<PAGE>
PROSPECTUS
COUNTRY STAR RESTAURANTS, INC.
2,022,103 shares of Common Stock,
$.001 par value per share
--------------------
This Prospectus relates to (i) 1,374,958 shares of common stock, $.001
par value (the "Common Stock"), of Country Star Restaurants, Inc., a Delaware
corporation (the "Company"), held by, and which may be offered from time to time
by, a number of persons and entities (collectively, the "Selling Stockholders"),
and (ii) 647,145 shares of Common Stock issuable upon the exercise of 647,145
common stock purchase warrants (the "Warrants") issued to, and which may be
exercised and offered from time to time by certain of the Selling Stockholders.
The shares of Common Stock registered hereunder and issuable upon the exercise
of the Warrants are sometimes referred to as the "Securities." Except with
respect to one of the Selling Stockholders who is bearing its pro rata cost of
the registration of their Securities, all costs in connection with the
registration of the Securities are being borne by the Company. See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the Securities pursuant to this Prospectus, although the Company will receive
net proceeds from the exercise of Warrants equal to the exercise prices thereof
which range from $2.00 to $3.00 per share.
The Common Stock is quoted on the Nasdaq National Market under the
symbol "CAFE." The last reported bid and asked prices of the Common Stock on
Nasdaq on June 13, 1996 were $4 1/8 and 4 3/16, per share, respectively.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE PURCHASED
ONLY BY THOSE PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. THE
COMPANY HAS INCURRED SUBSTANTIAL OPERATING LOSSES. SEE "RISK FACTORS" BEGINNING
ON PAGE 3.
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.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL SECURITIES IN ANY
STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
The Selling Stockholders directly or through agents, dealers or
underwriters to be designated from time to time may sell the Securities on terms
to be determined at the time of sale. To the extent required, the number of
Securities to be sold, the
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respective purchase price and public offering price, the name of any agent,
dealer or underwriter and any applicable commissions or discounts with respect
to a particular offer will be set forth in and accompanied by a Prospectus
Supplement. See "Plan of Distribution."
The Selling Stockholders and any agents, dealers or underwriters that
participate with the Selling Stockholders in the distribution of their shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and any commissions received by them
and any profits on the resale of the Selling Stockholders' shares, may be deemed
to be underwriting commissions or discounts under the Securities Act. Under
applicable rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), any person engaged in a distribution
of securities may not simultaneously bid for or purchase securities of the same
class for a period of two (2) business days prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Stockholders will be subject to the applicable provisions of the Exchange Act
and the rules and regulations thereunder, including, without limitation, Rules
10b-2, 10b-5, 10b-6 and 10b-7, in connection with transactions in the Securities
during the effectiveness of the Registration Statement of which this Prospectus
forms a part. All of the foregoing may affect the marketability of the
Securities.
The date of this Prospectus is June 14, 1996.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates herein by reference the following documents
heretofore filed with the Commission: the Annual Report of the Company on Form
10-KSB for the fiscal year ended December 31, 1995; the Current Report of the
Company on Form 8-K dated January 5, 1996; the Current Report of the Company on
Form 8-K dated March 18, 1996; and the Quarterly Report of the Company on Form
10-QSB for the period ended March 31, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
the termination of the offering hereby shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents. Any statement contained in a document incorporated herein by
reference shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein (or in any other
subsequently filed document which also is incorporated herein by reference)
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed to constitute a part hereof except as so modified or
superseded.
The Company will provide, without charge to each person to whom a
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated herein by reference, other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into the information that is incorporated into the Prospectus. Such
written requests should be directed to the Secretary of the Company at 11150
Santa Monica Boulevard, Los Angeles, CA 90025, (310) 268-2200.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
descriptions and financial information and statements appearing elsewhere in
this Prospectus and the documents incorporated herein by reference.
The Company
- -----------
The Company, Country Star Restaurants, Inc., develops, constructs, owns
and operates country music theme restaurants combining high quality, moderately
priced food with a casual, family oriented environment.
The Company's principal offices are located at 11150 Santa Monica
Boulevard, Suite 650, Los Angeles, California 90025, telephone (310) 268-2200.
The Offering
- ------------
Up to 2,022,103 shares of Common Stock are being offered pursuant to
this Prospectus which may be offered from time to time by the Selling
Stockholders for their own account.
Plan of Distribution
- --------------------
The Selling Stockholders, directly or through agents or underwriters,
may offer and sell from time to time all or any part of the Securities held by
them in amounts and on terms to be determined or at quoted prices then
prevailing on the Nasdaq National Market. See "Plan of Distribution."
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RISK FACTORS
Investment in the Company's securities involves a high degree of risk.
Investors should carefully consider the following factors, among others,
relating to the Company.
Need for Additional Financing. In order to effect the Company's
expansion strategy, the Company's cash requirements are significant. The Company
will require additional financing to implement its expansion strategy beyond
Country Star Las Vegas and Country Star Atlanta. Such sources of financing
include but are not limited to bank financing, third party equity investors,
capital leases, private limited partnerships, joint venture financing and
sale-leaseback arrangements.
