure on the property
identified as Millsites 12, 13 and the Smith Mining Claim by TommyKnocker, a
subsidiary of New Allied Development Corporation ("New Allied"). In May 1995,
Country World filed suit against New Allied in State Court for amongst other
things, failure to satisfy a first deed of trust obligation, overcharges in
conjunction with an EPA remediation plan and action taken by a New Allied
officer and related parties requiring Securities and Exchange Commission
sanctions which in turn could jeopardize Country World Casinos, Inc.'s
("Country World") ability to obtain a gaming license. In June 1995, New Allied
filed a counterclaim to this action.
The Company, on behalf of Country World, obtained financing for five
million dollars ($5,000,000) which was to enable Country World to repay all of
its outstanding indebtedness and emerge from Bankruptcy. This financing was
approved by the Bankruptcy Court and the Company acquired the funds and partial
distribution was made in accordance with the Court's order.
The five million dollar financing package for the Company's majority
owned subsidiary, Country World, which was consummated in May 1996, was to
enable Country World to emerge from Bankruptcy, which would have eliminated
substantial legal, travel and management expense associated with these
proceedings. New Allied and Tommy Knocker commenced adverse proceedings
against Country World in the Bankruptcy proceedings. Theses actions caused
Country World to remain in Bankruptcy substantially longer than originally
anticipated.
Final settlement hearings related to these adverse proceedings were held
in late September 1996 and Country World received final rulings from the court.
The Court's order found that TommyKnocker Casino Corporation/New Allied is not
entitled to default interest at the rate of 18%, however Country World was
ordered to pay 8% per annum on the unpaid balance due TommyKnocker.
Furthermore, Country World was not obligated to pay attorneys fees, as each
party has been directed by the court to pay their own accordingly.
The Court further found that Country World was not in default of its
Agreement with TommyKnocker/New Allied with regard to filing a registration
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statement for its preferred stock and until TommyKnocker/New Allied files such
registration statement and Country World fails to pay for its cost, Country
World is not in breach of the agreement.
Lastly, the Court's order upheld TommyKnocker's/New Allied's claim that
Country World was not entitled to an offset on the environmental clean up, due
to the fact that the work was completed and Country World paid all clean up
costs without objection, prior to the Company's acquisition of a majority
ownership in Country World.
Both parties were ordered to confer and agree on a specific dollar amount
by November 15, 1996. The parties came to an agreement and approximately $1.3
million was paid to TommyKnocker Casino Corp./New Allied with the Court's
approval in December 1996.
In December 1996, Country World petitioned the Court to pay the unsecured
creditors. All of the unsecured creditors have reached an agreement with
Country World, however TommyKnocker Casino Corporation/New Allied objected to
such payout by asking the Court to hold these funds for future payments,
possibly due to them or payment due to Kennedy Funding and sought to convert
Chapter 11 proceedings to a Chapter 7 liquidation. Country World countered by
filing a motion to Dismiss the Bankruptcy Proceedings. As part of this motion
on February 28, 1997, the Company deposited an additional Seven Hundred Fifty
Thousand ($750,000) Dollars which was necessary to payoff all unsecured
creditors and administrative expenses related to the fact that administrative
expenses increased dramatically because of the adverse proceedings brought by
New Allied/TommyKnocker. These adverse proceedings also caused the Bankruptcy
proceedings to be prolonged.
On March 3, 1997, the court denied New Allied/TommyKnocker's motion to
convert the proceedings and decided to dismiss the Bankruptcy proceedings which
allows Country World to emerge from Bankruptcy.
Country World anticipates that it will require an additional
approximately $27,350,000 to construct an operational and licensed Casino. At
present, a letter of intent for the permanent financing is in place to fund
the Casino after construction, however there can be no assurance that the
closing of such financing will be obtained.
Additionally, Country World
has moved to smaller, less expensive quarters substantially reducing its
operating costs. As of December 31, 1996, Country World vacated its Denver
office.
RESULTS OF OPERATIONS
Nine Months Ended December 31, 1996 Compared to Nine Months Ended
December 31, 1995
Based on the following results of operations and the substantial losses
attributable to HollyWood, the Company decided to cease ongoing operations of
this segment of the Company's business. Due to the plan of discontinuance for
HollyWood, revenues and net losses have been eliminated from the statement of
operations. The following comparison, therefore, does not include the results
attributable to HollyWood, but contains the costs of discontinued operations.
