<PAGE>
As filed with the Securities and Exchange Commission on March 20, 1997
Registration No. 333-16575
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
___________________
JAVA CENTRALE, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0268780
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1610 Arden Way, Suite 145
Sacramento, CA 95815
(916) 568-2310
(Address, including zip code, and telephone number,including
area code, of registrant's principal executive office)
STEVEN J. ORLANDO
Vice President and Chief Financial Officer
1610 Arden Way, Suite 145
Sacramento, CA 95815
(916) 568-2310
(Address, including zip code, and telephone number, including
area code, of agent for service of process)
The Commission is requested to send copies
of all communications to:
Philip S. Boone, Jr., Esq.
Rosenblum, Parish & Isaacs, PC
555 Montgomery Street, 15th Floor
San Francisco, CA 94111
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be Offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [ X ]
<PAGE>
CALCULATION OF REGISTRATION FEE
______________________________________________________________________________
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered per Share(1) Price(1) Fee(3)
______________________________________________________________________________
Common
Stock(2) 437,284 $0.71875 $314,298 $95
______________________________________________________________________________
(1) Estimated solely for the purpose of determining the registration fee,
based, in accordance with Rule 457(h), on the average of high and low
prices at which the Registrant's Common Stock was sold on November 18,
1996.
(2) Pursuant to Rule 416, there are also being registered such additional
shares as may be required for issuance pursuant to the anti-dilution
provisions of the Warrants described herein.
(3) The full amount of the Registration Fee was paid at the time of the initial
filing of this Registration Statement.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
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<PAGE>
JAVA CENTRALE, INC.
CROSS-REFERENCE SHEET PURSUANT TO
ITEM 501(B) OF REGULATION S-K
ITEM CAPTION IN FORM S-3 LOCATION IN
PROSPECTUS BY CAPTION
- -------------------------------------------------------------------------------
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus.......... Facing Page; Cross-Reference
Sheet; and Outside Front Cover
Page
2. Inside Front and Outside
Back Cover Pages of Prospectus.... Cover Page; Available Information;
Incorporation of Certain
Documents by Reference
3. Summary Information, Risk
Factors, and Ratio of
Earnings to Fixed Charges......... Risk Factors
4. Use of Proceeds................... Use of Proceeds
5. Determination of Offering Price... Not Applicable
6. Dilution.......................... Not Applicable
7. Selling Security Holders.......... Selling Stockholders
8. Plan of Distribution.............. Plan of Distribution
9. Description of Securities
to be Registered.................. Description of the Common Stock
10. Interests of Named Experts
and Counsel....................... Not Applicable
11. Material Changes.................. Not Applicable
12. Incorporation of Certain
Documents by Reference............ Incorporation of Certain
Information by Reference
13. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities.... Indemnification of Directors
and Officers
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<PAGE>
JAVA CENTRALE, INC.
437,284 Shares of Common Stock
____________________
Up to a total of 437,284 shares of the no par value common stock (the
"Common Stock") of Java Centrale, Inc., a California corporation (the
"Company") are being offered on a continuous basis in the future by two of
the Company's warrant holders and certain of the Company's current
shareholders (collectively, the Selling Stockholders"). For purposes of this
prospectus (the "Prospectus"), the stock purchase warrant issued to Artistic
License, Inc., a California corporation ("Artistic"), is referred to as the
(the "Artistic Warrant") and the stock purchase warrant issued to Alta
Petroleum, Inc., a California corporation ("Alta"), is referred to as (the
"Alta Warrant" and together with the Artistic Warrant, the "Warrants".) All
of the shares of Common Stock offered hereby (the "Shares") have been or will
be issued by the Company in private transactions, and were originally issued
as, or will be upon issuance, "restricted securities" under Rule 144 under
the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus has been prepared, and the Shares have been registered, so that
future sales of the Shares by the Selling Shareholders will not be restricted
under the Securities Act. (See "Selling Shareholders" and "Plan of
Distribution".)
The Company's Common Stock is listed on The NASDAQ Stock Market SmallCap
List under the symbol "JAVC." On March 3, 1997, the last reported sale price
for the Common Stock on the NASDAQ SmallCap Market List was $0.47 per share.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
______________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH ANY OFFER OR SALE OF THE SHARES DESCRIBED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS NOT CONTAINED HEREIN MUST NOT BE RELIED
UPON AS HAVING BEEN MADE OR AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF
THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANYONE TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
The date of this Prospectus is March 20, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION.................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................... 3
INTRODUCTION............................................................. 5
RISK FACTORS............................................................. 6
SELLING STOCKHOLDERS..................................................... 16
SECURITIES BEING OFFERED................................................. 17
Graham and Gem Shares................................................ 17
Artistic Warrant Shares.............................................. 18
Alta Warrant Shares.................................................. 18
DESCRIPTION OF THE COMMON STOCK.......................................... 18
GENERAL DESCRIPTION OF THE WARRANTS...................................... 19
Securities Available Upon Exercise of the Warrants................... 19
Manner of Exercise................................................... 19
Rights as a Shareholder, Employee, or Consultant..................... 19
Transfer of the Warrants............................................. 20
Redemption Rights.................................................... 20
TERMS OF THE ARTISTIC WARRANT............................................ 20
Adjustments to the Number of Artistic Shares......................... 20
Adjustments to the Artistic Warrant Exercise Price................... 21
TERMS OF THE ALTA WARRANT................................................ 21
Adjustments to the Number of Alta Shares............................. 21
Adjustments to the Alta Warrant Exercise Price....................... 21
RESALES OF COMPANY SECURITIES BY INSIDERS................................ 22
FEDERAL INCOME TAX CONSEQUENCES.......................................... 23
Tax Consequences of Grant or Exercise of a Warrant................... 23
Taxation Upon Sale of the Shares..................................... 24
Tax Treatment of Section 16 Insiders................................. 24
Tax Benefits to The Company.......................................... 24
PLAN OF DISTRIBUTION..................................................... 24
USE OF PROCEEDS.......................................................... 25
INDEMNIFICATION OF OFFICERS AND DIRECTORS................................ 25
LEGAL MATTERS............................................................ 25
EXPERTS.................................................................. 26
EXHIBIT A--Artistic Warrants............................................. A-1
EXHIBIT B--Alta Warrants................................................. B-1
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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 and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the regional offices of the Commission located at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois and 75 Park Place, 14th Floor, New York, New York 10007. 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, D.C. 20549.
The Commission also maintains a Web site, the address of which is
HTTP://WWW.SEC.GOV, which contains reports, proxy and information statements,
and other information regarding registrants that file electronically with the
Commission.
The Company's Common Stock is listed on the National Association of
Securities Dealers ("NASD") NASDAQ SmallCap Market List, and such reports and
other information concerning the Company can also be inspected at the offices
of the NASD at 1735 K Street, N.W., Washington, D.C. 20006-1500.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Attached hereto, the Company has filed with the Commission a registration
statement on Form S-3 under the Securities Act of 1933 (the "Registration
Statement"), with respect to the Company's Common Stock offered pursuant to
this Prospectus. This Prospectus omits certain information contained in the
Registration Statement, and reference is made to the Registration Statement,
including the exhibits thereto, for further information with respect to the
Company and the securities offered hereby. Statements made in this Prospectus
concerning the contents or provisions of any agreement or other document
referred to herein are not necessarily complete; and each such statement is
qualified in its entirety by, and reference is made to, the copy of such
agreement or other document filed as an exhibit or schedule to the
Registration Statement or incorporated therein by reference. For further
information, reference is made to the Registration Statement and to the
exhibits and schedules filed therewith, which are available for inspection
without charge at the principal office of the Commission in Washington, D.C..
Copies of the material containing this information may be obtained from the
Commission upon payment of the prescribed fee.
The following documents, all of which were previously filed with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference
in this Prospectus: The Company's Annual Report on Form 10-K, Form 10-K/A,
and Form 10-K/A2 for the fiscal year ended March 31, 1996; the Company's
Quarterly Reports on Form 10-Q and 10-Q/A for the quarters ended June 30, and
September 30, the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 1996; the Company's Current Report on Form 8-K dated
August 28, 1996, and the Company's Current Reports on Form 8-K and 8-K/A
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<PAGE>
dated December 13, 1996. All documents subsequently filed by the Company
pursuant to Section 13(a), 13(c), 14, or 15(d) of the Exchange Act, prior the
period in which the Warrants may be exercised, which ever is later, shall
also be deemed to be incorporated by reference herein. In addition, the
description of the Company's Common Stock contained in its Registration
Statement on Form S-1 (Registration No. 33-76528) filed on March 17, 1994,
including any amendment or report filed for the purpose of updating such
description, is also incorporated herein by reference.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that such statement is modified or superseded by a statement
contained in this Prospectus or in any other subsequently filed document that
also is or is deemed to be incorporated by reference into this Prospectus. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a
Prospectus has been delivered, upon the written request of any such person, a
copy of any or all of the documents that have been or may be incorporated in
this Prospectus by reference, other than exhibits to such documents. Written
requests for such copies should be directed to: Steven J. Orlando, Vice
President and Chief Financial Officer, Java Centrale, Inc., 1610 Arden Way,
Suite 145, Sacramento, California 95815, or by telephone at (916) 568-2310.