The Company has entered into a definitive agreement with NevStar
Restaurants, LLC ("NevStar") that provides, among other things, for (i) $4.5
million of equity financing for Country Star Las Vegas, and (ii) the right to
provide up to an additional $12.5 million of equity financing for future Country
Star Restaurants (the "Development Financing Agreement"). In the event that
NevStar does not provide any additional financing to the Company other than with
respect to Country Star Las Vegas, and in the event that the Company were not
successful in securing any other sources of financing on terms and conditions
acceptable to the Company, or at all, the Company's expansion strategy would be
materially adversely affected.
Limited Operating History; Accumulated Deficit; Absence of Profits. The
Company, which was formed in May 1993, opened its first Country Star Restaurant
in August 1994. For the quarter ended March 31, 1996, the Company had a net loss
$1,217,947. The Company has continued to incur operating losses. The Company's
ability to generate operating and net income in the future will depend on the
success of Country Star Hollywood, Country Star Las Vegas and Country Star
Atlanta, and the successful implementation of its expansion strategy. There can
be no assurance that the Company will be profitable in the future.
Site Locations. The choice of site location for each Country Star
Restaurant is extremely important to the potential success of the particular
establishment. The Company will be competing with a wide range of establishments
in attempting to identify and secure desirable locations. Although the Company
believes that it will be able to locate additional suitable sites, there can be
no assurance that such sites will be available or viable or on economic terms
acceptable to the Company.
Development and Construction Delays. In connection with the development
and construction of the Country Star Restaurants, a number of events over which
the Company will have no control could occur which might materially adversely
affect the costs and completion time of such projects. Such events include
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governmental regulatory approvals, shortages of or the inability to obtain labor
and/or materials, inability of the general contractor or subcontractors to
perform under their contracts, strikes, adverse weather conditions and acts of
God, availability and cost of needed debt or lease financing, and changes in
Federal, state or local laws or regulations. In addition, the Company will also
be dependent on unaffiliated third parties to complete the construction of its
Country Star Restaurants. Accordingly, there can be no assurance that the
Company will be able to complete any Country Star Restaurant in a timely manner
or within its proposed budget.
Need for Additional Personnel. The Company's ability to successfully
open and operate additional Country Star Restaurants will depend upon the
Company's hiring and retaining additional personnel who are experienced in the
operation of casual dining restaurants, of which there can be no assurance. The
Company's failure to hire additional experienced personnel will have a material
adverse effect on the ability of the Company to open and successfully operate
Country Star Restaurants and to expand its operations thereafter.
Dependence on Key Personnel. The Company is dependent upon the services
of Robert Schuster and Peter Feinstein, the Company's Chief Executive Officer
and President, respectively. In December, 1993, each of Messrs. Schuster and
Feinstein entered into a three-year employment agreement with the Company. The
loss or unavailability of either Mr. Schuster or Mr. Feinstein could have a
material adverse effect on the operations of the Company. The Company is the
sole beneficiary of a "key man" life insurance policy on the life of Mr. Peter
Feinstein in the amount of $1,000,000.
Significant Industry Competition; Special Restaurant Industry
Considerations. The restaurant industry is intensely competitive with respect to
price, service, location and food quality. There are many competitors of the
Company, such as Planet Hollywood(R) and Hard Rock Cafe(R), that are better
established, have substantially greater financial, marketing and other
resources, have been in existence for a substantially longer period of time and
have greater name brand recognition. Further, the restaurant industry is
significantly affected by many external factors, including changes in the
national economy or in regional or local economies, changes in the demographics
of areas in which restaurants are situated, changes in consumer preferences and
demands (including increased awareness of nutrition), and increases in the
number and density of restaurants in a particular locale. Factors such as
inflation and food costs may also affect the restaurant industry. There can be
no assurance that the Company will be able to successfully compete in the
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restaurant industry. Further, casinos in Las Vegas, in an attempt to attract
patrons, will often subsidize restaurants located on their premises. Country
Star Las Vegas will also have to compete with those restaurants which, because
they are subsidized by the casinos in which they are located, are able to offer
reduced prices. Nevertheless, the Company does not intend to adopt a special
pricing strategy for Country Star Las Vegas, as the Company does not believe
that the failure to do so will have a material adverse effect on the Company,
however, there can be no assurance that the failure to adopt a special pricing
strategy for Country Star Las Vegas will not have a material adverse effect on
the Company.
Intellectual Property Rights. The Company has made such appropriate
filings and registrations that it has deemed appropriate and sufficient in its
business judgment to protect the Company's name in all appropriate categories,
and taken such other actions necessary to obtain and protect all trademarks,
copyrights, tradenames, tradedress and all other intellectual property rights,
relating to its Country Star Restaurants, although there can be no assurance
that the Company will be able to effectively protect its rights. To date, the
Company has been issued a federal registration by the United States Patent and
Trademark Office for the "Country Star" trademark for clothing and restaurant
services. Third parties may attempt to exercise alleged rights in any of the
trademarks, copyrights or other intellectual property rights or appropriate any
trademarks, copyrights, or other intellectual property rights established by the
Company, and the Company's failure or inability to establish appropriate
copyrights and trademarks, or to adequately protect any of its intellectual
property rights, may have a material adverse effect on the Company.