Revenues for the nine months ended December 31, 1996 were $4,259,659 as
compared to $3,110,913 for the nine months ended December 31, 1995. The
increase in revenues is a result of the ability of the Company to fund
increased sales through funds raised earlier this year.
10
<PAGE>
Cost of sales for the nine months ended December 31, 1996 was $2,665,255
as compared to $3,268,390 for the nine months ended December 31, 1995. This
decrease was primarily the result of selling items with a higher gross profit
margin.
Gross profit was $1,594,404 for the nine months ended December 31, 1996,
as compared to a $157,477 gross loss for the nine months ended December 31,
1995. This increase of $1,751,881 in gross profit is attributable to
increased sales for the period, as well as the improvements and adjustments
in cost of sales.
Total operating expenses for the nine months ended December 31, 1996 were
$4,245,921 as compared to $3,842,764 for the comparable period ended December
31, 1995. The majority of these expenses are attributable to one time costs
associated with the reorganization of Navtech, closing costs for the $5
million funding associated with the Country World Chapter 11 Proceedings,
increased legal and other professional fees, raising of working capital,
consulting, stock expenses, as well as promotional fees.
Discontinued operations showed a income of $486,663 for the nine months
ended December 31, 1996 as compared to a loss of $2,275,239 for the nine
months ended December 31, 1995. The change was a result of the close down of
this aspect of operations during the prior year. In the current period,
income was primarily a result of the Company being able to settle past debt of
the closed down operations at a substantial discount.
Operating losses totaled $2,651,518 for the nine months ended December
31, 1996, as compared to an operating loss of $4,000,241 for the same period
in 1995 for the reasons described above.
Interest expense for the nine months ended December 31, 1996 was $387,256
as compared to $297,638 for the nine months ended December 31, 1995. This
cost is primarily attributable to the Navtech revolving line of credit with a
local lending institution in Farmington, New Mexico and notes payable for the
Company's financing of Country World.
Three Months Ended December 31, 1996 Compared to Three Months Ended December
31, 1995
Revenues for the three months ended December 31, 1996 were $1,221,426 as
compared to $721,039 for the three months ended December 31, 1995. The
increase in revenues is a result of the Company to fund increased sales through
funds raised earlier this year and a better selection of product sales.
Cost of sales for the three months ended December 31, 1996 was $664,686
as compared to $651,876 for the three months ended December 31, 1995. There
was a decrease in the percentage to sales, primarily the result of selling
items with a higher gross profit margin.
Gross profit was $556,740 for the three months ended December 31, 1996,
as compared to a $69,161 gross profit for the three months ended December 30,
1995. This increase in gross profit is attributable to increased gross profit
percentage for the period due to a better selection of product sales.
Total operating expenses for the three months ended December 31, 1996 was
$1,473,313, as compared to $2,246,103 for the three months ended December 31,
1995. This decrease of $772,103 is attributable to the high costs incurred
last year related to the operations of Navtech, the acquisition and
development of Country World, resulting in high legal and other administrative
costs.
Operating losses totaled $917,572 for the three months ended December 31,
1996 as compared to an operating loss of $2,176,942 for the period ended
December 31, 1995, a decrease of $1,259,370.
Interest expense for the three months ended December 31, 1996 was
$165,472 as compared to $146,988 for the comparable period in 1995.
Discontinued operations showed a income of $158,999 for the three months
ended December 31, 1996 as compared to a loss of $79,161 for the three months
ended December 31, 1995. The change was a result of the close down of this
aspect of operations during the prior year. In the current period, income was
primarily a result of the Company being able to settle past debt of the closed
down operations at a substantial discount.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
To the extent the Company has ceased operations of its woodworking
business, its cash requirements have diminished accordingly, and an extended
line of credit has been secured to fund Navtech's operations with The First
National Bank of Farmington in Farmington, New Mexico. The terms of this
facility are for a receivable and inventory line of credit in an amount not to
exceed $1,500,000 with a monthly floating interest rate of 1.5% over prime.
As of December 31, 1996, Navtech was indebted to the bank in the amount of
approximately $1.2 million. This loan becomes due on March 15, 1997.
Additionally, during this quarter, the Company raised $825,000 through a
private equity placement of the Company's Series E Preferred Stock.
