As filed with the Securities and Exchange Commission on July 12, 1996.
Registration No. 333-___________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------------------
FORM S-3
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
-----------------------------------------------------------------
WOODROAST SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1563961
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
10250 VALLEY VIEW ROAD, SUITE 145
EDEN PRAIRIE, MINNESOTA 55344
TELEPHONE: (612) 944-5113
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive offices)
Copies of communications to:
ERIC O. MADSON, ESQ.
WINTHROP & WEINSTINE, P.A.
3000 DAIN BOSWORTH PLAZA
60 SOUTH SIXTH STREET
MINNEAPOLIS, MINNESOTA 55402
TELEPHONE: (612) 347-0700
--------------------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being offered on this Form are to be offered pursuant to
dividend or interest reinvestment plans, check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration
Securities to Be Registered Be Registered (1) Per Share (2) Offering Price (2) Fee
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.005 par value 1,182,400 $6.00 $7,094,400 $2,446.34
=========================================================================================================================
</TABLE>
(1) Issuable on exercise of 1,182,400 outstanding Redeemable Class A Warrants.
(2) Estimated solely for the purpose of determining the registration fee,
based on the price at which the Redeemable Warrants may be exercised,
pursuant to Rule 457(g).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 12, 1996
PROSPECTUS
1,182,400 SHARES
WOODROAST SYSTEMS, INC.
COMMON STOCK
The shares of Common Stock offered hereby (the "Shares") are being
offered by Woodroast Systems, Inc. (the "Company"). The Shares are issuable upon
the exercise of the Company's Redeemable Class A Warrants (the "Redeemable
Warrants"). Each Warrant entitles the holder (the "Warrantholder") thereof to
purchase one share of Common Stock at a price equal to $6.00 per Share, subject
to reduction by the Company or adjustment as a result of certain events. The
Redeemable Warrants are exercisable until June 6, 1997 (3 years following the
date of the Company's initial public offering), unless extended by the Company
or earlier called for redemption by the Company. The Redeemable Warrants are
redeemable by the Company at a redemption price of $.01 per Warrant following a
period of 20 consecutive trading days where the per share closing bid price of
the Common Stock exceeds $7.50 on not less than 30 days written notice.
Warrantholders may exercise their rights until the close of business on the date
fixed for redemption, unless extended by the Company. See "Description of
Securities."
The Company's Common Stock and Redeemable Warrants are currently traded
on the Nasdaq Small Cap Market under the symbol "WRSI" and "WRSIW",
respectively. On July 10, 1996, the last reported sale price thereon was $7.63
per share of Common Stock and $1.38 per Warrant.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
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
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY (1)
- -------------------------------------------------------------------------------
Per Share...................... $6.00 None $6.00
- -------------------------------------------------------------------------------
Total (2)...................... $7,094,400 None $7,094,400
===============================================================================
(1) Before deducting expenses payable by the Company estimated at $37,000.
(2) Assumes the exercise of all 1,182,400 outstanding Redeemable Warrants.
Each Warrant entitles the Warrantholder to purchase one Share of Common
Stock at a price equal to $6.00 per share, subject to reduction by the
Company or adjustment as a result of certain events.
The date of this Prospectus is July ___, 1996.
AVAILABLE INFORMATION
The Company is subject to the information requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy and information
statements and other information can be inspected and copied at the public
facilities maintained by the Commission at 450 Fifth Street N.W., Room 1024,
Washington, D.C., and at the Commission's regional offices located at 7 World
Trade Center, 14th Floor, New York, New York 10048, and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates from the Public Reference
Section of the Commission, 450 Fifth Street N.W., Washington, D.C.
The Company has filed with the Commission a registration statement on
Form S-3 (together with all amendments and exhibits thereto) under the
Securities Act of 1933 with respect to the shares offered hereby. The Prospectus
does not contain all information set forth in such registration statement. For
further information with respect to the Company and the shares offered hereby,
reference is made to such registration statement, including the exhibits and
financial schedules filed as part thereof. Such information may be inspected at
the Chicago regional office of the Commission at Northwestern Atrium Center, 500
West Madison, Suite 1400, Chicago, Illinois 60661 and at the public reference
facilities at 450 Fifth Street N.W., Washington, D.C. 20549. Copies thereof may
be obtained from the Commission at prescribed prices.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated by reference in this
Prospectus except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal year
ended December 25, 1995;
2. The Company's Quarterly Report on Form 10-QSB for the quarter
ended March 31, 1996;
3. The Company's Proxy Statement dated April 29, 1996 for the
1996 Annual Meeting of Shareholders; and
4. The description of the Company's Common Stock contained in the
Company's Form SB-2 Registration Statement dated March 25,
1994, Registration No. 33-75152C.
All documents filed by the Company with the Commission pursuant to
Section 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 of the shares offered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including a
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any or all documents that have been or may be
incorporated by reference herein (other than exhibits to such documents which
are not specifically incorporated by reference into such documents). Requests
for such copies should be directed to Sheldon F. Jacobs, Woodroast Systems,
Inc., 10250 Valley View Road, Suite 145, Eden Prairie, Minnesota 55344,
telephone number (612) 944-5113.