Potential Anti-Takeover Effect of Development Financing Agreement. The
Development Financing Agreement provides that in the event of a takeover of the
Company, NevStar shall have the right, at its option, to cause a potential
acquiror to purchase, at a pre-determined formula, NevStar's equity interest in
some or all of the Country Star Restaurants that it has financed. Since under
the Development Financing Agreement up to five (5) Country Star Restaurants may
receive financing, the added cost to a potential acquiror to acquire such
interests may be significant, and thus may be a deterrent to such potential
acquiror deciding to purchase the Company.
No Dividends with Respect to Common Stock. The Company has not paid any
dividends since inception and does not intend to pay dividends in the
foreseeable future with respect to its Common Stock. The Company may, at its
election, pay a 6% cumulative, quarterly dividend with respect to the Preferred
Stock, which may be in cash or Common Stock at the Company's sole discretion.
For the quarters ended December 31, 1995 and March 31, 1996, the Company paid
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the Preferred Stock dividend in shares of Common Stock. It is presently
anticipated that the Company will pay future Preferred Stock dividends, if any,
in shares of Common Stock and any earnings which the Company may realize in the
foreseeable future will be retained to finance the growth of the Company. See
"Market Price for the Common Stock and Dividends."
Adverse Effect of Possible Redemption of Preferred Stock. As of May 30,
1996, there were 512,528 shares of the Company's 6% cumulative convertible
preferred stock (the "Preferred Stock") issued and outstanding. Commencing on
May 8, 1996, and extending through May 9, 1997, the Preferred Stock may be
redeemed by the Company in whole or in part, provided certain market conditions
are met or alternatively, may be redeemed by the Company in whole or in part at
any time at specified premiums in excess of the initial public offering price of
the Preferred Stock. The Company may choose to redeem the Preferred Stock rather
than incur the cost of keeping a registration statement current with the
Securities and Exchange Commission (the "Commission") for the shares of Common
Stock underlying the Preferred Stock. Redemption or automatic conversion of the
Preferred Stock could force the holders to convert the Preferred Stock at a time
when it may be disadvantageous for the holders to do so, to sell the Preferred
Stock at the then current market price when they might otherwise wish to hold
the Preferred Stock for possible additional appreciation and receipt of
dividends, or to accept the redemption price, which is likely to be
substantially less than the market value of the Preferred Stock at the time of
redemption.
Anti-Takeover Law; Issuance of Other Stock. The Company is subject to
the provisions of Section 203 of the General Corporation Law of Delaware, an
anti-takeover statute enacted in 1988. As a result of Section 203, potential
acquirors of the Company may be discouraged from attempting to effect
acquisition transactions with the Company, thereby possibly depriving holders of
the Company's securities of certain opportunities to sell or otherwise dispose
of such securities at above-market prices pursuant to such transactions.
In addition, the board of directors of the Company (the "Board of
Directors") may issue one or more series of preferred stock or additional Common
Stock without any action on the part of the stockholders of the Company, the
existence and/or terms of which may adversely affect the rights of holders of
the Common Stock or the Preferred Stock. In addition, the issuance of any such
additional preferred stock or Common Stock may be used as an "anti-takeover"
device without further action on the part of the stockholders. Issuance of
additional preferred stock or Common Stock, which may be accomplished through a
public offering or a private placement to parties favorable to current
management, may dilute the voting power of holders of Common Stock or the
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preferred stock (such as by issuing preferred stock with super voting rights)
and may render more difficult the removal of current management, even if such
removal may be in the stockholders' best interests.
Seasonality. Country Star Hollywood in Universal City is in a location
that experiences significantly higher traffic during the summer months due to
Universal City's popularity as a tourist destination. Consequently, the
operating results of Country Star Hollywood are subject to seasonality. Although
there can be no assurances, management of the Company believes that seasonality
will not have a material impact on the Company's overall operations once it has
established Country Star Las Vegas and Country Star Atlanta, neither of which
are expected to be subject to material seasonal fluctuations.
Government Regulation. The Company is subject to various federal, state
and local laws affecting its business. Each of the Company's restaurants will be
subject to licensing regulation by numerous governmental authorities, which may
include alcohol beverage control, building, health and safety, and fire agencies
in the state or municipality in which the restaurant is located. Difficulties in
obtaining or failures to obtain the necessary licenses or approvals could delay
or prevent the development of a new restaurant in an area.
Alcoholic beverage control regulations in each state require that the
Company's restaurants apply to the specific state authority and, in certain
locations, county and municipal authorities for a license or permit to sell
alcoholic beverages on the premises and to provide service for extended hours
and on Sundays. Typically, an alcoholic beverage license must be renewed
annually and may be revoked or suspended for cause at any time. Alcohol 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 failure of a restaurant
to obtain or retain a liquor or food service license would adversely affect that
particular restaurant's operations.