In January 1995, the Company borrowed, on an unsecured basis, an
aggregate of $1,000,000 from three individuals and entities at 15% annual
interest. In lieu of such interest, the Company issued to such note holders an
aggregate of 150,000 shares of Common Stock. The principal amount of such
notes was due and payable on January 13, 1996, and in March 1996, the Company
entered into an extension agreement with the three individuals whereas the
Company made a partial payment of $500,000 and Mr. Larry Berman, the Company's
Chairman, transferred 370,000 shares of the Company's Common Stock owned by him
in exchange for an extension until August 9, 1996 at which time a balance
payment of $400,000 to be due. The parties further agreed to extend the August
9th deadline until such time as Country World emerges from the Chapter 11
Proceedings. The Company utilized the $1,000,000 to make a loan to Country
World, which indebtedness was canceled in exchange for the issuance of
5,000,000 shares of Country World common stock to the Company. The Company
plans to invest up to an additional $35 million to develop and construct the
casino and hotel complex in Black Hawk, Colorado. At present, a letter of
intent for the permanent financing is in place to fund the Casino after
construction, however, there can be no assurance that the closing of such
financing will be obtained.
The Company consummated a Private Placement of 767,000 shares of its
Series E Convertible Preferred Stock in March of 1996, resulting in gross and
net proceeds of $7,670,000 and $6,628,000, respectively. The proceeds of this
offering were utilized for repayment of debt, settlement of litigation fees
associated with securing financing for Country World Casinos, Inc. and working
capital for the Company and Navtech. Each share of Series E Preferred Stock
is convertible into shares of the Company's Common Stock at the rate
determined by dividing $10.00 by the lesser of 75% of the closing bid price as
reported by NASDAQ, of the Company's Common Stock on the date of the closing
of the subscription or 65% of the average closing bid price for the five (5)
trading days immediately preceding the date of conversion. In August through
December 1996, the Company consummated a second placement of an aggregate
197,500 shares of its Series E Convertible Preferred Stock under the same
terms described above.
In February 1996, the Company hired Martin Janis & Company to act as
agent for the Company in providing additional public relations services for a
three month period. The Company issued 35,000 shares of its Common Stock for
such services and in May 1996, paid an additional fee of approximately $24,000
for such three month period. Additionally, the Company will retain limited
services from Martin Janis & Company for the next nine months at a fee of
$3,000 per month.
In April 1996, the State of New Jersey approved the issuance of 555,000
shares of Series Z Preferred Stock in accordance with the Company's
Certificate of designation. In September 1996, such authorization was
increased to 1,050,000 shares and issued in exchange for debt.
In June 1996, the Company issued an aggregate of 1,300,000 shares of its
Common Stock to Messrs. Irwin Schneider, Eugene Lombardo and Scott Schneider
in return for certain services performed by these individuals on behalf of
the Company.
In September 1996, the Company issued 573,333 shares of Common Stock to N
& A Promotions in return for certain services performed for the Company.
In September 1996, a debt of $30,000 owed to Sunrise, Inc. was converted
into 30,000 shares of Series C Preferred Stock and pursuant to the terms
thereof, into 120,000 shares of Common Stock.
In October 1996, the Company issued 450,000 shares of Common Stock to
Sparta Capital Ltd. for the exercise of its warrants.
Unless and until the Company improves its financial results sufficiently
and maintains such improved results, the Company may have to borrow or raise
additional capital to fund any cash shortage, if the need should arise.
12
<PAGE>
OTHER BUSINESS
There is no matter other than those described above, so far as is known
to the management of the Company, at the date of this proxy statement, to be
acted on at the meeting. It is intended, however, if other matters come up
for action at said meeting or any adjournments thereof, that the persons named
in the enclosed form of proxy shall, in accordance with the terms of the
proxy, have authority in their discretion to vote shares represented by
proxies received by them, in regard to such other matters, as seems to said
persons in the best interests of the Company and its stockholders.