PROSPECTUS SUMMARY
The following information is qualified in its entirety by the more
detailed information and financial statements of Woodroast Systems, Inc.,
including the notes thereto, appearing elsewhere in this Prospectus or
incorporated herein by reference.
THE COMPANY
Woodroast Systems, Inc. (the "Company"), through its wholly-owned
subsidiary, Shelly's Woodroast-Two, Inc. ("Shelly's Two"), owns and operates a
Shelly's Woodroast restaurant in St. Louis Park, Minnesota, a suburb of
Minneapolis (the "St. Louis Park Restaurant"), and in Rockville, Maryland, a
suburb of Washington, D.C. (the "Rockville Restaurant," and together with the
St. Louis Park Restaurant, the "Restaurants"). The Shelly's Woodroast restaurant
concept is an integrated concept, involving a distinctive cooking style, menu
offerings, beverage selections and facility design. The inspiration of the
concept is the fresh, relaxed atmosphere of the north woods, from the great
fieldstone and timber lodges to the aroma of meat, fish and fowl roasting over a
hardwood fire. In addition to the Company's plans to expand its Shelly's
Woodroast restaurants, the Company has developed the "Shelly's Back Room"
concept. Shelly's Back Room is an upscale cigar parlor, full service bar and
restaurant featuring the Company's northwoods theme and catering to the growing
popularity of cigars.
The Company was incorporated in 1987 under the laws of the State of
Minnesota. Its principal executive offices are located at 10250 Valley View
Road, Suite 145, Eden Prairie, Minnesota 55344 and its telephone number is (612)
944-5113.
THE OFFERING
All references in this Prospectus to numbers of shares of the Company's
Common Stock give effect to the three-for-one split of outstanding shares of
Common Stock that was effected by a distribution on January 18, 1996 of two
shares for every one share held of record as of January 4, 1996.
Common Stock offered................................... 1,182,400 shares
Common Stock outstanding
before the offering.................................. 2,874,967 (1)(2)
Common Stock outstanding
after the offering................................... 4,057,367 (2)(3)
NASDAQ Symbols
Common Stock......................................... WRSI
Redeemable Warrants.................................. WRSIW
- --------------------------
(1) Excludes the 1,182,400 Shares issuable upon exercise of the Redeemable
Warrants.
(2) Does not include (i) 250,000 shares of Common Stock reserved for issuance
under the Company's 1994 Stock Plan or (ii) 292,286 shares of Common Stock
issuable upon exercise of outstanding stock purchase warrants, not
including the Redeemable Warrants.
(3) Assumes exercise of all of the Redeemable Warrants.
USE OF PROCEEDS
The Company plans to use the proceeds received upon exercise of the
Redeemable Warrants for working capital and general corporate purposes. See "USE
OF PROCEEDS."
RISK FACTORS
An investment in the securities offered hereby is speculative and
involves a high degree of risk. See "RISK FACTORS."
RISK FACTORS
Prospective investors should be aware of the following risk factors and
should review carefully the information contained elsewhere in this Prospectus
or incorporated herein by reference.
LACK OF PROFITABILITY; DEPENDENCE ON TWO RESTAURANTS. The Company has
been operating Shelly's Woodroast restaurants since 1987. The St. Louis Park
restaurant opened in autumn of 1989 and the Rockville Restaurant opened in
November 1995. The Company had net losses of ($415,916), ($1,167,433) and
($259,802) during the fiscal years ended December 25, 1994 and December 31, 1995
and the thirteen weeks ended March 31, 1996, respectively, and a working capital
deficit of ($261,611) at March 31, 1996. The Company expects losses to continue
for the near future.
Future revenues and profits will depend upon various factors, including
market acceptance of the Shelly's Woodroast restaurant and Shelly's Back Room
concepts and general economic conditions. There can be no assurance of the
Company's ability to attain profitability. The Company's present sole sources of
revenue are the two Restaurants, one of which has recently opened. The Company
also faces all of the risks, expenses and difficulties frequently encountered in
connection with the operation and development of a new and expanding business.
Furthermore, to the extent that the Company's expansion strategy is successful,
the Company must manage the transition to multiple site operations, higher
volume operations, the control of overhead expenses and the addition of
necessary personnel.
DEVELOPMENT OF COMPANY-OWNED RESTAURANTS; NEED FOR FINANCING
The Company's decisions to opening additional Shelly's Woodroast
restaurants and Shelly's Back Rooms will depend upon several factors, including
the success of the Rockville Restaurant, the costs of developing and opening new
facilities and the Company's ability to obtain additional financing if
necessary. The Company estimates that the costs of developing additional
facilities will range from $350,000 to $3,500,000 depending upon construction
costs and the level of landlord contributions. There can be no assurance,
however, that additional restaurants will be developed at such costs or that
additional restaurants, if developed, would be profitable.
The cost of developing, constructing and opening the Rockville
Restaurant was approximately $3,200,000, not including approximately $300,000
for pre-opening costs. Management believes that each new location should be of a
form and size suitable to the particular location. Accordingly, the Company has
not developed a standardized restaurant layout, nor obtained actual current cost
estimates for development of new restaurants.