Restaurants in most states are subject to "dram shop" laws and
legislation, which imposes liability on licensed alcoholic beverage servers for
injuries or damages caused by their negligent service of alcoholic beverages to
a visibly intoxicated person or to a minor, if such service is the proximate
cause of the injury or damage and such injury or damage is reasonably
foreseeable. The Company maintains liquor liability insurance as part of its
existing comprehensive general liability insurance, which it believes to be
adequate to protect against such liability, although there can be no assurance
that it will not be subject to a judgment in excess of such insurance coverage
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or that it will be able to continue to maintain such insurance coverage at
reasonable costs or at all. The imposition of a judgment substantially in excess
of the Company's insurance coverage would have a material adverse effect on the
Company. In the event that such insurance coverage were to become unavailable in
the future, it could materially and adversely affect the Company.
Upon the opening of Country Star Las Vegas, the Company presently
intends to lease space for up to 5 slot machines to an independent third party
licensed slot route operator who will install and operate the slot machines in
exchange for a monthly rental fee to the Company. The Company does not presently
intend to install and operate any slot machines for its own account in Country
Star Las Vegas. In the event the Company were to decide in the future to install
and operate any slot machines in Country Star Las Vegas for its own account, it
would first be required to obtain the necessary gaming approvals from the
appropriate regulatory authorities in the State of Nevada. The ownership and
operation of casino gaming facilities and slot machine routes in Nevada and the
manufacture and distribution of gaming devices in Nevada are subject to the
Nevada Act and to licensing and regulatory control by the Nevada State Gaming
Control Board (the "Nevada Board"), the Nevada Gaming Commission (the "Nevada
Commission") and various local, city and county regulatory agencies
(collectively, the "Nevada Gaming Authorities"). Obtaining the necessary
approvals, of which there can be no assurance, is a lengthy and costly process.
To date, the Company has not sought any such approvals.
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THE COMPANY
General
- -------
Country Star Restaurants, Inc. (the "Company"), which was formed in May
of 1993, develops, constructs, owns and operates country music theme restaurants
combining high quality, moderately priced food with a casual, family-oriented
environment. World renowned country music recording artists Reba McEntire, Vince
Gill and Wynonna Judd and country music television personalities Lorianne Crook
and Charlie Chase serve as celebrity representatives and spokespersons for the
Company and endorse the Country Star Restaurants.
The first Country Star(R) Restaurant, upon which all other Country Star
Restaurants will be modeled, opened in August 1994 in Hollywood, California
adjacent to Universal Studios Hollywood and the Universal Citywalk development,
a major tourist attraction. Country Star Hollywood features an exciting,
entertaining dining experience, including an extensive display of country music
memorabilia and artifacts, approximately 100 video monitors, 10 audio listening
posts, and a number of interactive audio-video kiosks. The menu features
moderately priced American and country-style food such as ribs, chili, chicken,
burgers, salad, pizza, fish and desserts, which was developed to be consistently
reproducible domestically and internationally. Country Star Hollywood also sells
a variety of merchandise with the Country Star logo, including casual clothing,
food products and other related items.
In recent years theme restaurants have gained increasing popularity, as
a number of such restaurants featuring a variety of different themes have
opened. The two most popular and well known restaurants of this genre are Planet
Hollywood(R) and Hard Rock Cafe(R), both of which combine an entertainment
component with a casual dining atmosphere. Aside from enhancing the dining
experience, the entertainment component also provides an additional revenue
stream, predominantly from merchandise sales. Patrons of theme restaurants have
evidenced a willingness to purchase souvenir T-shirts, hats, mugs, and other
items bearing the logo and reflecting the lifestyle of the particular theme
restaurant. These retail sales are typically at higher profit margins than food
and beverage sales, inclusive of labor costs.
The Company believes that its country music theme provides a distinctly
American experience which, combined with its casual, high-quality dining in a
state-of-the-art multimedia environment, is a format with wide demographic
appeal. The Company believes that the country music theme is an under-exploited
segment of quality dining in the restaurant industry and will fill a niche in
the casual dining segment of the restaurant industry, therefore representing an
attractive opportunity for the Company.
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The Company's strategy is to develop and operate a limited number of
additional flagship Country Star restaurants in key domestic and international
cities where the Country Star concept will have broad appeal to both local
residents and tourists. The Company has expanded its infrastructure to support
the development and management of multiple Country Star locations. The Company
will open two additional flagship Country Star Restaurants during the third
quarter of 1996. The first one will be Country Star Las Vegas which will be
located on the "strip" in Las Vegas, Nevada near the intersection of Las Vegas
Boulevard South and Harman Avenue. The second Country Star Restaurant will be
Country Star Atlanta, which will be located in the Buckhead section of Atlanta,
Georgia. Both Country Star Las Vegas and Country Star Atlanta are currently
under construction. The Company is also currently exploring approximately six
(6) other domestic sites for future Country Star Restaurants in 1997 and beyond.
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SELLING STOCKHOLDERS
The following table sets forth, as of the date hereof, the number of
the Company's shares of Common stock beneficially owned by each Selling
Stockholder, the number of shares of Common Stock that are to be offered and
sold by each Selling Stockholder pursuant to this Prospectus, and the amount and
percentage of shares to be beneficially owned by each Selling Stockholder after
the offering assuming all shares being offered pursuant to this Prospectus are
sold.