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<PAGE>
INTRODUCTION
Java Centrale, Inc., a California corporation (the "Company"), began its
principal operations as of April 1, 1993. The Company is in the business of
selling coffee and bakery products to consumers through its system of
Company-operated and franchised European style gourmet coffee cafes, carts
and kiosks operating under the Java Centrale name, as well as through a chain
of upscale bakery cafes operated or franchised through its wholly-owned
subsidiary Paradise Bakery, Inc. Until December of 1996, the Company also
owned and operated a third line of cafes under its Oh-La-La! Division.
Effective December 10, 1996, however, the Oh-La-La! Division was sold to The
Good Food Fast Companies ("GFFC"), an unrelated corporation, freeing the
Company's management to concentrate on the development of its two primary
chains. The purchase price for the Oh-La-La! Division included $1,250,000 in
cash, a three-year $750,000 promissory note bearing interest at 9% per year,
the buyer's assumption of $48,341 in liabilities, and 233,333 shares of the
buyer's convertible preferred stock. The Company valued the preferred stock
it acquired at approximately $700,000, based on a number of factors including
the ratio by which the preferred stock may be converted into common stock of
GFFC, the price being paid contemporaneously for shares of GFFC's common
stock by investors unrelated to the Company, GFFC's assets following
consummation of the Oh-La-La! transaction, and GFFC's business plan and
acquisition strategy.
In addition to selling numerous coffees and other specialty beverages,
the Company-operated and franchised Java Centrale cafes offer consumers a
wide selection of gourmet sandwiches, salads, soups, pastries, and desserts,
and also sell coffee-making equipment and accessories such as brewers,
espresso makers, grinders, mugs, and carafes. The Company's Java Centrale
carts and kiosks offer the same selection of espresso based specialty
beverages and Italian sodas as are offered in its Java Centrale cafes, as
well as brewed coffees and a selection of morning pastries. As of December
31, 1996 the Company's Java Centrale operations comprised locations in nine
states, including three Company-owned and 24 franchised cafes, and no
Company-owned and eight franchised carts. An additional six franchises have
been sold for new Java Centrale cafe locations, most of which are expected to
open their doors before the end of 1997.
The Company's Paradise Bakery subsidiary operates in high-end locations
such as upscale malls and airports. Featured menu items, depending upon the
type of location, include as assortment of bakery products, featuring
cookies, muffins, croissants and desserts, prepared and freshly baked daily
at each location, as well as, specialty soups, salads, and sandwiches.
Paradise Bakery, Inc. has operated a successful and growing business for 19
years. Most of the existing locations are in high profile upscale areas in
California, Arizona, Colorado, Oregon, Washington, Texas, and Hawaii. As of
December 31, 1996, there were 16 Company-owned and 35 franchised Paradise
Bakery cafes, operating in eight states.
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RISK FACTORS
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, IN EVALUATING AN INVESTMENT IN
THE COMPANY'S COMMON STOCK, THE FOLLOWING FACTORS, IN ADDITION TO THE OTHER
INFORMATION AND FINANCIAL DATA INCLUDED HEREIN AND INCORPORATED HEREIN BY
REFERENCE.
HISTORICAL LOSSES
The Company has never earned a profit in any fiscal year. Since its
incorporation in 1992, the Company's operations have required (rather than
provided) cash every year. In order to meet these cash requirements, the
Company has from time to time sold Common Stock and Preferred Stock or
borrowed money from Baycor Ventures. The Company recorded a loss in the
development stage during its first fiscal year of operation and, since
principal operations commenced, has recorded a loss for the fiscal years
ended March 31, 1993, 1994, 1995, and 1996. The net loss for fiscal 1996
(which ended March 31, 1996) was $3,966,426; the net loss for the quarter
ended December 31, 1996 was $648,037. There is no assurance that losses will
not continue or that the Company will become profitable in the future.
ACCUMULATED DEFICIT AND FUTURE LOSSES
As of December 31, 1996, the Company had an accumulated deficit of
$10,280,643. The Company anticipates that the size of its losses will decrease
due to anticipated development and acquisition of new Company-owned and
franchised Java Centrale and Paradise Bakery locations in the United States and
Canada. However, if such developments are delayed and the Company does not
realize such increased sales, its losses are likely to remain at or near
previous levels.
Effective December 10, 1996, the Company sold its Oh-La-La! Division,
consisting of 14 retail outlets and one bakery, mostly located in the San
Francisco Bay Area. The sale of the Oh-La-La! Division is expected to
facilitate the development of the Company's Java Cafe and Paradise Bakery
operations by simplifying the mix of the Company's cafe lines and freeing
Company resources for the development of its remaining cafes and potential
cafe locations. In particular, the Company anticipates opening two new
Company-owned and 26 franchised Paradise Bakery cafes during calendar 1997.
The Company may also consider franchising some or all of its Company-owned
Paradise Bakery cafes in order to free the associated capital for further
expansion of this line of cafes, including the opening of both Company-owned
and franchised cafe locations.
Until the Company's network of Company-owned and franchised Java Centrale
cafes, carts, and kiosks and Paradise Bakery cafes is more fully developed,
however, the Company will be dependent upon other sources of income, such as
franchisee fees, which cannot be predicted as to timing or dollar amount.
Delays in the development of the Company's network of distribution centers
for its products, as well as any potential future acquisitions or strategic
mergers, could extend continuing losses and result in the need for additional
financing.
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<PAGE>
RELIANCE ON GROWTH FOR PROFITABILITY
As of December 31, 1996, the Company had a total of 88 Company-owned and
franchised cafes open and operating. The Company currently intends to open,
either on its own or through franchisees, up to 10 cafes during fiscal 1997,
and approximately 60 cafes during fiscal 1998. By March 31, 1998 (the end of
the Company's 1998 fiscal year), the Company's plans call for the Company to
have a total of 153 cafes opened and operating. If the foregoing timetable is
maintained, and the Company's cost structure remains comparatively stable,
the Company should achieve profitability on or before March 31, 1998. There
can be no assurance, however, that the Company or its franchisees will be
able to open the planned new cafes, carts and kiosks or that they can be
operated profitably. The Company's ability to expand will depend upon a
number or factors, including selection and availability of suitable locations
and franchisees; negotiation of acceptable lease terms; the securing of
required state and local permits and approvals; adequate supervision of
construction; hiring, training and retention of skilled management and other
personnel; availability of adequate financing; and other factors, many of
which are beyond the Company's control.
SUBSTANTIAL COMPETITION
Java Centrale's whole bean coffee products compete directly against
specialty coffees sold at retail outlets through supermarkets, specialty
retailers and a growing number of specialty coffee stores. The Company's
coffee beverages compete directly against all restaurant and beverage outlets
that serve coffee and a growing number of espresso stands, carts and stores
in the North American metropolitan markets. Both the Company's whole bean
coffees and coffee beverages compete indirectly against all other coffees on
the market. The specialty coffee segment of the market is becoming
increasingly competitive. The coffee industry is dominated by several large
companies such as Kraft, General Foods, Procter & Gamble and Nestle. Many of
the Company's competitors have greater financial and marketing resources and
brand name recognition and a larger customer base than the Company.
Competitors with significant economic resources in both existing nonspecialty
and specialty coffee businesses and companies in other retail food service
businesses could at any time enter the specialty coffee market with
substantially equivalent coffee products. The Company competes against both
other specialty retailers and restaurants for store sites, and there can be
no assurance that management will be able to continue to secure adequate
sites at acceptable costs.
Java Centrale stores compete with fast food chains, major restaurant
chains, and other food service related franchisors for franchisees of its
cafes, carts and kiosks. Many franchisors have greater market recognition
and greater financial, marketing, and human resources than the Company does.
Paradise Bakery competes with a variety of restaurant concepts, many of
which are located in covered malls. Some competition comes from similar
concepts, such as, Au Bon Pain, which is a bakery/cafe concept, or
sandwich/salad concepts, such as Wall Street Deli, that are closely located
to a particular Paradise Bakery. Other types of competitors are strictly
bakery product driven, such as, Cinnabon and Mrs. Fields. What sets Paradise
apart from most competitors is menu mix, positioning, and pricing.
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FRANCHISE OPERATIONS
The Company believes that its acquisition and operation of Paradise
bakery/cafes will allow the Company to enhance the Company's expansion strategy
by franchising and developing Paradise Bakery. The Company plans to expand the
franchisee-owned system by allowing existing franchisees to expand and by
developing new franchise locations outside its current system.