The success of such development will also be dependent upon customer
acceptance of the Shelly's Woodroast restaurant and Shelly's Back Room concepts
in new markets. Until November 1995, the Company's operating experience has been
limited to the Minneapolis-St. Paul metropolitan area. Although the Company
believes that the Shelly's Woodroast restaurant concept has been accepted by the
public in the Minneapolis-St. Paul metropolitan market, and preliminary
indications in Rockville, Maryland suggest acceptance there, no assurance can be
given that such acceptance will be received in new markets. Successful expansion
of the Company's operations will be largely dependent upon a variety of factors,
some of which are currently unknown or beyond the Company's control, including:
customer acceptance of the Shelly's Woodroast restaurant and Shelly's Back Room
concepts; the ability of the Company's management to identify suitable sites and
to negotiate leases or purchases of such sites; timely and economic development
and construction of restaurants; the hiring of skilled management and other
personnel; the ability of the Company's management to apply standardized
policies and procedures to a larger number of restaurants; the availability of
adequate financing; the general ability to successfully manage growth (including
monitoring restaurants, controlling costs and maintaining effective quality
controls); and the general state of the economy. There can be no assurance that
the Company will be able to open new restaurants.
The opening of additional Shelly's Woodroast restaurants and Shelly's
Back Rooms outside of the MinneapolisSt. Paul metropolitan market will give rise
to additional expenses associated with managing restaurants located in multiple
markets. Such expenses include: advertising in more than one market; lease rates
and construction costs which may be higher in the new markets; travel costs; and
other similar expenses. Moreover, the Company's results of operations may be
adversely affected by economic conditions in those regions and other geographic
areas in which the Company may expand. Achieving consumer awareness and market
acceptance will require substantial efforts and expenditures by the Company. An
extraordinary amount of management's time may be drawn to such matters and
result in a dilution of potential earnings.
COMPETITION; CERTAIN FACTORS AFFECTING THE RESTAURANT INDUSTRY
The restaurant industry is highly competitive with respect to price,
service, food quality (including taste, freshness, healthfulness and nutritional
value) and location, and, as a result, has a high failure rate. There are
numerous well-established competitors, including national, regional and local
restaurant chains, possessing substantially greater financial, marketing,
personnel and other resources than the Company. There can be no assurance that
the Company will be able to respond to various competitive factors affecting the
restaurant industry. The restaurant industry is also generally affected by:
changes in consumer preferences; national, regional and local economic
conditions; and demographic trends. The performance of individual restaurants
may also be affected by factors such as traffic patterns, demographic
considerations, and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and employee benefit
costs, and the availability of experienced management and hourly employees may
also adversely affect the restaurant industry in general and the Company's
restaurants in particular. Restaurant operating costs are further affected by
increases in the minimum hourly wage, unemployment tax rates and similar matters
over which the Company has no control.
LONG-TERM, NON-CANCELABLE LEASES
The Company leases the land under its restaurants pursuant to
long-term, non-cancelable leases. Any additional restaurants developed by the
Company may be subject to similar long-term leases. If an existing or future
restaurant does not perform at a profitable level, and the decision is made to
close the restaurant, the Company will nonetheless be committed to perform its
obligations under the applicable lease.
GOVERNMENT REGULATION
The restaurant business is subject to various federal, state and local
government regulations, including those relating to the sale of food and
alcoholic beverages. While the Company to date has not experienced an inability
to obtain or maintain any necessary governmental licenses, permits or approvals,
the failure to maintain food and liquor licenses could have a material adverse
effect on the Company's operating results. In addition, restaurant operating
costs are affected by increases in the minimum hourly wage, unemployment tax
rates, sales taxes and similar costs over which the Company has no control.
Since many of the Company's restaurant personnel are paid at rates based on the
federal minimum wage, increases in the minimum wage will result in an increase
in the Company's labor costs. The Company also may be subject in certain states
to "dram shop" statutes which generally provide a person injured by an
intoxicated person the right to recover damages from an establishment that
served alcoholic beverages to an intoxicated person.
DEPENDENCE ON KEY PERSONNEL; LACK OF AN EXPERIENCED CHIEF FINANCIAL OFFICER;
NEED FOR ADDITIONAL MANAGEMENT
The Company is highly dependent upon the personal efforts and abilities
of Sheldon F. Jacobs, its President and Chief Executive Officer. Mr. Jacobs is
also the Company's Chief Financial Officer, but has no accounting background.
The loss of the services of Mr. Jacobs could have a substantial adverse effect
on the Company's ability to achieve its objectives, and the Company has not
obtained key-man life insurance on his life. The Company will need to hire other
corporate level and management employees to help implement and operate its
expansion plans. The failure to obtain, or delays in obtaining, such employees
could have a material adverse affect on the Company.
ABSENCE OF DIVIDENDS
The Company has not paid any dividends on its capital stock since its
incorporation and does not intend to pay any cash dividends in the foreseeable
future.