<TABLE>
<CAPTION>
Number of Number of
Shares Warrants
Number of Number of Beneficially Beneficially
Shares Owned Warrants Number of Owned Owned
Prior to Owned Prior Shares to After this After this
Name and Address Offering to Offering be Offered Offering(2) Offering(3)
- ---------------- -------------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Heller Investments 6,418 -0- 6,418 -0- -0-
c/o Gerald Heller
1845 Forest Boulevard
Tulsa, OK 74114
Linn T. Hodge 778 -0- 778 -0- -0-
11368 Isletta Street
Los Angeles, CA 90049
Rex Licklider 100,000 65,000 165,000(1) -0- -0-
990 Moraga Drive
Los Angeles, CA 90049
Licklider Living 266,667 83,334 250,001(1) -0- 100,000
Trust Dated 5/2/86
990 Moraga Drive
Los Angeles, CA 90049
Attn: Rex Licklider
Paneco S.A. 342,857 -0- 342,857 -0- -0-
Calle 11-1
Edificio Paneco
Urbanizacion Industrial
La Urbina
Venezuela, South America
Dan Rubin 331,905 125,000 456,905(1) -0- -0-
P.O. Box 2032
Princeton, NJ 08543
The Rubin Investment
Group -0- 2,143 2,143(1) -0- -0-
P.O. Box 2032
Princeton, NJ 08543
Roy B. Rubin, M.D.,
P.C., M.P.P.P. 160,000 -0- 160,000 -0- -0-
P.O. Box 2032
Princeton, NJ 08543
Bruce Sokoloff 100,000 50,000 150,000(1) -0- -0-
55 East 52nd Street
29th Floor
New York, NY 10055
Mark Spino and
Debra Spino JTTEN 20,189 -0- 20,189 -0- -0-
6912 Wish Avenue
Van Nuys, CA 91406
Libby Weatherby and
William Weatherby 4,999 -0- 4,999 -0- -0-
12261 Sunset Parkway
Los Angeles, CA 90064
</TABLE>
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<TABLE>
<CAPTION>
Number of Number of
Shares Warrants
Number of Number of Beneficially Beneficially
Shares Owned Warrants Number of Owned Owned
Prior to Owned Prior Shares to After this After this
Name and Address Offering to Offering be Offered Offering(2) Offering(3)
- ---------------- -------------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
David M. Wiener -0- 255,000 255,000(1) -0- -0-
40 East 94th Street
New York, NY 10026
WisdomTree Associates,
L.P. 66,667 33,334 100,001(1) -0- -0-
1633 Broadway
New York, NY 10019
WisdomTree Offshore,
Ltd. 66,667 33,334 100,001(1) -0- -0-
1633 Broadway
New York, NY 10019
Douglas B. Zubrin 7,811 -0- 7,811 -0- -0-
320 Arden Avenue, #100
Glendale, CA 91203
--------- ------- --------- -------- -------
TOTAL 1,474,958 647,145 2,022,103 -0- 100,000
========= ======= ========= ======== =======
</TABLE>
- ---------------
(1) Includes all shares of Common Stock issuable upon exercise of warrants
beneficially owned by the Selling Stockholder.
(2) Assumes all of the Common Stock being offered pursuant to this Prospectus
are sold by the Selling Stockholder.
(3) Assumes all of the warrants beneficially owned by the Selling Stockholder
are exercised and the shares of Common Stock issuable upon such exercise are
offered for sale and sold by the Selling Stockholder.
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PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the shares
of Common Stock by the Selling Stockholders pursuant to this Prospectus. The
securities offered by this Prospectus may be sold from time to time by all of
the Selling Stockholders. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the Selling Stockholders.
The Selling Stockholder through whom such securities are sold may be
deemed "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered, and any
profits realized or commissions received may be deemed underwriting
compensation. The Company has agreed to indemnify the Selling Stockholders
against certain liabilities, including liabilities under the Securities Act.
At the time a particular offer of the shares is made by or on the
behalf of a Selling Stockholder, to the extent required, a Prospectus Supplement
will be distributed which will set forth the number of shares being offered and
the terms of the offering, including the name or names of any underwriters,
dealers or agents, the purchase price paid by any underwriter for shares
purchased from the Selling Stockholders, any discounts, commissions and other
items constituting compensation from the selling Stockholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers, and the
proposed selling price to the public.
The shares of Common Stock may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at varying prices
determined at the time of sale, or at negotiated prices. Such prices will be
determined by the Selling Stockholders or by agreement between the Selling
Stockholders and any underwriters.
In order to comply with the applicable securities laws of certain
states, if any, the shares of Common Stock will be offered or sold through
registered or licensed brokers or dealers in those states. In addition, in
certain states the shares of Common Stock may not be offered or sold unless they
have been registered or qualified for sale in such states or an exemption from
such registration or qualification requirement is available and is complied
with.
Under applicable rules and regulations promulgated under the Exchange
Act, any person engaged in a distribution of securities may not simultaneously
bid for or purchase securities of the same class for a period of two business
days prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Stockholders will be subject to applicable
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provisions of the Exchange Act and the rules and regulations thereunder,
including without limitation Rules 10b-2, 10b-5, 10b-6 and 10b-7, in connection
with transactions in the shares during the effectiveness of the Registration
Statement of which this Prospectus is a part. All of the foregoing may affect
the marketability of the shares of Common Stock.