To facilitate its expansion, the Company has begun filing for
registration with various state agencies. These filings were necessitated by
the fact that registrations were not kept current by the previous owner of
Paradise Bakery, Inc. prior to its acquisition by the Company. In June of
1996, the Company prepared disclosure documents to allow the sale of two
company-owned bakery/cafes and for existing franchisees in Arizona and
Colorado to develop additional locations. The Company completed other filings
needed to begin carrying out Paradise Bakery's expansion plans during late
1996. There can be no guarantee that these filings will be approved by all the
relevant state franchise regulators. Until a given state regulatory agency
has accepted the relevant filing, Paradise Bakery, Inc. will be unable to
offer or sell a new franchise in that state.
UNPREDICTABLE FRANCHISEE REVENUES
Historically, revenues from the Company's franchisees have been an
important part of the Company's revenues, profits and financing. The Company
is actively pursuing efforts to develop additional franchisee operations, as
well as to extend its network of Company-owned cafes. However, the
development of the Company's franchise system is unpredictable as to timing
and the amount of income which may be produced by individual franchisees.
LIQUIDITY; LIMITED CAPITAL RESOURCES
The Company's initial capitalization was obtained through the issuance of
2,500,000 shares of no par common stock for $10,000 on March 5, 1992. In
addition, the Company issued 2,950,000 shares of Series A cumulative
preferred stock, in exchange for 2,950,000 shares of no par cumulative
preferred stock, which were subscribed for on March 5, 1992 for proceeds of
$590,000, on March 12, 1993. On March 30, 1993, the Company sold 5,000,000
shares of no par value redeemable Series B cumulative preferred stock for
$1,000,000. The proceeds from the issuance of all such stock were used for
capital acquisitions and operating costs of the Company during its
development stage. On May 19, 1994, the Company raised $7,288,000 in net
proceeds from an initial public offering of 1,500,000 shares of common stock.
Of the 4,716,820 shares outstanding after the offering, 855,300 were placed
in escrow and are subject to an Escrow Agreement which provides for the
release of such shares on or before March 31, 1999, with earlier release
based upon the financial performance of the Company.
As part of the purchase price for the assets of Oh-La-La! that were
acquired by the Company on March 31, 1995, the Company issued to Oh-La-La!,
Inc. a note payable of $745,874, and assumed liabilities for tenant
improvement loans related to the properties acquired of $113,306.
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In the 1996 fiscal year, the Company issued 1,604,692 common shares for
$3,540,722 in proceeds in a series of private placements. The Company also
issued convertible debt in three separate private transactions totaling
$3,500,000.
The Company used $5,375,000 of the cash raised through private
transactions to acquire 100% of the common stock in Paradise Bakery, Inc., on
December 31, 1995. Additionally, as part of the acquisition of Paradise
Bakery, Inc., the Company issued notes to the seller in the amount of
$1,350,000. The Company also issued notes in the amount of $46,071 to the
sellers and assumed $97,950 in debt obligation associated with the purchase
of three Paradise Bakery franchises. The Company assumed bank debt in the
amount of $1,085,000 and $24,535 in lease obligations associated with the
merger of Founders Venture, Inc., another Paradise Bakery franchisee, into
Paradise Bakery, Inc.
At the Company's current level of development, it does not generate net
cash from operations. To fund its operations, the Company requires either
additional financing, sales of additional franchises, or a substantial
increase in its network of Company-owned cafes and carts. The Company
incurred a net loss of $3,966,000 and used net cash of $2,391,000 in
operating activities for the year ended March 31, 1996.
The Company has developed a specific operating plan to meet the ongoing
liquidity needs of the Company's operations both for the year ended March 31,
1997, and thereafter. During the nine months ended December 31, 1996, the
Company reduced administrative salaries, certain employee benefit costs, and
marketing expenses. The Company also sold 20 of its existing Company-owned
cafes and carts for proceeds of $1,556,000 in cash, and is actively pursuing
the sale of additional assets. Despite the sale (and possible future sales)
of these Company-owned locations, the Company does intend to continue to
operate Company-owned locations in the future. During the nine months ended
December 31, 1996, the Company sold a total of 1,538,462 shares of its Common
Stock in two private placements, for net proceeds of $900,000, and it is
actively pursuing the possible placement of additional equity and/or debt
securities.
In addition to the operating plan, the Company will benefit from 12 months
of Paradise Bakery operating income during the year ended March 31, 1997, as
compared to three months in the year ended March 31, 1996.
Management believes that the Company's operating and financing plan will,
if carried out successfully, be sufficient to meet the Company's liquidity
needs for the year ended March 31, 1997 and thereafter. Based on the
Company's current cost structure and other expense calculations, and the
Company's current and anticipated revenue streams, including sales of new
Java Centrale franchises and the operating income expected to be produced by
the Company's Paradise Bakery chain, the Company estimates that it will break
even on cash flow at approximately September 30, 1997, assuming it succeeds
in maintaining its schedule for the opening of new Company and
franchisee-owned cafes. The Company does not expect to achieve profitability,
however, until approximately March 31, 1998, which is the end of its 1998
fiscal year, and then only if the Company's growth projections can be met and
its cost structure remains stable, of which there can be no assurance (see
"-- Reliance on Growth for Profitability" above). However, there can be no
assurance that enough new franchises will be sold to provide the necessary
liquidity, or that the Company's liquidity goals will be reached in the
immediate future, if ever.
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DEPENDENCE ON TWO PRODUCT-LINES
Prior to the Paradise Bakery acquisition, the Company's operations have
been, to a significant extent, limited to the sale of whole bean coffees,
coffee beverages and related products. These products are principally sold
through its Company-owned and franchised Java Centrale cafes, carts and
kiosks. They presently comprise about 20% of the Company's total revenue.
Although retail sales of specialty coffee increased from approximately $1.0
billion in 1990 to $1.2 billion in 1992, during the period between 1962 and
1992, per capita coffee consumption in the United States decreased
significantly. Any significant health concerns with respect to coffee could
have an adverse effect on coffee consumption and the Company's profitability.
The Company is not presently aware of any such significant health concerns.
By acquiring Paradise Bakery, the Company diversified its revenue base by
adding a new product line of convenience-based food products. Paradise Bakery's
quick service restaurant concept generates approximately 80% of the Company's
revenues. Paradise Bakery features menu items that include, depending upon the
type of location, specialty soups, salads and sandwiches, as well as an
assortment of bakery products, including cookies, muffins, croissants and
desserts that are freshly prepared and baked daily at each location.
FLUCTUATIONS IN AVAILABILITY AND COST OF GREEN COFFEE
The Company's revenues generated by sales at Java Centrale locations are
vulnerable to fluctuations in the cost and availability of green coffee. Java
Centrale locations currently obtain their coffees pursuant to a Producer
Agreement (the "Producer Agreement") between the Company and Coffee Bean
International ("CBI"), an independent roaster. Pursuant to the Producer
Agreement, the Company utilizes CBI, which, in turn, uses numerous outside
brokers, to source its primary raw material, green coffee. Coffee is the
world's second largest traded commodity and its supply and price are subject
to volatility. Although most coffee trades in the commodity market, coffee of
the quality sought by the Company tends to trade on a negotiated basis at a
substantial premium above commodity coffee pricing. Prices negotiated are
dependant on the market forces to create the aggregate supply and demand for
premium coffee beans at the time of purchase. Supply and price can be
affected by multiple factors, such as weather, politics and economics in the
producing countries.
GEOGRAPHIC CONCENTRATION
A significant amount of the currently operating Company-owned or
franchised cafes are located in the States of California, Texas, and Nevada.
Accordingly, the Company is susceptible to fluctuations in its business
caused by adverse economic conditions in those regions. Although California's
economy has been in a long recession over the past several years, there
recently have been indications that it may be in the early stages of a
recovery. California's economy exerts significant influence on the Nevada
economy, and as a result, although other sectors of the Nevada economy have
been strong, Nevada's gaming industry results in Nevada have been depressed
by the poor California economic performance. Difficult economic conditions in
other geographic regions into which the Company may expand may also adversely
affect the Company's results of operations. In addition, consumer preferences
and tastes vary from region to region, and there can be no assurance that
consumers located in the regions in which the Company intends to expand will
be as receptive to specialty coffees as consumers in existing markets.
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DEPENDENCE ON KEY PERSONNEL
Management of the Company is dependent to a large degree on the services
of Richard D. Shannon, Gary C. Nelson, Bradley B. Landin, Thomas A. Craig,
and Steven J. Orlando. Loss of the services of any of these individuals could
have a material adverse effect on the Company's business. Although the
Company has entered into employment agreements with each of the officers
named above, it does not maintain key man life insurance for any of them. In
addition, the Company believes that in order to succeed in the future it will
be required to continue to attract, retain and motivate additional highly
skilled executive, sales and other employees.
NO PROPRIETARY PROCESS
Because Java Centrale stores and kiosks do not have any patents for their
roasting specifications or the processes for preparing several of its coffee
related beverages, competitors may be able to copy such specifications or
processes. Moreover, there can be no assurance that competitors will not be
able to develop processes more advanced than those of the Company.