CONTROL BY EXISTING MANAGEMENT
Upon the exercise of the Redeemable Warrants, Mr. Jacobs will own
approximately 28.3% of the issued and outstanding shares of the Common Stock of
the Company. Accordingly, Mr. Jacobs will be able to control the Company's
affairs, including without limitation, the sale of equity or debt securities of
the Company, the appointment of officers, and the determination of officers'
salaries.
OUTSTANDING STOCK PURCHASE WARRANTS
In connection with a private placement in November 1995, the Company
issued warrants to purchase 200,016 shares of Common Stock with an exercise
price of $.01 per share. The nominal amount of the exercise price of such
warrants may not provide a meaningful deterrent to immediate exercise. Further,
the Company has registered the resale of the shares of Common Stock underlying
such warrants. The exercise of such warrants and the resale of a significant
portion of the underlying shares could have an adverse impact on the trading
price of the Company's Common Stock.
UNDESIGNATED STOCK
The Company's authorized capital consists of 33,000,000 shares of
capital stock. The Board of Directors, without any action by the Company's
stockholders, is authorized to designate and issue shares in such classes or
series (including classes or series of preferred stock) as it deems appropriate
and to establish the rights, preferences and privileges of such shares,
including dividends, liquidation and voting rights. The Company currently has
2,874,967 shares of Common Stock outstanding. No other class of common stock, or
preferred stock, is currently designated and there is no current plan to
designate or issue any such securities. The rights of holders of preferred stock
and other classes of common stock that may be issued may be superior to the
rights granted to the holders of the Common Stock. Further, the ability of the
Board of Directors to designate and issue such undesignated shares could impede
or deter an unsolicited tender offer or takeover proposal regarding the Company
and the issuance of additional shares having preferential rights could adversely
affect the voting power and other rights of holders of Common Stock.
MINNESOTA ANTI-TAKEOVER LAW
The Company is subject to Minnesota statutes regulating business
combinations and restricting voting rights of certain persons acquiring shares
of the Company, which may hinder or delay a change in control of the Company.
See "DESCRIPTION OF SECURITIES."
USE OF PROCEEDS
The net proceeds to the Company from the exercise of the Redeemable
Warrants, after deducting estimated costs and expenses, are estimated to be as
much as $7,057,400, assuming all of the Redeemable Warrants are exercised, or as
little as nothing. The closing bid price for the Company's Common Stock on July
10, 1996, was higher than the exercise price of the Redeemable Warrants. The
Company does not expect any Redeemable Warrants to be exercised unless the
market price of the Company's Common Stock exceeds the exercise price of the
Redeemable Warrants.
The net proceeds (if any) from the exercise of the Redeemable Warrants
will be used to finance the operation and expansion of the Company's business.
The foregoing discussion assumes that the Company will receive net proceeds of
$7,057,400. Since the actual amount of net proceeds is uncertain, the foregoing
uses and amounts only represent management's current expectations as to the
application of such proceeds as they are received by the Company.
DILUTION
The net tangible book value of the Company's Common Stock at March 31,
1996 was $3,257,205 or $1.20 per share. Net tangible book value per share of
Common Stock represents the tangible assets reduced by total liabilities,
divided by the number of outstanding shares of Common Stock. Assuming the
exercise of 1,182,400 Redeemable Warrants at an exercise price of $6.00 per
share and the receipt of the net proceeds therefrom, and assuming no further
changes in net tangible book value since such date, the adjusted net tangible
book value of the Company's Common Stock at March 31, 1996, would have been
approximately $10,314,605, or $2.65 per share. This represents an immediate
dilution upon exercise of the Redeemable Warrants of $3.35 per share.
The following table illustrates the dilution, in terms of net tangible
book value, that will be experienced by purchasers of the securities offered
hereby, and the increase in terms of net tangible book value that will be
experienced by the existing stockholders:
Exercise price per share................................ $ 6.00
Net tangible book value per share
at March 31, 1996.................................... $ 1.20
Increase per share to existing stockholders
attributable to sale of shares to new investors 1.45
------
Adjusted net tangible book value per share after
exercise of Redeemable Warrants...................... 2.65
------
Dilution per share upon exercise of Redeemable Warrants $ 3.35
======
The foregoing discussion assumes no exercise of currently outstanding
options and warrants to purchase Common Stock other than purchase of the shares
offered hereby upon exercise of the Redeemable Warrants. The issuance of shares
upon the exercise of such options or warrants may result in additional dilution
to stockholders.
PLAN OF DISTRIBUTION
The Company is not using an underwriter or selling agent in connection
with this offering. The 1,182,400 shares of Common Stock being offered by the
Company hereby are issuable upon the exercise of the Redeemable Warrants. The
Company does not currently intend to engage any solicitation agent. If the
Company determines to do so in the future, the Company anticipates that it would
be required to pay such warrant solicitation agent a fee and reimburse the
expenses of such agent.
Any broker-dealers that act in connection with the sale of the Common
stock as a solicitation agent on behalf of the Company might be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act.
DESCRIPTION OF SECURITIES
COMMON STOCK
The Company is authorized to issue up to 33,000,000 shares of Common
Stock, $.005 par value. At June 30, 1996, there were 2,874,967 shares
outstanding and approximately 35 holders of record of the Company's Common
Stock.