The Company will pay all of the expenses incident to the registration
of the shares of Common stock other than any fees or expenses of any counsel
retained by the Selling Stockholders and any out of pocket expenses incurred by
the Selling Stockholders or any person retained by the Selling Stockholders in
connection with the registration of the shares, fees and expenses of compliance
with state securities or blue sky laws and commissions and discounts of
underwriters, dealers or agents, if any. The expenses payable by the Company are
estimated to be $20,000.
16
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital of the Company consists of (i) 25,000,000 shares
of common stock, par value $.001 per share (the "Common Stock"), 11,995,649
shares of which were outstanding as of May 30, 1996, and (ii) 2,000,000 shares
of "blank check" preferred stock, par value $.001 per share ("Preferred Stock"),
512,528 of which is currently issued and outstanding as of May 30, 1996.
Common Stock
- ------------
Each share of Common Stock is entitled to one vote, either in person or
by proxy, on all matters that may be voted upon by the owners thereof at a
meeting of the stockholders, including the election of directors. The holders of
Common Stock (i) have equal, ratable rights to dividends from funds legally
available therefor, when, as and if declared by the Board of Directors of the
Company; (ii) are entitled to share ratably in all of the assets of the Company
available for distribution to holders of Common Stock upon liquidation,
dissolution or winding up of the affairs of the Company; (iii) do not have
preemptive or redemption provisions applicable thereto; and (iv) are entitled to
one noncumulative vote per share on all matters on which stockholders may vote
at all meetings of stockholders.
All shares of Common Stock issued and outstanding are, and those
offered hereby, when issued, will be fully paid and non-assessable, with no
personal liability attaching to the ownership thereof.
6% Cumulative Convertible Series A Preferred Stock
- --------------------------------------------------
The following is a summary of the terms of the Preferred Stock. This
summary is not intended to be complete and is subject to, and qualified in its
entirety by, a Certificate of Designation which was filed with the Secretary of
State of the State of Delaware and sets forth the designations, rights, powers,
preferences, qualifications and limitations of the Preferred Stock.
Dividends. The holders of the Preferred Stock are entitled to receive
if, when and as declared by the Board of Directors out of funds legally
available therefor, cumulative dividends, payable in cash or Common Stock at the
Company's election, at the rate of 6% per annum of the Liquidation Value of the
Preferred Stock. The dividend is payable quarterly on December 31, March 31,
June 30 and September 30 of each year, commencing December 31, 1995. Dividends
shall be paid to the holders of record as of a date, not more than thirty (30)
days prior to the dividend payment date, as may be fixed by the Board of
Directors (the "Dividend Declaration Date"). Dividends accrue from the first
17
<PAGE>
day of the quarterly period in which such dividend may be payable, except with
respect to the first quarterly dividend which shall accrue from the date of
issuance of the Preferred Stock. In the event that the Company elects to pay
dividends in Common Stock, each holder of Preferred Stock shall receive shares
of Common Stock equal to the quotient of (i) 6% of the Liquidation Value of the
Preferred Stock divided by (ii) the average ten (10) day moving average stock
price of the Common Stock during the thirty (30) trading days prior to the
Dividend Declaration Date (the "Stock Dividend Price"); provided, however, that
in no event shall the Stock Dividend Price ever exceed $7.00 per share or be
less than $2.00 per share.
No dividends may be paid on any shares of capital stock ranking junior
to the Preferred Stock unless and until all declared but unpaid dividends on the
Preferred Stock have been declared and paid in full.
Right to Convert. Each outstanding share of Preferred Stock will be
convertible, at the option of the holder, at any time commencing on February 8,
1996 (the "Conversion Date"). Each share of Preferred Stock is convertible into
six (6) shares of Common Stock (a "Conversion Price" of $2.00 per share). The
Conversion Price will be adjusted to reflect stock dividends, stock splits,
combinations or reclassifications on or of the Common Stock. The Company will
notify holders of Preferred Stock of such adjustments. A holder of Preferred
Stock who wishes to convert same into Common Stock must surrender the
certificate therefor to the Company's transfer agent with the conversion notice
appropriately completed and signed. Such notice is not required if the
conversion is automatic. The transfer agent will, as soon as practicable
thereafter, issue a certificate for the appropriate number of shares of Common
Stock. Conversion will be deemed to have been made upon the surrender of the
certificate for the shares of Preferred Stock to be converted. If the conversion
would result in the issuance of a fractional share of Common Stock, the Company
will, in lieu of issuing a fractional share, round up to the nearest whole
share.
Automatic Conversion. Unless earlier converted, all the outstanding
shares of Preferred Stock will be automatically converted into Common Stock
without any action by the holders thereof upon the earlier of (i) May 10, 1997,
and (ii) five (5) business days following the filing by the Company with the
Commission of the first Form 10-QSB or Form 10-KSB (or any similar form), as the
case may be (the "SEC Report"), which reflects that, as of the last day of the
period to which such SEC Report relates, the Company has achieved calendar
quarter consolidated gross revenue from operations in excess of $7,000,000 (the
"Automatic Conversion Date").