LIMITED REGISTRATION PERIOD
The Company does not intend to maintain indefinitely the effectiveness of
the Registration Statement of which this Prospectus forms a part. From and
after December 31, 1997, the Registration Statement will no longer be
effective (unless the Company has elected to extend its effectiveness), and
once the Registration Statement has been allowed to lapse the shares
described herein may no longer be sold in reliance upon this Prospectus or
the Registration Statement.
SUBSTANTIAL AMOUNT OF SHARES AVAILABLE FOR FUTURE SALE
Sale of a substantial number of shares of Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock. The Company's Articles of Incorporation authorize the issuance
of 25 million shares of Common Stock, of which only 13,262,482 shares were
outstanding as of December 31, 1996, and 25 million shares of preferred
Stock, of which no shares were outstanding as of the date of this Prospectus.
As a matter of corporate policy, the Company intends to issue shares of its
Common Stock as part of the consideration for future acquisitions and other
transactions, where the use of such shares appears to be appropriate and
cost-effective. The Company may, in the discretion of the Company's board of
directors (the "Board of Directors"), also issue shares in public or private
offerings as a means of raising capital, or as a means of compensating and
providing incentives to the Company's officers, directors, and consultants.
The Board of Directors is not normally required to obtain shareholder
approval for any such issuances.
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POSSIBLE FUTURE ISSUANCES OF COMMON STOCK AND OTHER SECURITIES
Additional shares of Common Stock of the Company may be issued at any
time by the Board of Directors, without shareholder approval. The issuance of
any such additional shares of Common Stock may have an adverse effect on the
market price of the Common Stock offered hereby. As a matter of corporate
policy, the Company intends to issue shares of its Common Stock as part of
the consideration for future acquisitions and other transactions, where the
use of such shares appears to be appropriate and cost-effective, or as a
means of compensating and providing incentives to the Company's officers,
directors, and consultants. As of December 31, 1996, the Company had
outstanding a total of 5,618,730 options or warrants to issue shares of its
Common Stock, at prices ranging from $0.25 to $9.90 per share. Additionally,
as of December 31, 1996, there were then outstanding three Convertible notes,
which provided, in the aggregate, for the potential issuance of a total of
4,143,404 new shares of Common Stock upon conversion of such notes at the
then-current market price of the Company's common stock.
Shares of preferred stock or other securities of the Company may also be
issued by the Board of Directors, without shareholder approval, on such terms
as the Board may determine. The rights of the holders of Common Stock will
be subject to, and may be adversely affected by, the rights of the holders of
any preferred stock that may be issued in the future. Moreover, although the
ability to issue preferred stock may provide flexibility in connection with
possible acquisitions and other corporate purposes, such issuance may make it
more difficult for a third party to acquire, or may discourage a third party
from acquiring a majority of the voting stock of the Company. The Company
has no current plans to issue any shares of preferred stock.
NO CASH DIVIDENDS
The Company has never paid any cash dividends on its Common Stock and
does not anticipate paying any such dividends in the foreseeable future. For
information about the Company's recently announced warrant dividend, see
"--Possible Future Issuances of Common Stock and Other Securities," above.
STOCK PRICE VOLATILITY
The price of the Company's Common Stock is subject to significant
volatility due to fluctuations in revenues, earnings, capitalization,
liquidity, press coverage, and financial market interest. Some of these
factors may be exacerbated because the Company operates in multiple retail
markets in widely dispersed geographic areas. The performance of Company
owned and franchised outlets in local market areas may be affected by weather
conditions and by local or regional economic trends or events, among other
things. Furthermore, the Company's markets tend to be both highly competitive
and dominated by a few exceptionally strong companies, such as the market for
coffee beverage and related products (which is dominated by Starbuck's, among
others) and the convenience-based food products market (which is dominated by
such national chains as McDonald's, Taco Bell, and Burger King). Market
perceptions of the Company's recent or potential performance in its various
local market areas, economic trends generally, and the Company's relative
degree of success with respect to its competition, among other factors, could
cause the price of its stock to vary significantly in the short and middle
term regardless of whether such perceptions prove to be accurate in the long
run.
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The Company's Common Stock is currently traded on the NASDAQ SmallCap
Market. This market has, from time to time, experienced extreme price and
volume fluctuations which often have been unrelated to the operating
performance of particular companies. There can be no assurance that the
NASDAQ SmallCap Market will not in the future experience more severe
fluctuations than are contemporaneously experienced by other U.S. stock
markets and exchanges, such as the New York Stock Exchange or the American
Stock Exchange, or the NASDAQ National Market List. Regulatory developments
and economic and other external factors, as well as period-to-period
fluctuations in financial results of the Company, may have a significant
impact on the market price of the Common Stock.
CONCENTRATION OF STOCK OWNERSHIP
As of December 31, 1996, the three Company stockholders of record which
held the largest numbers of common shares were Baycor Ventures, Inc.
("Baycor"), which owned of record approximately 14.1%, PSSS, Inc., which
owned of record approximately 6.3%, and Gary C. Nelson, who owned of record
approximately 5.3%. In the aggregate, Baycor, Mr. Nelson, and the other
officers and directors of the Company currently own of record approximately
22.4% of the currently outstanding Common Stock. Accordingly, if Baycor,
PSSS, Inc., Mr. Nelson, and the Company's other officers and directors were
to vote in the same manner on any matter requiring approval of a majority of
the outstanding Common Stock, such matter would most likely be approved or
defeated, as the case may be, although the outcome would not be certain.
Baycor is a wholly-owned subsidiary of Baycor Capital, Inc. Richard D.
Shannon, the Chairman of the Company, and Kevin R. Baker, a director of the
Company, each own 50% of the outstanding capital stock of Baycor Capital,
Inc. PSSS, Inc. is not affiliated with the Company or with Baycor or Baycor
Capital, Inc.
As of December 31, 1996, $1,900,454 of the convertible debt held by Santina
Holding, Inc., Gross Foundation, Inc. and Legong Investment Investments, N.V.
had been converted into 2,940,433 shares of Common Stock.
GENERAL LIABILITY AND COMMERCIAL INSURANCE; PRODUCT LIABILITY INSURANCE
Although the Company carries general liability and commercial insurance
with coverage up to $1,000,000 and product liability insurance with coverage
up to $1,000,000, there can be no assurance that this insurance will be
adequate to protect the Company against any general, commercial and/or
product liability claims. Any general, commercial and/or product liability
claim which is not covered by such policy, or is in excess of the limits of
liability of such policy, could have a material adverse effect on the
financial condition of the Company. There is no assurance that the Company
will be able to maintain this insurance on reasonable financial terms.
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GOVERNMENTAL REGULATION
The food service industry is subject to extensive federal, state and
local government regulations relating to the development and operation of
food service outlets, including laws and regulations relating to building and
seating requirements, the preparation and sale of food, cleanliness, safety
in the work place, accommodations for the disabled, and the Company's
relationship with its employees, such as minimum wage requirements,
discriminatory practices, overtime and working conditions and citizenship
requirements. The Company-owned and franchised cafes and carts are subject to
various federal laws and regulations, including without limitation, the Fair
Labor Standards Act, the Americans With Disabilities Act, the Department of
Agriculture, the Food & Drug Administration, and numerous State and local
laws and regulatory agencies. The failure to obtain or retain necessary food
licenses or substantial increases in the minimum wage could adversely affect
the operation of the Company. Furthermore, federal government proposals
relating to health care may result in higher costs for the Company. The
Company is also subject to federal regulations and certain state laws which
regulate the offer and sale of franchises to its franchisees.
LISTING ON THE NASD SMALLCAP MARKET UNDER CURRENT LISTING RULES
The Company's Common Stock is currently listed for trading on the NASD
SmallCap Market. The basic maintenance criteria for the Company to keep its
Common Stock quoted on the NASDAQ SmallCap Market under current NASD rules are
as follows:
1. The Common Stock must be registered with the Securities and Exchange
Commission under Section 12(g)(1) of the Securities Act of 1934, as
amended;
2. The Company must maintain total assets of at least $2,000,000;
3. The Company must have at least $1,000,000 in capital and surplus;
4. The Company must maintain a public float of at least 100,000 shares;
5. The market value of the public float must be equal to at least
$200,000;
6. Either one or the other of the following criteria must be met: (a) the
minimum bid price for the Company's Common Stock must be at least
$1.00 per share, or alternatively (b) the aggregate market value of
the Company's public float must be at least $1,000,000 AND the Company
must have at least $2,000,000 in combined capital and surplus;
7. The Company must have at least two registered and active market
makers; and
8. The Company must have at least 300 beneficial holders of its Common
Stock.
In addition to the foregoing criteria, the NASD also requires listed
companies to meet certain corporate governance and shareholder voting rights
standards. Although the Company and its Common Stock currently meet all of
the above maintenance criteria and standards, there can be no assurance that
such criteria will continue to be met in the future. In addition, the NASD
has proposed certain changes in its listing and maintenance criteria (see the
following Risk Factor), which the Company may or may not be able to meet in
the future.