COST OF SOLICITATION
The Company will bear the cost of the solicitation of proxies from its
stockholders. The Company has engaged the services of Shareholder
Communications Corporation ("SCC") to assist in the solicitation of proxies
for the Meeting. It is estimated that the aggregate costs of SCC's services
will be approximately $7,500.00. The cost of SCC's services will be borne by
the Company. The Company expects to solicit proxies principally by mail, but
the Company or SCC may solicit proxies by telephone, facsimile or personal
interview. In addition to the use of mail, proxies may be solicited by
directors, officers and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers and
employees of the Company will not be compensated additionally for the
solicitation, but may be reimbursed for out-of-pocket expenses in connection
with this solicitation. Arrangements are also being made with brokerage
houses and any other custodians, nominees and fiduciaries for the forwarding
of solicitation material to the beneficial owners of the Company, and the
Company will reimburse such brokers, custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses.
13
<PAGE>
The following is a statement of estimated expenses to be incurred by the
Company in connection with the Proposal contained within this Proxy Statement:
Filing Fee $ 73.12
Solicitation Expenses 7,500.00
Legal Expense 15,000.00
Accounting Expense 5,000.00
Reimbursement of Mailing Expenses 10,000.00
Printing Expense 3,000.00
Miscellaneous 2,000.00
-------------
Total Estimated Expenses $30,073.12
By Order of the Company,
Larry S. Berman
Chairman, CEO & Secretary
Dated: Bala Cynwyd, Pennsylvania
April 7, 1997
Exhibits
A - Proposed Certificate of Amendment
14
<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 (UNAUDITED)
Assets:
Current Assets:
Cash and Cash Equivalents $ 579,963
Accounts Receivable Trade - [Net of Allowance for Doubtful
Accounts of $178,695] 2,030,173
Inventory 572,694
Prepaid Expenses 330,480
Total Current Assets 3,513,310
Property and Equipment - [Net of Accumulated
Depreciation and Amortization of $273,906] 11,455,405
Deposits 51,582
Intangible Assets - Net 533,328
Other Assets 62,786
Deferred Financing Costs 312,500
Total Assets $15,928,911
See Notes to Consolidated Financial Statements
F-1
<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 (UNAUDITED)
Liabilities and Stockholders' Equity:
Current Liabilities:
Notes Payable - Related Party $ 925,000
Demand Notes Payable - Bank 1,242,823
Notes Payable - Others 5,400,000
Accounts Payable 1,428,098
Accrued Expenses 611,233
Payroll Taxes Payable 6,743
Current Portion of Long-Term Debt 139,557
Current Portion of Capital Lease Obligations 61,237
Total Current Liabilities 9,814,691
Long-Term Debt 524,360
Long-Term Portion of Capital Lease Obligations 523,537
Minority Interest 2,012,360
Commitments and Contingencies --
Stockholders' Equity:
Preferred Stock - Authorized 2,000,000 Shares:
Series D: Convertible $10.00 Par Value, $1.00 Per
Share Per Annum Cumulative Dividends, 389,975 Shares
Issued and Outstanding 3,899,750
Series E: Convertible $10.00 Par Value, 30,000 Shares
Issued and Outstanding 300,000
Series Z: Convertible $0.25 Par Value, 1,013,628 Shares
Issued and Outstanding 253,407
Additional Paid-in Capital [Preferred] (1,163,601)
Common Stock - No Par Value, Authorized 150,000,000
Shares, 4,937,488 Shares Issued and Outstanding 17,777,799
Additional Paid-in Capital [Common] (83,947)
Accumulated [Deficit] (17,929,445)
Total Stockholders' Equity 3,053,963
Total Liabilities and Stockholders' Equity $ 15,928,911
See Notes to Consolidated Financial Statements
F-2
<PAGE>
<TABLE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $ 1,221,426 $ 721,039 $ 4,259,659 $ 3,110,913
Cost of Sales 664,686 651,878 2,665,255 3,268,390
Gross Profit [Loss] 556,740 69,161 1,594,404 (157,477)
Operating Expenses:
General, Selling and Administrative 1,474,312 2,246,103 4,245,921 3,842,764
Operating [Loss] (917,572) (2,176,942) (2,651,517) (4,000,241)
Other [Expense]:
Other Income 11,163 (41,729) 54,601 11,137
Interest Expense (165,472) (146,988) (387,256) (297,638)
Other [Expense] - Net (154,309) (188,717) (332,655) (286,501)
Minority Interest Share in Loss of Subsidiary 96,090 31,764 202,161 102,699