Voting Rights. Each holder of shares of Preferred Stock will be
entitled to the number of votes equal to the number of shares of Common Stock
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<PAGE>
into which such holder's shares of Preferred Stock could be converted at the
time of the vote, will have voting rights equal to the voting rights of such
number of shares of Common Stock voting together with the Common Stock as a
single class on all matters submitted to the holders of Common Stock and shall
be entitled to notice of any stockholders' meeting. Any fractional voting rights
resulting from the above formula (after aggregating all shares of Common Stock
into which shares of Preferred Stock held by a single holder are converted) will
be disregarded.
Redemption. Subsequent to ninety (90) days after the Conversion Date
and prior to the Automatic Conversion Date, if the Common Stock shall have a
closing price that is at least 170% of the Conversion Price for twenty (20) out
of thirty (30) consecutive trading days ending within five (5) business days of
the date of the notice of redemption, the Preferred Stock may be redeemed at the
Company's option, in whole or in part for $12.00 per share, plus any declared
but unpaid dividends, if any, to the date fixed for redemption. In addition,
subsequent to ninety (90) days after the Conversion Date and prior to the
Automatic Conversion Date, the Preferred Stock may be redeemed, together with an
amount equal to any declared but unpaid dividends to the date fixed for
redemption, at the Company's option, in whole or in part, at the following per
share prices:
Period Redemption Price
- ------ ----------------
May 8, 1996 - July 9, 1996 $13.08
July 10, 1996 - January 9, 1997 $12.72
January 10, 1997 - May 9, 1997 $12.36
There is no sinking fund requirement for redemption of the Preferred Stock.
Notice of intention to redeem Preferred Stock will be given to holders
of the Preferred Stock by mailing notice thereof to holders of record by the
transfer agent. Such notice will be deemed to have been given on the date of
mailing as evidenced by an affidavit from the transfer agent. In the case of a
redemption in whole, notice will be given, not more than sixty (60) days nor
less than thirty (30) days prior to the redemption date. In the case of a
partial redemption, notice will be given twice, the first such notice to be
given not more than seventy-five (75) days nor less than sixty (60) days prior
to the redemption date and the second such notice to be given at least twenty
(20) days thereafter but not less than thirty (30) days prior to the redemption
date.
Liquidation Preference. The holders of shares of Preferred Stock will
be entitled to receive, in the event of any liquidation, dissolution or winding
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<PAGE>
up of the Company, whether voluntary or involuntary, out of or to the extent of
the net assets of the Company legally available for such distribution, before
any distributions are made with respect to any Common Stock or any stock ranking
junior to the Preferred Stock, $12.00 per share, plus any declared but unpaid
dividends (the "Liquidation Preference"). After payment of the full amount of
the Liquidation Preference, the holders of shares of Preferred Stock will not be
entitled to any further participation in any distribution of assets by the
Company.
Upon any such liquidation, dissolution or winding up, such preferential
amounts with respect to the Preferred Stock and any class or series ranking on a
parity with the Preferred Stock if not paid in full shall be distributed pro
rata in accordance with the aggregate preferential amounts of the Preferred
Stock and such other classes or series of stock, if any.
Restrictions and Limitations. Shares of Preferred Stock acquired by the
Company by reason of purchase, conversion, redemption or otherwise shall be
retired and shall become authorized but unissued shares of Preferred Stock,
which may be reissued as part of a new series of Preferred Stock created under
the Company's Certificate of Incorporation.
Other Preferred Stock
- ---------------------
As of the date hereof, there are no shares of preferred stock
outstanding other than the Preferred Stock. The Company's Certificate of
Incorporation authorizes the issuance of "blank check" preferred stock in one or
more classes or series with such designations, rights, preferences and
restrictions as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors may, without prior stockholder approval,
issue preferred stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the relative voting power or other rights of
the holders of Common Stock. Preferred stock could be used, under certain
circumstances, as a method of discouraging, delaying or preventing a change in
control of the Company. Although the Company has no present intention of issuing
any shares of preferred stock, there can be no assurance that it will not do so
in the future. If the Company issues preferred stock, such issuance may have a
dilutive effect upon both the preferred and common stockholders.
Transfer Agent
- --------------
The transfer agent and registrar for the Common Stock and Preferred
Stock is Continental Stock Transfer & Trust Company, located at 2 Broadway, New
York, New York 10004.