Holders of Common Stock are entitled to receive such dividends as are
declared by the Board of Directors of the Company out of funds legally available
for the payment of dividends. The Company expects to retain any earnings to
finance the development of its business. Accordingly, the Company does not
anticipate payment of any dividends on the Common Stock for the foreseeable
future. In the event of any liquidation, dissolution or winding-up of the
Company, the holders of Common Stock will be entitled to receive a pro rata
share of the net assets of the Company remaining after payment or provision for
payment of the debts and other liabilities of the Company.
Holders of Common Stock are entitled to one vote per share in all
matters to be voted upon by stockholders. There is no cumulative voting for the
election of directors, which means that the holders of shares entitled to
exercise more than 50% of the voting rights in the election of directors are
able to elect all of the directors.
Holders of Common Stock have no preemptive rights to subscribe for or
to purchase any additional shares of Common Stock or other obligations
convertible into shares of Common Stock which may hereafter be issued by the
Company.
The rights of holders of the shares of Common Stock may become subject
in the future to prior and superior rights and preferences in the event the
Board of Directors establishes one or more additional classes of Common Stock,
or one or more additional series of Preferred Stock. The Board of Directors has
no present plan to establish any such additional class or series.
All of the outstanding shares of Common Stock are, and the Shares to be
sold pursuant to this Offering will be, fully paid and non-assessable. Holders
of Common Stock of the Company are not liable for further calls or assessments.
REDEEMABLE WARRANTS
WARRANT AGREEMENT
The Redeemable Warrants were issued under and are governed by the
provisions of the Warrant Agreement between the Company and Norwest Bank
Minnesota, National Association, as Warrant Agent. A copy of the Warrant
Agreement has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following statements are summaries of certain
provisions contained therein, are not complete, and are qualified in their
entirety by reference to the Warrant Agreement.
The Redeemable Warrants are transferrable separately from the Common
Stock with which they were issued. One Redeemable Warrant entitles the
Warrantholder thereof to purchase one share of Common Stock during the three
year period ending June 6, 1997, unless earlier called for redemption by the
Company. Each Warrant is exercisable at a price equal to $6.00 per share,
subject to adjustment as a result of certain events. The Redeemable Warrants are
redeemable, by the Company at a redemption price of $.01 per Redeemable Warrant
on not less than 30 days written notice, provided that the closing bid price of
the Common Stock exceeds $7.50 per share (subject to adjustment) for any 20
consecutive trading days prior to such notice. As of July 2, 1996 this
requirement has been satisfied. For these purposes, the closing bid price of the
Common Stock shall be determined by the closing bid price as reported by NASDAQ
so long as the Common Stock is quoted on NASDAQ and, if the Common Stock is
listed on a national securities exchange, shall be determined by the last
reported sale price on the primary exchange on which the Common Stock is traded.
Holders of Redeemable Warrants will automatically forfeit all rights thereunder
except the right to receive the $.01 redemption price per warrant unless the
Redeemable Warrants are exercised before they are redeemed. Holders of
Redeemable Warrants may exercise their rights until the close of business on the
date fixed for redemption, unless extended by the Company.
Warrantholders as such are not entitled to vote, receive dividends, or
exercise any of the rights of holders of shares of Common Stock for any purpose
until such Redeemable Warrants have been duly exercised and payment of the
purchase price has been made. The Redeemable Warrants are in registered form and
may be presented for transfer, exchange, or exercise at the corporate office of
the Warrant Agent. The Redeemable Warrants are quoted on the Nasdaq SmallCap
Market under the symbol "WRSIW."
The Warrant Agreement permits the Company to reduce the exercise price
of the Redeemable Warrants during all or any portion of the originally stated
exercise period upon reasonable notice to the Warrantholders. The Warrant
Agreement also permits the Company to extend the exercise period and to increase
the exercise price for any period the exercise period is extended upon
reasonable notice to the Warrantholders.
The Warrant Agreement provides for adjustment of the exercise price and
the number of shares of Common Stock purchasable upon exercise of the Redeemable
Warrants to protect Warrantholders against dilution in certain events, including
stock dividends, stock splits, reclassification, and any combination of Common
Stock, or the merger, consolidation, or disposition of substantially all the
assets of the Company.