[Loss] Income from Continuing Operations (975,791) (2,333,895) (2,782,011)
(4,184,043)
Discontinued Operations:
Income [Loss] from Operations of
Woodworking Business 158,999 (79,161) 486,663 (2,275,239)
Estimated [Loss] on disposal of
Woodworking Business -- (1,201,633) -- (2,043,056)
Net [Loss] (816,792) (3,614,689) (2,295,348) (8,502,338)
Preferred Stock Dividends 0 201,250 0 301,875
Net [Loss] Available to Common Stockholders $ (816,792) $(3,815,939) $(2,295,348)
$(8,804,213)
Loss Per Common Share:
[Loss] from Continuing Operations $ (0.22) $ (3.36) $ (0.89) $ (7.06)
Income [Loss] from Discontinued
Operations $ 0.04 $ (0.11) $ 0.15 $ (3.84)
Estimated Loss on Disposal of
Woodworking Business $ -- $ (1.73) $ -- $ (3.45)
Net [Loss] Per Common Share $ (0.18) $ (5.49) $ (0.74) $ (14.86)
Weighted Average Number of
Common Shares Outstanding 4,492,823 695,524 3,115,978 592,672
See Notes to Consolidated Financial Statements
</TABLE>
F-3
<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine months ended
December 31,
1996 1995
Operating Activities:
[Loss] From Continuing Operations $ (2,782,011) $ (4,184,043)
Adjustments to Reconcile Net [Loss]
to Net Cash [Used for] Operating
Activities:
Depreciation and Amortization 88,367 140,318
Amortization of Deferred Financing
Activities 320,433 112,500
Minority Interest 202,161 --
Changes in Assets and Liabilities:
[Increase] Decrease in:
Accounts Receivable 1,651,723 (277,607)
Inventory (342,818) (420,722)
Other Current Assets (4,534) 21,685
Due from Stockholders & Related
Parties -- 25,000
Note Receivable -- 1,050,000
Deposits (194,880) --
Prepaid Expenses (116,500) --
Other Assets (546,726) --
Increase [Decrease] in:
Accounts Payable and Accrued
Expenses (897,390) 1,888,508
Payroll Taxes Payable (75,080) 71,249
Other Current Liabilities (14,182) --
Total Adjustments 70,574 2,610,931
Net Cash - Continuing Operations - Forward (2,711,437) (1,573,112)
Discontinued Operations:
Net [Loss] From Discontinued Operations 486,663 (2,275,239)
Adjustments to Reconcile Net [Loss] to
Net Cash Operations:
Depreciation and Amortization -- 59,540
Bad Debts -- --
Changes in Net Assets, Liabilities
and Losses (575,007) 2,228,959
Estimated Loss in Disposal of
Woodworking Business -- (2,043,056)
Net Cash - Discontinued Operations - Forward (88,344) (2,029,796)
Investing Activities - Continuing Operations:
Acquisition of Assets (1,889,148) (90,508)
Purchase of Navtech - Net of Cash -- --
Net Cash - Investing Activities - Continuing
Operations - Forward $(1,889,148) $ (90,508)
See Notes to Consolidated Financial Statements
F-4
<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS [UNAUDITED]
Nine months ended
December 31,
1996 1995
Net Cash - Continuing Operations -
Forwarded $ (2,711,437) $ (1,573,112)
Net Cash - Discontinued Operations -
Forwarded (88,344) (2,029,796)
Net Cash - Investing Activities -
Continuing Operations - Forwarded (1,889,148) (90,508)
Financing Activities - Continuing Operations:
Proceeds from Notes Payable-Other 5,223,714 500,000
Payment of Notes Payable - Other (150,000)
- --
Proceeds from Demand Notes Payable -
Stockholders and Related Parties -- 322,000
Payment of Demand Notes Payable -
Stockholders and Related Parties (2,971,504) (262,427)
Proceeds of Demand Note Payable - Banks 384,470 1,164,792
Proceeds from Issuance of Preferred Stock 1,679,000 2,400,000
Proceeds from Sale of Warrants 168,750 --
Dividends Paid -- (100,625)
Net Cash - Financing Activities -
Continuing Operations 4,334,430 4,023,740
Financing Activities - Discontinued Operations:
Payment of Demand Note Payable -- (334,287)
Proceeds from Demand Note Payable -- --
Net Cash - Financing Activities -
Discontinued Operations -- (334,287)
Net Increase (Decrease) in Cash and Cash
Equivalents (354,499) (3,963)
Cash and Cash Equivalents - Beginning of
Periods $ 934,462 189,180
Cash and Cash Equivalents - End of
Periods $ 579,963 $ 185,217
Supplemental Disclosures of Cash Flow Information:
Cash paid during the periods for:
Interest $ 178,272 $ 334,931
Income Taxes $ -- $ --
Supplemental Schedule of Non-Cash Investing and Financing Activities:
See notes to consolidated financial statements for details of certain
non-cash investing and financing activities.