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EFFECT OF PROPOSED CHANGES TO NASD SMALLCAP MARKET LISTING RULES
The NASD has published for comment a number of possible changes to its
listing and maintenance criteria for companies quoted on the NASDAQ SmallCap
Market. If adopted in final form, the proposed changes are currently scheduled
to go into effect during the second half of 1997.
The NASD's current proposal would, among other things, require that the
minimum bid price for any stock quoted on that market is $1.00; if the
minimum bid price for a listed company's stock should drop below $1.00 for a
material period of time, it would become eligible for delisting from the
NASDAQ SmallCap Market List. Current NASD rules provide that one or the other
(but not necessarily both) of the following criteria must be met: either (a)
the minimum bid price for the Company's Common Stock must be at least $1.00
per share, or alternatively (b) the aggregate market value of the Company's
public float must be at least $1,000,000 AND the Company must have at least
$2,000,000 in combined capital and surplus. The Company does meet the current
listing criteria, but it may not meet the new standards in this respect. For
the entire period between September 30, 1996 and January 31, 1997, the daily
low price bid per share for the Company's Common Stock ranged from a low of
$0.47 to a high of $0.94, never equalling or exceeding $1.00. Therefore, if
the NASD's current proposals are adopted without change and the minimum bid
prices for the Company's Common Stock do not remain above $1.00, the Company
may need to consider effectuating a reverse stock split or taking some other
corporate action in order to be confident of its continuing ability to meet
the NASD's new minimum bid requirements in this respect.
Another of the criteria currently being proposed by the NASD is that
companies having securities listed on the SmallCap market maintain at least one
of the following: either (a) net tangible assets of $2,000,000, or (b) a market
capitalization of $35,000,000, or (c) annual net income for two of the previous
three years of at least $500,000. The Company currently has net tangible assets
significantly in excess of the minimum described in the proposed rules, but it
does not meet the other alternative criteria described above. If the Company's
net tangible assets should in the future drop below $2,000,000 (a development
not anticipated by the Company), this maintenance requirement could create a
problem for the Company in the future.
In addition, there can be no assurance that the maintenance requirements
ultimately adopted by the NASD will not be stronger, or otherwise different,
than those currently being proposed, or that the Company will be able to meet
any such other criteria if adopted by the NASD. If the Company is unable to
substantially improve the minimum bid price for its Common Stock or
effectuate a reverse stock split, or if its net tangible assets drop below
$2,000,000 for any significant period of time, or if other criteria are
adopted by the NASD which are more restrictive than those currently proposed,
the Company's Common Stock could ultimately be delisted from the NASDAQ
SmallCap Market List. In such an event, the trading market for its Common
Stock would immediately become be far less liquid than it is at present.
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SELLING STOCKHOLDERS
The Shares registered hereunder are being offered for the accounts of the
stockholders of the Company listed below (the "Selling Stockholders").
Shares
Owned Shares Owned
Prior to Shares To Be After Offering
Stockholder Offering Offered Number(1) Percent(2)
----------- -------- ------------ --------- ----------
James E. Elliott 25,934 12,967 12,967 *
Lillian P. Elliott 4,000 2,000 2,000 *
Dennis R. Golden 13,948 6,974 6,974 *
Richard W. Harris 6,118 3,059 3,059 *
Graham Pacific, Inc. 62,284 62,284 -0- -0-
Artistic License, Inc.(3) 300,000 300,000 -0- -0-
Alta Petroleum, Inc.(4) 50,000 50,000 -0- -0-
TOTALS 462,284 437,284 25,000 *
_________________________
(*) Indicates less than 1%
(1) Assumes all shares to be offered will be sold.
(2) Percentage of Common Stock outstanding estimated to be owned after
completion of the offering, based upon 12,902,239 shares of Common Stock
outstanding as of October 22, 1996.
(3) Represents shares which may be acquired upon the exercise of certain Stock
Purchase Warrants held by Artistic License, Inc. See "TERMS OF THE ARTISTIC
WARRANT" below for more information on these shares.
(4) Represents shares which may be acquired upon the exercise of certain Stock
Purchase Warrants held by Alta Petroleum, Inc. See "TERMS OF THE ALTA
WARRANT" below for more information on these shares.
James E. and Lilian P. Elliott, Dennis R. Golden, and Richard W. Harris
were all shareholders of GEM Ventures, Inc., a Nevada corporation which was
until August 1995 a Java Centrale franchisee based in Reno, Nevada. In August
of 1995 the Company agreed to purchase the franchise and certain of its
assets from GEM Ventures, Inc. in exchange for 50,000 shares of stock.
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Artistic License, Inc. is a licensed California Finance Lender which in
July 1995 loaned the Company $350,000 in exchange for a Promissory Note due
in April 1997. As partial consideration for the loan, Artistic License, Inc.
sought and received from the Company the stock purchase warrants described
below. The loan from Artistic license, Inc. was paid in full on December 4,
1996.
Alta Petroleum, Inc. granted the Company a credit line of $400,000 in
July 1996. As partial consideration for the credit line, Alta Petroleum, Inc.
received from the Company the stock purchase warrant described below.
SECURITIES BEING OFFERED
This Prospectus relates to the following securities which have been or may
be issued by the Company:
(a) A total of 25,000 shares of the Company's Common Stock (the "GEM
Shares") which are held as described above by James E. Elliott,
Lillian P. Elliott, Dennis R. Golden, and Richard W. Golden, four
individuals who were investors and/or principals in a former Company
franchisee, GEM Ventures, Inc., a Nevada corporation ("GEM"). These
individuals received the GEM Shares as a result of a transaction
between the Company and Gem in August of 1995.
(b) A total of 62,284 shares of the Company's Common Stock which are held
by Graham Pacific, Inc., a Washington corporation ("Graham"). Graham
received these shares (the "Graham Shares") as a result of a
transaction between the Company and Graham in October of 1995.
(c) Up to 300,000 shares of Company's Stock which may be issued to
Artistic upon the exercise of certain stock purchase warrants held by
Artistic (the "Artistic Warrant Shares"), and
(d) Up to 50,000 shares of the Company's Stock which may be issued to Alta
upon the exercise of certain stock purchase warrants held by Alta (the
"Alta Warrant Shares").
GRAHAM AND GEM SHARES
The Shares being offered hereby include 87,284 shares of Common Stock
which were originally issued as a result of two privately negotiated
transactions with former Company franchisees during August and October of
1995. The agreements pursuant to which the GEM Shares and the Graham Shares
were issued each included a Company undertaking to register the Shares in
question. These initial issuances were themselves exempt from registration
under the Securities Act pursuant to Section 4(2) of the Securities Act.
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ARTISTIC WARRANT SHARES
The Shares being offered hereby include 300,000 shares of Common Stock
which Artistic has the right to purchase by exercising Common Stock purchase
warrants that were issued to it by the Company, on July 11, 1996 (the
"Artistic Warrants"). The Artistic Warrants were issued to Artistic in
connection with a transaction between Artistic and the Company pursuant to
which Artistic, which is a licensed California Finance Lender, made a loan of
$350,000 to the Company on July 11, 1996. This loan has since been paid off
in full. The Artistic Warrants are exercisable at any time prior to 5:00 PM,
California time, on April 30, 1997 (the "Artistic Expiration Time"), at a
price equal to the lowest closing sale price recorded on the National
Association of Securities Dealers, Inc. Automated Quotation System, SmallCap
Market List, for the Company's Common Stock on any trading day which falls
(i) at least one day prior to the date on which notice of exercise of the
Artistic Warrants is sent to the Company, and (ii) between July 11, 1996 and
April 30, 1997.
ALTA WARRANT SHARES
The Shares being offered hereby include 50,000 shares of Common Stock
which Alta has the right to purchase by exercising Common Stock purchase
warrants that were issued to it by the Company, effective as of October 21,
1996 (the "Alta Warrants"). The Alta Warrants were issued to Alta in
connection with a credit line issued to the Company in July 1996. The Alta
Warrants are exercisable at any time prior to 5:00 PM, California time, on
June 30, 2000, at a price equal to the lowest closing sale price recorded on
the National Association of Securities Dealers, Inc. Automated Quotation
System, SmallCap Market, for the Company's Common Stock on any trading day
which falls (i) at least one day prior to the date on which notice of
exercise of the Alta Warrants is sent to the Company and (ii) between July
10, 1996 and April 30, 1997.
DESCRIPTION OF THE COMMON STOCK
The Company is authorized to issue up to 25,000,000 shares of no par
value Common Stock, and 25,000,000 shares of preferred stock. As of October
22, 1996, 12,902,239 shares of the Company's Common Stock were issued and
outstanding, and no shares of the preferred stock, were issued and
outstanding. The Company's Common Stock has been registered, as a class,
under Section 12 of the Exchange Act.