20
<PAGE>
MARKET FOR THE COMPANY'S COMMON EQUITY AND DIVIDENDS
Commencing on December 15, 1993, the date of the Company's initial
public offering, through April 21, 1995, the Company's Common Stock, par value
$.001 per share (the "Common Stock") and redeemable warrants (the "Redeemable
Warrants") were quoted on the NASDAQ SmallCap Market. On April 21, 1995, the
Redeemable Warrants were redeemed by the Company and delisted from the NASDAQ
SmallCap Market. Since November 10, 1995, the Common Stock, as well as the
Company's 6% Series A Cumulative Convertible Preferred Stock (the "Preferred
Stock"), have been quoted on the NASDAQ National Market. The high and low bid
quotations, on a quarterly basis, for the Redeemable Warrants for 1994 through
their delisting on April 21, 1995, is set forth below, as are the high and low
bid quotations, on a quarterly basis, for the Common Stock since 1994 and the
Preferred Stock since November 10, 1995, the date the Preferred Stock commenced
trading. All of the prices set forth below reflect inter-dealer prices, without
retail mark up, mark down or commission and may not reflect actual transactions:
<TABLE>
<CAPTION>
Common Stock Redeemable Warrants
---------------- -------------------
1994 Quoted Bid Price Quoted Bid Price
- ---- ---------------- -------------------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C>
First Quarter $ 8 1/4 $6 3/4 $ 2 1/2 $1 1/4
Second Quarter $10 3/4 $6 1/2 $ 4 1/4 $1 5/8
Third Quarter $17 7/8 $9 3/4 $10 3/4 $3 3/8
Fourth Quarter $10 3/8 $4 $ 4 $ 5/8
Preferred Stock
---------------
1995 Quoted Bid Price Quoted Bid Price Quoted Bid Price
- ---- ---------------- ---------------- ----------------
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter $ 4 3/4 $3 3/4 $2 3/8 $1 4/25 -- --
Second Quarter $ 5 1/2 $3 5/8 $1 14/25 $1 3/8 -- --
Third Quarter $ 4 1/4 $3 1/8 N/A N/A -- --
Fourth Quarter $ 3 7/16 $1 7/8 N/A N/A $13 $11
1996 Quoted Bid Price Quoted Bid Price Quoted Bid Price
- ---- ---------------- ---------------- ----------------
High Low High Low High Low
---- --- ---- --- ---- ---
First Quarter $3 12/25 $8/25 -- -- $22 4/25 $11 3/8
Second Quarter
(through June
13, 1996) $5 $3 -- -- $30 $18 1/8
</TABLE>
On June 13, 1996, the closing bid and asked prices of Common Stock as
reported on the Nasdaq National Market were $4 1/8 and $4 3/16, respectively.
21
<PAGE>
On June 13, 1996, the closing bid and asked prices of the Preferred
Stock on the Nasdaq National Market were $24 3/4 and $26, respectively.
On June 13, 1996, there were 206 holders of record of Common Stock and
32 holders of record of the Preferred Stock.
No cash dividends have been paid on the Common Stock by the Company and
management does not anticipate paying cash dividends in the foreseeable future.
The Preferred Stock pays quarterly dividends, at the Company's discretion,
payable each March 31, June 30, July 31 and December 31 at the rate of 6% per
annum. Such dividends are payable either in cash or shares of Common Stock at
the sole discretion of the Company. To date, the Company has paid each of the
first two Preferred Stock dividends (December 31, 1995 and March 31, 1996) in
shares of Common Stock.
22
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock will be passed upon for the
Company by Zukerman Gore & Brandeis, LLP, New York, New York.
EXPERTS
The financial statements of the Company for the year ended December 31,
1995 incorporated in this Prospectus by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1995 have been so incorporated in
reliance on the report of BDO Seidman, LLP, independent accountants, given upon
the authority of that firm as experts in auditing and accounting.
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 statements and other information with
the Securities and Exchange Commission (the "Commission"). Reports, proxy
statements and other information filed by the Company in accordance with the
Exchange Act can be inspected and copies made at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, IL 60661 and 7 World Trade Center, New York, NY 10048.
Copies of such material can be obtained at prescribed rates from the public
reference section of the Commission at 450 Fifth Street, N.W., Washington, DC
20549.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including all amendments thereto, the "Registration Statement"), with
respect to the Securities offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information about the Company and the Securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto, which may be examined without charge at the public reference facilities
maintained by the Commission at Room 1204, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, DC 20549, and copies of which may be obtained from the
Commission upon payment of the prescribed fees.
No person has been authorized by the Company to give any information or
to make any representation other than as contained in this Prospectus and, if
given or made, such information or representation must not be relied upon as
having been authorized by the Company. Neither the delivery of this Prospectus
23
<PAGE>
nor any distribution of the shares of the Common Stock issuable under the terms
of this Prospectus, under any circumstances, create any implication that there
has been no change in the affairs of the Company since the date hereof.
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
No dealer, salesman or other person has been authorized to give any information
or to make any representations not contained in this Prospectus and if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or any Underwriter. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any COUNTRY STAR RESTAURANTS, INC.
implication that there has been no change in the affairs of the Company since
the date hereof. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any 2,022,103 Shares of Common Stock,
jurisdiction to any person to make such offer or solicitation in such Offered by Selling Stockholders
jurisdiction.
--------------------
TABLE OF CONTENTS
Page
---- ---------------------
Incorporation of Certain
Documents by Reference...................................................... 3 PROSPECTUS
Prospectus Summary........................................................... 4
Risk Factors................................................................. 5 ---------------------
The Company.................................................................. 11
Selling Stockholders......................................................... 13
Plan of Distribution......................................................... 15 June 14, 1996
Description of
Capital Stock............................................................... 17
Market for the Company's
Common Equity
and Dividends.............................................................. 21
Legal Matters................................................................ 23
Experts...................................................................... 23
Available Information........................................................ 23
--------------------
</TABLE>