REGISTRATION
The Company has sufficient shares of Common Stock authorized and
reserved for issuance upon exercise of the Redeemable Warrants, and such shares
when issued will be fully paid and nonassessable. The Company must have a
current registration statement on file with the Securities and Exchange
Commission (the "Commission") and, unless exempt therefrom, with the securities
commission of the state in which the Warrantholder resides in order for the
Warrantholder to exercise his Redeemable Warrants and obtain shares of Common
Stock free of any transfer restrictions. The shares so reserved for issuance
upon exercise of the Redeemable Warrants are registered pursuant to the
Registration Statement of which this Prospectus is a part. Furthermore, the
Company has agreed to use its best efforts to maintain an effective registration
statement (by filing any necessary post-effective amendments or supplements to
the Registration Statement) throughout the term of the Redeemable Warrants with
respect to the shares of Common Stock issuable upon exercise thereof. The
Company will incur significant legal and other related expenses in order to keep
such registration statement current. However, there can be no assurance that the
Company will be able to keep any such registration statement current or that
such registration statement will be effective at the time the Warrantholder
desires to exercise his or her Redeemable Warrants. Additionally, the Company
has agreed to use its best efforts to maintain exemptions or qualifications in
those jurisdictions where the Redeemable Warrants were originally qualified for
sale to permit exercise of the Redeemable Warrants and issuance of shares of
Common Stock upon such exercise. However, there can be no assurance that any
such exemption will be available or qualification will be effective at the time
the Warrantholder desires to exercise his or her Redeemable Warrants. If for any
reason the Company's registration statement is not kept current, or if the
Company is unable to qualify its Common Stock underlying the Redeemable Warrants
for sale in particular states, Warrantholders in those states will, absent an
applicable exemption, have no choice but to either sell such Warrants or let
them expire.
EXERCISE
The Redeemable Warrants may be exercised upon surrender of the
certificate therefor on or prior to the expiration date (or earlier redemption
date) at the offices of the Company's Warrant Agent, with the form of "Purchase
Form" on the reverse side of the certificate filled out and executed as
indicated, accompanied by payment of the full exercise price (by certified or
cashier's check payable to the order of the Company) for the number of
Redeemable Warrants being exercised.
For the term of the Redeemable Warrants, the Warrantholders are given
the opportunity to profit from a rise in the market price of the Company's
Common Stock with a resulting dilution in the interest of the Company's
stockholders. During such term, the Company may be deprived of opportunities to
sell additional equity securities at a favorable price. The Warrantholders may
be expected to exercise their Redeemable Warrants at a time when the Company
would, in all likelihood, be able to obtain equity capital by a sale or a new
offering on terms more favorable to the Company than the terms of the Redeemable
Warrants.
TAX CONSIDERATIONS
No gain or loss will be recognized by a holder of a Redeemable Warrant
upon purchase of Common Stock for cash pursuant to the exercise of the
Redeemable Warrant. The adjusted basis of a share of Common Stock so acquired
will equal the adjusted basis of the Redeemable Warrant plus the exercise price.
There may be other federal tax considerations, and state, local, or foreign tax
considerations. Investors should consult their own tax advisors before
determining whether to purchase the Units or exercise the Redeemable Warrants.
MINNESOTA ANTI-TAKEOVER LAW
The Company is governed by the provisions of Sections 302A.671 and
302A.673 of the Minnesota Business Corporation Act. In general, Section 302A.671
provides that the shares of a corporation acquired in a "control share
acquisition" have no voting rights unless voting rights are approved in a
prescribed manner. A "control share acquisition" is an acquisition, directly or
indirectly, of beneficial ownership of shares that would, when added to all
other shares beneficially owned by the acquiring person, entitle the acquiring
person to have voting power of 20% or more in the election of directors. In
general, Section 302A.673 prohibits a publicly-held Minnesota corporation from
engaging in a "business combination" with an "interested shareholder" for a
period of four years after the date of transaction in which the person became an
interested shareholder, unless the business combination is approved in a
prescribed manner. "Business combination" includes mergers, asset sales and
other transactions resulting in a financial benefit to the interested
shareholder. An "interested shareholder" is a person who is the beneficial
owner, directly or indirectly, or 10% or more of the corporation's voting stock
or who is an affiliate or associate of the corporation and at any time within
four years prior to the date in question was the beneficial owner, directly or
indirectly, of 10% or more of the corporation's voting stock.
INDEMNIFICATION AND WAIVER OF DIRECTOR LIABILITY
The Company's Articles of Incorporation eliminate or limit certain
liabilities of its directors and the Company's Bylaws provide for
indemnification of directors, officers and employees of the Company in certain
instances. Insofar as exculpation of, or indemnification for, liabilities
arising under the Securities Act of 1933 may be permitted to directors, officers
or persons controlling the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such exculpation or indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
TRANSFER AGENT AND REGISTRAR
Norwest Bank Minnesota, National Association, is the Transfer Agent and
registrar for the Common Stock and Redeemable Warrants of the Company.
LEGAL MATTERS
The validity of the shares of Common Stock being offered hereby will be
passed upon for the Company by Winthrop & Weinstine, P.A., Minneapolis,
Minnesota.
EXPERTS
The financial statements of the Company, incorporated by reference in
the Registration Statement of which this Prospectus is a part, have been audited
by Lund Koehler Cox and Company, PLLP, independent public accountants, as
indicated in their report with respect thereto, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said report.
MATERIAL CHANGES
The Company has begun to actively promote and develop the Shelly's Back
Room concept. Shelly's Back Room is an upscale cigar parlor offering
comfortable, casual seating, full-service bar, food service and a
state-ofthe-art air purification system in the Company's northwoods atmosphere.