Subject to preferential rights of the holders of preferred stock and
senior debt securities (if any) and the applicable provisions of the
California General Corporation Law, the holders of the Company's Common Stock
will be entitled to receive such dividends as may be declared by the Board of
Directors out of funds legally available therefor, and on liquidation,
dissolution, or winding up of the Company such holders will be entitled to
receive pro rata its net assets remaining after the payment of all creditors.
The holders of the Common Stock are entitled to one vote for each share
on all matters submitted to a vote of the shareholders. In any election of
directors each shareholder has the right to cumulate votes. Shareholders have
no preemptive rights or other rights to subscribe for additional shares.
There are no conversion rights, redemption rights, or sinking fund provisions
with respect to shares of the Common Stock. The outstanding shares of Common
Stock are fully-paid and nonassessable.
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GENERAL DESCRIPTION OF THE WARRANTS
All questions about the issuance, exercise, and terms of the Warrants and
the rights of the Warrant Holders will be decided by the Company's Board of
Directors. For a full description of the Warrants, please refer to the
Warrants themselves, copies of which are attached hereto as Exhibits A and B,
respectively, and are by this reference incorporated herein. The descriptions
of the Warrants contained in this Prospectus are qualified in their entirety
by reference to the complete text of such documents. Any conflict between the
summary provided in this Prospectus and the actual terms of such documents
must be resolved in favor of the terms as expressed in the documents
themselves. Copies of the Warrants may also be obtained from the Company by
persons entitled thereto upon request, free of charge.
SECURITIES AVAILABLE UPON EXERCISE OF THE WARRANTS
Each of the Warrants provides for the issuance, upon exercise and payment
of the exercise price, as described below (see "TERMS OF THE ARTISTIC WARRANT"
and "TERMS OF THE ALTA WARRANT" below), of that number of shares of the
Company's Common Stock which is specified therein; however both the number of
Shares which may be obtained upon exercise of the Warrants and the exercise
price for the Warrants are subject to adjustment in certain circumstances, as
more fully described below.
MANNER OF EXERCISE
The holder of each of the Warrants may exercise them to purchase all or
any whole number of the Shares covered by the respective Warrants by (a)
completing in the manner indicated, and executing, a subscription form (which
is attached to each of the Warrants) for that number of Shares to which it is
entitled and desires to purchase; (b) surrendering its current Warrant to the
Company at the Company's principal place of business in Sacramento,
California; and (c) paying the appropriate purchase price for the Shares, by
cash, money order, bank draft, or certified check, payable to the Company at
its principal place of business in Sacramento, California.
RIGHTS AS A SHAREHOLDER, EMPLOYEE, OR CONSULTANT
No person who holds a Warrant will have any rights as a Company shareholder
with respect to the Shares represented thereby until such Warrant is exercised
and the Shares are actually issued. The grant of a Warrant does not impose any
obligation whatsoever on the Company to employ or continue to employ the
recipient of the Warrant, and does not interfere with the Company's right to
terminate any position he or she may have with the Company, as a consultant or
otherwise, at any time.
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TRANSFER OF THE WARRANTS
The Warrants are nontransferable, and any attempt to sell, assign,
transfer, hypothecate, or otherwise convey or encumber any interest in any
Warrant, or any Shares which may be (but have not yet been) obtained upon
exercise of a Warrant, is invalid. The Company has no obligation to recognize
any such sale, assignment, transfer, hypothecation, or other conveyance or
encumbrance; or to reflect any such purported transaction on the official
records of the Company; or to issue Warrants or shares of its Common Stock to
any party in violation of this restriction. Consequently there is not, and
there will not be, any market for the Warrants themselves.
REDEMPTION RIGHTS
The Warrants do not provide the Company with any redemption rights with
respect to either the Warrants themselves or the underlying shares of Common
Stock.
TERMS OF THE ARTISTIC WARRANT
The Artistic Warrant may be exercised, at any time prior June 30, 2000
(the "Artistic Expiration Time"), to purchase up to Three Hundred Thousand
(300,000) Shares at the lowest closing sale price recorded on the National
Association of Securities Dealers, Inc. Automated Quotation System, SmallCap
Market, for the Company's Common Stock on any trading day which falls (i) at
least one day prior to the date on which notice of exercise of such Warrants
is sent to the Company, and (ii) between July 11, 1996 and April 30, 1997.
The total number of shares for which the Artistic Warrant may be
exercised, and Artistic's Exercise Price, may be adjusted and re-adjusted
from time to time as described below, (see "Adjustments to the Artistic
Warrant's Exercise Price" and "Adjustments to the Number of Artistic
Shares"). No portion of the Artistic Warrant has been exercised as of the
date of this Prospectus.
ADJUSTMENTS TO THE NUMBER OF ARTISTIC SHARES.
The Artistic Warrant provides that if, prior to the Artistic Warrant
Expiration Time, the number of outstanding shares of the Company's Common Stock
are increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment must be made in the number and kind of
shares as to which the Artistic Warrant may be exercised. By way of example
only, if the Company should make a two-for-one stock split of its outstanding
shares of Common Stock, the number of Shares for which the Artistic Warrant may
be exercised would thereupon increase from 300,000 to 600,000 Shares, with a
corresponding change in the exercise prices applicable to the Artistic Warrant
as described below (see "Adjustments to the Artistic Warrant's Exercise Price"
below).
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ADJUSTMENTS TO THE ARTISTIC WARRANT EXERCISE PRICE
In the event of a change in the number of shares of Common Stock which
may be caused by any event described above (see "Adjustments to the Number of
Artistic Shares"), a corresponding adjustment changing Artistic's Exercise
Price per share of Common Stock attributable to any unexercised portion of
the Artistic Warrant must also be made. By way of example only, if the
Company should make a two-for-one stock split of its Common Stock then, in
addition to the change in number of shares for which the Artistic Warrant may
be exercised as described above, the otherwise applicable exercise price for
the Artistic warrants would be divided by one-half.
A complete copy of the Artistic Warrant, including the Artistic Warrant
Subscription Form, is attached to this Prospectus as Exhibit 4.1.
TERMS OF THE ALTA WARRANT
The Alta Warrant may be exercised, at any time prior June 30, 2000 (the
"Alta Expiration Time"), to purchase up to Fifty Thousand (50,000) Shares at
the lowest closing sale price recorded on the National Association of
Securities Dealers, Inc. Automated Quotation System, SmallCap Market, for the
Company's Common Stock on any trading day which falls (i) at least one day
prior to the date on which notice of exercise of such Warrants is sent to the
Company, and (ii) between July 10, 1996 and April 30, 1997.
The total number of shares for which the Alta Warrant may be exercised,
and Alta's Exercise Price, may be adjusted and re-adjusted from time to time
as described below, (see "Adjustments to the Alta Warrant's Exercise Price"
and "Adjustments to the Number of Alta Shares"). No portion of the Alta
Warrant has been exercised as of the date of this Prospectus.
ADJUSTMENTS TO THE NUMBER OF ALTA SHARES.
The Alta Warrant provides that if, prior to the Alta Warrant Expiration
Time, the number of outstanding shares of the Company's Common Stock are
increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment must be made in the number and kind of
shares as to which the Alta Warrant may be exercised. By way of example (only),
if the Company should make a two-for-one stock split of its outstanding shares
of Common Stock, the number of Shares for which the Alta Warrant may be
exercised would thereupon increase from 50,000 to 100,000 Shares, with a
corresponding change in the exercise prices applicable to the Alta Warrant as
described below (see "Adjustments to the Alta Warrant's Exercise Price").
ADJUSTMENTS TO THE ALTA WARRANT EXERCISE PRICE
In the event of a change in the number of shares of Common Stock which
may be caused by any event described above (see "Adjustments to the Number of
Alta Shares"), a corresponding adjustment changing Alta's Exercise Price per
share of Common Stock attributable to any unexercised portion of the Alta
Warrant must also be made. By way of example, only, if the Company should
make a two-for-one stock split of its Common Stock as described above then,
in addition to the change in number of shares for which the Alta Warrant may
be exercised as described above, the otherwise applicable exercise price for
each share of Common Stock for which the Alta Warrant may thereafter be
exercised would be divided by one-half.
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A complete copy of the Alta Warrant, including the Alta Warrant
Subscription Form, is attached to this Prospectus as Exhibit 4.2.
RESALES OF COMPANY SECURITIES BY INSIDERS
The Warrants are by their terms nontransferable, and consequently, except
for the Section 16 issues outlined in this section, the following discussion
does not apply to them. There are no contractual restrictions applicable to the
Shares which may be obtained upon exercise of the Warrants.
Persons who are not deemed to be "affiliates" of the Company, as that term
is defined in the rules under the Securities Act, may as a general rule freely
resell, from time to time, any Shares they acquire under the Warrants. Persons
who are "affiliates" of the Company, however, may as a general rule only resell
Shares (i) in accordance with the provisions of Rule 144 under the Securities
Act, or (ii) pursuant to an effective registration statement filed with the SEC
OTHER THAN the Registration Statement of which this Prospectus forms a part.