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
HOLLY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
[1] SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies of Holly Holdings, Inc. are set forth in the
Company's Form 10-KSB for the period ended March 31, 1996, as filed with the
Securities and Exchange Commission.
[2] BUSINESS OF REPORTING
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, such statements include
all adjustments [consisting of normal recurring items] which are considered
necessary for a fair presentation. Operating results for the three and nine
months ended December 31, 1996 and 1995 are not necessarily indicative of the
results that may be expected for the year ended March 31, 1997. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes for the period ended March 31, 1996, included
in the Holly Holdings, Inc. Form 10-KSB.
[3] INVENTORY
At December 31, 1996 inventory consisted of the following:
Work-in-Process $ 110,000
Raw Materials 800,694
Total 910,694
Less Reserve (338,000)
Total $ 572,694
Inventory is stated at the lower of cost [first-in, first-out method] or
market.
[4] EARNINGS PER SHARE
Earnings per share are based on 4,492,823 and 695,524 shares outstanding for
the three months ended December 31, 1996 and 1995, respectively, and 3,115,978
and 592,672 for the nine months ended December 31, 1996 and 1995,
respectively. Such amounts of shares represent the weighted average number of
shares outstanding for the periods. Shares in escrow and the effect of
outstanding warrants were not included in the calculations, as their effect
would be anti-dilutive. Effective December 26, 1996, the shareholders of the
Company approved an amendment to reflect a one-for-ten reverse split of the
Company's Common Stock.
[5] EQUITY TRANSACTIONS
During the quarter, 167,500 shares of Series E Preferred Stock were converted
pursuant to the terms thereof into 7,960,097 shares of Company common stock.
In October, November and December 1996, the Company issued 82,500 shares of
Series E Preferred Stock resulting in gross proceeds of $825,000. In October
1996, the Company issued 450,000 shares of its Common Stock to Sparta Capital
Ltd. for the exercise of 450,000 warrants.
F-6
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
HOLLY HOLDINGS, INC.
TO: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:9-2(4) and Section 14A:9-4(3)
of the New Jersey Business Corporation Act, the undersigned corporation
executes the following Certificate of Amendment to its Certificate of
Incorporation:
I
The name of the Corporation is: Holly Holdings, Inc. ("the Corporation")
II
The following amendments to the Certificate of Incorporation were approved by
the directors of the Corporation and thereafter duly adopted by the holders of
the Series D Preferred Stock of the Corporation, pursuant to votes cast by
stockholders representing an aggregate of __________ shares of Series D
Preferred Stock, at a Special Meeting of the Corporation's Series D Preferred
Stockholders on the 30th day of April, 1997.
2.1 (a) RESOLVED, that Article FOURTH of the Certificate of Incorporation
be amended by adding the following to the end thereof:
"Each two shares of Series D Preferred Stock issued and outstanding as of May
___, 1997 shall be changed and re-classified into one fully paid and
non-assessable share of Common Stock. To reflect this change and
re-classification, each certificate representing two shares of Series D
Preferred Stock shall represent one share of New Common Stock. Any reference
to, or provision for, Series D Preferred Stock is hereby deleted, and the
Series D Preferred Stock is deemed eliminated."
(b) The number of shares of Series D Preferred Stock entitled to vote
at the time of the adoption of this amendment was 389,975.
15
<PAGE>
(c) The number of shares of Series D Preferred Stock voting for and
against such amendment is as follows:
Number of Shares Voting Number of Shares Voting
For Amendment Against Amendment
(d) This Amendment is to be effective on the date hereof.
IN WITNESS WHEREOF, Holly Holdings, Inc. has caused this certificate to
be signed by it's Chief Executive Officer and attested by its Secretary this
______ day of May 1997.
Holly Holdings, Inc.
By:___________________________
Attest: William H. Patrowicz,
President
By: __________________________________
Larry S. Berman, Chief Executive Officer
and Secretary
16
<PAGE>