The first Shelly's Back Room is located in the Rockville Restaurant, and the
Company is pursuing plans for additional stand alone operations. The Company is
currently negotiating the terms of a lease for the first stand alone Shelly's
Back Room to be located in Washington, D.C. in a street level store front
location. In May 1996, the Company signed a non-binding letter of intent with
Grand Casinos, Inc. ("Grand") to design and construct Shelly's Back Room
locations in one or more of Grand's gaming properties. However, the specific
locations have not been determined and the final terms and conditions of the
arrangements are subject to further negotiation.
The Company has retained an executive search firm to identify
candidates for the positions of chief financial officer and chief operating
officer. Management is seeking to identify and hire candidates within 90 days.
===========================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE OFFER MADE HEREBY. IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR SOLICITATION OF AN OFFER TO PURCHASE BY ANY PERSON IN ANY
JURISDICTION IN WHICH SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR INCORPORATED HEREIN BY
REFERENCE IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THE DATE OF
THE REPORT FROM WHICH IT IS INCORPORATED.
TABLE OF CONTENTS
PAGE
Available Information...................................
Incorporation of Certain Documents by Reference.........
Prospectus Summary......................................
Risk Factors............................................
Use of Proceeds.........................................
Price Range of Common Stock.............................
Dilution................................................
Plan of Distribution....................................
Description of Securities...............................
Legal Matters............................................
Experts..................................................
Material Changes.........................................
===========================================================
===========================================================
1,182,400 SHARES
WOODROAST SYSTEMS, INC.
COMMON STOCK
--------------------
PROSPECTUS
--------------------
JULY ___, 1996
========================================================
SUPPLEMENT
TO PROSPECTUS DATED ____________, 1996
WOODROAST SYSTEMS, INC.
REDEMPTION OF WARRANTS
On _____________________, 1996 Woodroast Systems, Inc. (the "Company")
called for redemption on _______________, 199__ (the "Redemption Date") of all
of its outstanding Redeemable Class A Warrants (the "Redeemable Warrants"), at
the price of $.01 per Redeemable Warrant (the "Redemption Price"), for a total
redemption price of $_______.
Each Redeemable Warrant entitles the registered holder thereof to
purchase one share of Common Stock at $6.00 per share of Common Stock.
THE RIGHT TO EXERCISE THE REDEEMABLE WARRANTS EXPIRES AT 5:00 P.M.,
MINNEAPOLIS TIME ON ________________, 199_, WHICH IS THE LAST FULL BUSINESS DAY
PRIOR TO THE REDEMPTION DATE. THEREAFTER THE REDEEMABLE WARRANT WILL NO LONGER
BE EXERCISABLE, AND THE HOLDERS OF REDEEMABLE WARRANTS WILL HAVE ONLY THE RIGHT
TO RECEIVE THE REDEMPTION PRICE.
The Redeemable Warrants may be exercised upon surrender of the
certificate therefor on or prior to 5:00 p.m., Minneapolis time, on
_____________________, 199_, at the offices of the Company's warrant agent,
Norwest Bank Minnesota, N.A. (the "Warrant Agent") with the form of "Election to
Purchase" on the reverse side of the certificate filled out (with guaranteed
signature) and executed as indicated, accompanied by payment (in the form of
certified or bank check payable to the order of Woodroast Systems, Inc.) of the
full exercise price for the number of Redeemable Warrants being exercised.
Holders of the Redeemable Warrants will automatically forfeit all rights
thereunder except the right to receive the $.01 Redemption Price unless the
Redeemable Warrants are exercised on or before ___________________, 199_.
The Company will receive an aggregate of approximately $7,057,400 in
net proceeds from the issuance of the Common Stock upon exercise of all of the
Redeemable Warrants, after deducting expenses of this Offering of approximately
$37,000.
The date of this Prospectus Supplement is _______________, 1996.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the distribution of the shares of Common Stock offered hereby:
SEC registration fee................................ $ 2,446
Legal fees and expenses............................. 16,000
Accounting fees and expenses........................ 8,000
Printing expenses................................... 10,000
Miscellaneous....................................... 554
--------
TOTAL.......................................... $ 37,000
========
Each amount set forth above, except the SEC registration fee, is
estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 302A.521 of the Minnesota Statutes requires, among other
things, the indemnification of persons made or threatened to be made a party to
a proceeding by reason of acts or omissions performed in their official capacity
as an officer, director, employee or agent of the corporation against judgments,
penalties and fines (including attorneys' fees) if such person is not otherwise
indemnified, acted in good faith, received no improper benefit, reasonably
believed that such conduct was in the best interests of the corporation, and, in
the case of criminal proceedings, had no reason to believe the conduct was
unlawful. In addition, Section 302A.521, subd. 3, of the Minnesota Statutes
requires payment by the corporation, upon written request, of reasonable
expenses in advance of final disposition in certain instances if a decision as
to required indemnification is made by a disinterested majority of the Board of
Directors present at a meeting at which a disinterested quorum is present, or by
a designated committee of the Board, by special legal counsel, by the
Shareholders or by a court.