This Prospectus may not be used in connection with any resales of the Shares by
affiliates of the Company. Certain officers of the Company and its
subsidiaries, and all directors and 10% or greater shareholders of the Company,
will normally be deemed to be "affiliates" of the Company for purposes of the
Securities Act and Rule 144. ANY HOLDER OF SHARES WHO IS ALSO AN OFFICER,
DIRECTOR, OR 10% SHAREHOLDER OF THE COMPANY OR ANY OF ITS AFFILIATES IS
CAUTIONED TO CONSULT WITH COUNSEL REGARDING HIS OR HER POTENTIAL STATUS AS AN
"AFFILIATE" BEFORE EFFECTING ANY TRANSACTIONS IN SHARES.
Section 16 of the Exchange Act applies to Company stock transactions by
members of its Board of Directors, certain corporate officers of the Company
and its subsidiaries, and all holders of more than 10% of its the Company's
common or preferred stock ("Section 16 Insiders"). Under this law, Section 16
insiders must report these transactions to the SEC.
In addition, if any Section 16 Insider realizes a profit from either:
(i) the grant or acquisition of warrants, convertible preferred stock,
options, stock appreciation rights or other similar rights with an exercise
or conversion privilege at a price related to Company stock, or similar
securities with a value derived from the value of an equity security,
("Derivative Securities Contracts") by the Company; followed within six
months by the sale of those Derivative Securities Contracts, Company stock
or other Derivative Securities Contracts (a "purchase and sale");
(ii) a purchase of Company stock, followed within six months by a sale of
those or other Company shares (a "purchase and sale");
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(iii) the sale of Company stock or Derivative Securities Contracts,
followed within six months by the grant or acquisition of Warrants, or
other Derivative Securities Contracts or the purchase of Company stock; (a
"sale and purchase"); or
(iv) a sale of Company stock, followed within six months by a purchase of
those or other Company shares (a "sale and purchase");
then the Section 16 Insider could be forced to repay this "short-swing profit"
to the Company.
All officers, directors, and employees of the Company and its affiliates
(whether or not they are Section 16 Insiders), and all other shareholders who
or which may be in possession of material non-public information about the
Company, should also keep in mind the rules against "insider trading" when
considering whether to buy or sell Company stock. Federal and California law,
and the Company's own corporate policies, prohibit the purchase or sale of
Company stock while the buyer or seller is in possession of material
information about the company or its prospects which have not yet been made
public.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax consequences
associated with the granting and exercise of the Artistic Warrants and the Alta
Warrants, as well as the sale of the shares of the Common Stock underlying the
aforementioned Warrants, the Artistic Shares and the Alta Shares. This summary
is based on existing federal income tax laws and regulations, and does not
discuss the provisions of the income tax laws of any State or foreign country.
This summary is applicable only as of the date of this Prospectus, and Warrant
holder should be aware that federal tax laws and regulations are subject to
change at any time. It is not intended to be, or offered as, a complete
description of the tax consequences which may be associated with any individual
grant or exercise of a Warrant, or as tax, investment, or legal advice. EVERY
PERSON OR ENTITY HOLDING ARTISTIC WARRANTS, ALTA WARRANTS, OR SHARES OF COMMON
STOCK OBTAINED UPON THE EXERCISE OF THE AFOREMENTIONED WARRANTS SHOULD CONSULT
HIS, HER, OR ITS OWN TAX ADVISOR CONCERNING HIS, HER, OR ITS INDIVIDUAL
SITUATION.
TAX CONSEQUENCES OF GRANT OR EXERCISE OF A WARRANT
Holders of the Warrants do not recognize taxable income on the date of
the grant of the Warrants themselves, which are in effect non-statutory
options. Normally, however, they will recognize ordinary income on the date
of exercise of the Warrants, in the amount of the difference between the
Warrant exercise price and the fair market value of the Company's Common
Stock on the date of the exercise. However, if the holder of a Warrant is
subject to the restrictions on resale imposed by Section 16 of the Exchange
Act, as described above (see "RESALES OF COMPANY SECURITIES TO INSIDERS,"
above), he or she will normally recognize ordinary income under a slightly
modified set of rules (see "TAX TREATMENT OF SECTION 16 INSIDERS," below).
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TAXATION UPON SALE OF THE SHARES
When the Shares obtained through the exercise of the Warrants are sold, any
difference between the sale price and the Warrant holder's tax basis in the
shares (normally, the basis will be equal to the exercise price plus any income
recognized by the Warrant holder on exercise of the Warrant) will be treated as
capital gain or loss. This gain or loss will be treated as a long-term capital
gain or loss unless the Shares have been held for less than one year, in which
case it will be treated as a short-term capital gain or loss.
TAX TREATMENT OF SECTION 16 INSIDERS
Warrant Holders will normally recognize income for federal income tax
purposes at the time a Warrant is exercised. However, a Warrant Holder who is
a Section 16 Insider, and who exercises a Warrant less than six months after
the date it was granted, will not recognize income for federal income tax
purposes until the earlier of (i) the expiration of such six-month period or
(ii) the first day on which a sale of the Shares received upon such exercise,
at a profit, will not subject the Warrant Holder to liability under Section
16, unless he or she elects to be taxed at the time of exercise by filing an
election with the Internal Revenue Service under Section 83(b) of the Code.
The election under 83(b) must be filed within 30 days of the date of
exercise. The Internal Revenue Service has taken the position that there will
be no such deferred taxation in the situation where a Section 16 Insider has
purchased the Company Shares (in a transaction unrelated to the Warrants)
within six months prior to the date of exercise in a transaction which is not
exempt from the short-swing profit provisions of Section 16. See "RESALES OF
COMMON STOCK BY INSIDERS," above.
TAX BENEFITS TO THE COMPANY
The Company will be entitled to a deduction for federal tax purposes at the
time that any optionee recognizes ordinary income and in the amount of such
included income with respect to the exercise of a Warrant.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Shares may be offered from time to
time by or for the account of the Selling Stockholders through dealers,
brokers or other agents, or directly to one or more purchasers, at market
prices prevailing at the time of sale or prices otherwise negotiated.
The Registration Statement covering the Shares offered hereby will be
maintained in effect, and the Shares may be sold thereunder by the Selling
Stockholders, until December 31, 1997 (the "Offering Period"). At the end of
the Offering Period, Shares not sold by the Selling Stockholders during the
Offering Period will return to the status of restricted stock which may be sold
pursuant to the provisions of Rule 144 under the Securities Act of 1933 (the
"Act").
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<PAGE>
Several of the Selling Stockholders have advised the Company that they may
sell the Shares, directly or through brokers or dealers, from time to time
during the Offering Period. Such sales may be made at the market price in one
or more transactions on the NASD Automated Quotation System, SmallCap Market,
on
any other local or national exchange or quotation system on which the Company's
Common Stock may then be listed; or at privately negotiated prices in
negotiated
transactions; or otherwise at prices and terms prevailing at the time of sale.
USE OF PROCEEDS
The Company will not receive any proceeds from any sale or other transfer
of any of the Shares. All proceeds from such transactions will go to the
holders of the Shares. All proceeds derived from the exercise of the Warrants
has been or will be used for general corporate purposes.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Articles of Incorporation and By-Laws provide for
indemnification of directors and officers to the full extent permitted or
authorized under California Law, for expenses, liabilities and losses actually
and reasonably incurred as a result of any such director's or officer's status
as such, provided that the indemnitee acted in good faith and in a manner he or
she believed to be in or not to be opposed to the best interest of the
corporation. In addition, the Company has entered into an Indemnification
Agreement with each of its directors and executive officers, which agreement
provides, among other things, for contractual rights of the indemnitee to
advancement of expenses prior to final disposition of an action provided that,
if required by California law, the indemnitee agrees to repay such advance upon
the Company's request if it is ultimately determined that the indemnitee is not
entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL MATTERS
The legality of the Common Stock offered hereby will be passed upon for the
Company by Rosenblum, Parish & Isaacs, PC, of San Francisco and San Jose,
California.
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EXPERTS
The audited consolidated financial statements and schedules incorporated
by reference in this Prospectus and elsewhere in this Registration Statement
have been audited by Grant Thornton LLP, independent certified public
accountants, as indicated in their reports with respect thereto; and are
included therein and incorporated herein by reference in reliance upon the
authority of such firm as experts in providing such reports.
No person has been authorized in connection with this offering to give
any information, or to make any representation not 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. This Prospectus
does not constitute an offer of any securities other than those to which it
relates or an offer to any person in any jurisdiction where such an offer
would be unlawful, or in which the person making such offer or solicitation
is not qualified to do so. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication
that the information herein is correct as of any time subsequent to its date.