The Company's Bylaws provide for the indemnification of its directors,
officers, employees, and agents in accordance with, and to the fullest extent
permitted by, the provisions of the Minnesota Business Corporation Act, as
amended from time to time.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following exhibits are filed as part of this Registration Statement
on Form S-3:
EXHIBIT
NO. DESCRIPTION
5.1 Opinion of Winthrop & Weinstine, P.A., counsel to the Company.
23.1 Consent of Winthrop & Weinstine, P.A. (included in Exhibit
5.1).
23.2 Consent of Lund Koehler Cox and Company, PLLP, independent
public accountants.
24.1 Powers of Attorney (included in signature page on page II-3
hereof).
ITEM 17. UNDERTAKINGS
(a) The Company will:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration Statement
to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a fundamental
change in the information in the Registration Statement; and
(iii) Include any additional or changed material
information on the plan of distribution.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) For determining liability under the Securities Act of
1933, as amended, treat each post-effective amendment as a new
registration statement of the securities offered, and the offering of
the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold at the end of the
offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers, and
controlling persons of the small business issuer pursuant to the provisions
summarized in Item 15 above, or otherwise, the small business issuer has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the small business issuer of
expenses incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the small business issuer will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act, as
amended, and will be governed by the final adjudication of such issue.
(c) The Company will:
(1) For determining any liability under the Securities Act of
1933, treat the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Company under Rule
424(b)(1) or (4) or 497(h) under the Securities Act of 1933 as part of
this registration statement as of the time the Commission declared it
effective.
(2) For determining any liability under the Securities Act of
1933, treat each post-effective amendment that contains a form of
prospectus as a new registration for the securities offered in the
registration statement, and that offering of the securities at that
time as the initial bona fide offering of those securities.
(d) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
Annual Report pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Minneapolis, State of Minnesota, on July 12, 1996.
WOODROAST SYSTEMS, INC.
By /s/ Sheldon F. Jacobs
Sheldon F. Jacobs, President
Chief Executive Officer and
Chief Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Sheldon F. Jacobs, such person's true and lawful attorney-in-fact and
agent with full power of substitution and resubstitution for such person and in
such person's name, place and stead, in any and all capacities, to sign the
Registration Statement on Form S-3 of Woodroast Systems, Inc. and any or all
amendments (including post-effective amendments) to the Registration Statement,
and to file the same, with all exhibits hereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Sheldon F. Jacobs President, Chief Executive Officer, July 12, 1996
Sheldon F. Jacobs Chief Financial Officer and Director
(principal executive, financial and
accounting officer)
/s/ Lee M. Cohn Director July 12, 1996
Lee M. Cohn
/s/ Byron L. Frank Director July 12, 1996
Byron L. Frank
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION PAGE
5.1 Opinion of Winthrop & Weinstine, P.A.,
counsel to the Company.........................
23.1 Consent of Winthrop & Weinstine, P.A.
(included in Exhibit 5.1).
23.2 Consent of Lund Koehler Cox and Company, PLLP,
independent public accountants.................
24.1 Powers of Attorney (included in signature page
on page II-3 hereof).
Exhibit 5.1
WINTHROP & WEINSTINE, P.A.
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
(612) 347-0700
July 12, 1996
Woodroast Systems, Inc.
10250 Valley View Road, Suite 145
Eden Prairie, Minnesota 55344
Re:Registration Statement on Form S-3
Gentlemen:
We have acted as legal counsel for Woodroast Systems, Inc. (the "Company") in
connection with the preparation of a Registration Statement on Form S-3 (the
"Registration Statement") to be filed with the Securities and Exchange
Commission, and the Prospectus to be used in conjunction with the Registration
Statement (the "Prospectus"), relating to the registration under the Securities
Act of 1933, as amended, of 1,182,400 shares (the "Shares") of common stock, par
value $.005 per share (the "Common Stock"), to be issued upon exercise of the
Company's outstanding Redeemable Class A Warrants (the "Warrants").
In connection therewith, we have examined (a) the Articles of Incorporation and
Bylaws of the Company, both as amended to date; (b) the corporate proceedings of
the Company relative to its organization and to the authorization and issuance
of the Warrants and Shares; and (c) the Registration Statement and the
Prospectus. In addition to such examination, we have reviewed such other
proceedings, documents and records and have ascertained or verified such
additional facts as we deem necessary or appropriate for purposes of this
opinion.
Based upon the foregoing, we are of the opinion that:
1. The Company has been legally incorporated and is validly existing under
the laws of the State of Minnesota.
2. All necessary corporate action has been taken by the Company to
authorize the issuance of the Shares.
3. The Shares issuable upon exercise of the Warrants are validly authorized
by the Company's Articles of Incorporation, as amended, and when issued
and paid for upon exercise of the Warrants pursuant to the terms thereof
and as contemplated in the Registration Statement and Prospectus, will
be validly issued, fully paid, and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus.
Very truly yours,
WINTHROP & WEINSTINE, P.A.
By - /s/ Eric O. Madson
Eric O. Madson
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to incorporation by
reference of our report dated March 1, 1996 included in the Company's Form
10-KSB for the year ended December 31, 1995 and to all references to our Firm
included in or made part of this Registration Statement on Form S-3.
LUND KOEHLER COX & COMPANY, PLLP
Minneapolis, Minnesota
July 11, 1996