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
---------------------------------------------
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with
the sale and distribution of the Shares being registered, other than
underwriting discounts and commissions, if any, incurred by the Selling
Stockholders in sales of Shares effected through intermediaries. All of the
amounts shown are estimates except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission
Registration Fee . . . . . . . . . . . . . . . $ 95.00
Accounting Fees. . . . . . . . . . . . . . . . . . . 3,500.00*
Legal Fees . . . . . . . . . . . . . . . . . . . . . 8,500.00*
Miscellaneous. . . . . . . . . . . . . . . . . . . . 2,000.00*
----------
TOTAL. . . . . . . . . . . . . . . . . . . $14,095.00*
________________
* Estimated
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article V of the Registrant's Amended and Restated Articles of
Incorporation (the "Articles") provides that the liability of directors of
the Registrant for monetary damages is eliminated to the fullest extent
permissible under California law.
Article VI of the Articles provides that the Registrant is authorized to
indemnify its directors and officers to the fullest extend permissible under
California law.
Article VI of the Registrant's Amended and Restated Bylaws (the "Bylaws")
provides, with certain qualifications, that the Registrant shall have the power
to indemnify any person, who is or is threatened to be made a party to
proceeding by reason of the fact that he or she is or was an officer, director,
employee, or agent of the Registrant, for all costs, expenses and other amounts
actually and reasonably incurred in connection with such proceeding. The
foregoing indemnification is conditioned upon a finding, by either (i) the
uninterested members of the Registrant's Board of Directors, (ii) its
shareholders, (iii) independent legal counsel in a written opinion, or (iv) the
court in which the proceeding is or was pending, that the person seeking
indemnification was acting in good faith and in a manner reasonably believed to
be in the best interests of the Registrant, or in the case of a criminal
proceeding that he or she had no reasonable cause to believe that his or her
conduct was unlawful.
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<PAGE>
As authorized by the foregoing Article and Bylaw provisions, the
Registrant and each of its Directors and executive officers individually have
entered into indemnification agreements whereby the Registrant agreed to
indemnify such individuals against any claims or expenses they may incur as a
result of serving the Registrant in those or other capacities, provided that
the person seeking indemnification was acting in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Registrant, or in the case of a criminal proceeding that he or she had no
reasonable cause to believe that his or her conduct was unlawful.
Additionally, the Registrant has entered into separate Indemnification
Agreements, with the Registrant's principal corporate shareholder and the
corporation which holds all of that company's stock, which provide similar
indemnification against claims and expenses arising out of those
relationships and certain consulting arrangements between those entities and
the Registrant.
Item 16. EXHIBITS.
4.1 Stock Purchase Warrant, dated July 11, 1996, issued by the
Company to Artistic License, Inc.
4.2 Stock Purchase Warrant, dated October 21, 1996, issued by the
Company to Alta Petroleum, Inc.
5. Opinion of Rosenblum, Parish & Isaacs, PC
23.1 Consent of Rosenblum, Parish & Isaacs, PC
(See Exhibit 5)
23.2 Consent of Grant Thornton LLP
24. Power of Attorney
Item 17. UNDERTAKINGS.
(a) The undersigned hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" section of the effective
registration statement;
II-2
<PAGE>
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 each such post-effective amendment shall be deemed to
be a new registration statement 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 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.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Pre-Effective Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Sacramento, California, this 17th day of March 1997.
JAVA CENTRALE, INC.
By: /S/ GARY C. NELSON
------------------------------
Gary C. Nelson
Its President
(Principal Executive Officer)
By: /S/ STEVEN J. ORLANDO
------------------------------
Steven J. Orlando
Its Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Pre-Effective Amendment No. 2 has been signed by the following persons in
the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/S/ KEVIN R. BAKER*
- -------------------------- Director March 17, 1997
Kevin R. Baker
/S/ LYLE P. EDWARDS*
- -------------------------- Director March 17, 1997
Lyle P. Edwards
/S/ GARY C. NELSON
- -------------------------- Director and March 17, 1997
Gary C. Nelson President
/S/ RICHARD D. SHANNON* Director and March 17, 1997
- -------------------------- Chairman of
Richard D. Shannon the Board
* By /S/ GARY C. NELSON
- -------------------------- March 17, 1997
Gary C. Nelson
Attorney-in-Fact
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<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Exhibit
4.1* Stock Purchase Warrant, dated July 11, 1996,
issued by the Company to Artistic License, Inc.
4.2* Stock Purchase Warrant, dated October 21, 1996,
issued by the Company to Alta Petroleum, Inc.
5. Opinion of Rosenblum, Parish & Isaacs, PC
23.1 Consent of Rosenblum, Parish & Isaacs, PC
(See Exhibit 5)
23.2 Consent of Grant Thornton, LLP
____________________
* PREVIOUSLY FILED.
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<PAGE>
EXHIBIT 4.1
STOCK PURCHASE WARRANT
THREE HUNDRED THOUSAND (300,000) WARRANTS
TO PURCHASE COMMON STOCK OF
JAVA CENTRALE, INC.
THIS WARRANT IS TO CERTIFY THAT JAVA CENTRALE, INC., a California
corporation (the "Company") has, effective as of the execution date indicated
below, authorized the issuance to ARTISTIC LICENSE, INC., a California
corporation, ("ALI"), of rights to purchase (the "Warrants") an aggregate of
Three Hundred Thousand (300,000) fully-paid and non-assessable shares of the
no par value Common Stock of the Company (the "Warrant Shares"), on the basis
of one Share for each Warrant, exercisable at any time prior to 5:00 PM,
California time, on June 30, 2000 (the "Expiration Time"), at the principal
office of the Company, on payment of the price per Share specified in Section 2
of this Warrant and subject to the terms and conditions governing this
Warrant hereinafter expressed.
THIS IS TO CERTIFY ALSO THAT, for value received, the Company agrees,
subject to the terms and conditions hereinafter expressed, to sell and deliver
to ALI 300,000 fully-paid and nonassessable Warrants.
This Warrant is nontransferable, shall be subject to all of the terms
hereof as set forth below, and shall become void, and terminate and lapse, at
the Expiration Time, after which this Warrant shall be of no further force nor
effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
the undersigned, duly authorized thereunto.
DATED as of July 11, 1996.
JAVA CENTRALE, INC.
By: /S/ GARY C. NELSON
------------------------
Gary C. Nelson
Its President
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<PAGE>
WARRANTS TO PURCHASE COMMON STOCK
The terms and conditions with respect to the holding and exercise of these
Stock Purchase Warrants are as follows.
1. NUMBER OF SHARES ACQUIRABLE UPON EXERCISE; CERTAIN ADJUSTMENTS.
(a) ALI shall be initially entitled to receive, upon exercise hereof,
up to Three Hundred Thousand (300,000) shares of the Company's Common Stock,
subject, however, to adjustment as provided below.
(b) If, following the date hereof and prior to the Expiration Time
(as defined below), the outstanding shares of the Company's Common Stock
shall be increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment shall be made in the number and kind
of shares as to which any remaining unexercised Warrants may be exercised. By
way of example only, if the Company should undergo a one-for-two reverse
stock split of its outstanding shares of Common Stock prior to the exercise
of any such warrants, the number of shares for which the Warrants may be
exercised would thereupon decrease to 150,000 shares.
(c) Any increase or decrease in the number of shares obtainable
through the exercise of the Warrants shall become effective immediately
following the effective time of the stock split or consolidation causing such
increase or decrease, or in the case of an increase required by a stock
dividend, shall become effective as of the payment or distribution date of such
dividend.
(d) No fractional shares of stock shall be issued or made available
under the this Warrant on account of any such adjustment, and fractional share
interests shall be disregarded.
2. EXERCISE PRICE.
(a) The Exercise Price for the Warrant Shares shall be equal to the
lowest closing sale price recorded on the National Association of Securities
Dealers, Inc. Automated Quotation System, SmallCap Market, for the Company's
Common Stock on any trading day which falls (i) at least one (1) day prior to
the date on which notice of exercise of such Warrants is sent to the Company as
provided in Section 3, below, and (ii) between the date hereof and April 30,
1997.
(b) Subject to all of the other terms of this Warrant, ALI may
purchase any or all of the Warrant Shares at any time during the term of this
Warrant; PROVIDED, HOWEVER, that any subsequent fluctuation in the closing
sales prices of the Company's Common Stock shall not affect any prior sale or
sales.
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<PAGE>
3. METHOD OF EXERCISE. ALI may exercise its right to purchase Warrant
Shares pursuant to this Warrant at any time prior to the Expiration Time, by
(a) completing in the manner indicated, and executing, the attached
Subscription Form for that number of Warrant Shares which it is entitled, and
desires, to purchase; (b) surrendering the Warrant to the Company at its
principal place of business in Sacramento, California; and (c) paying the
appropriate purchase price for the Warrant Shares (rounded to the nearest
whole cent), by cash, money order, bank draft, or certified check, payable to
the Company at its principal place of business in Sacramento, California.
Upon such surrender and payment, the Company will issue to ALI the number of
Warrant Shares so subscribed for.
4. EFFECT OF EXERCISE. Upon surrender of this Warrant and due payment
of the exercise price, the Company will issue to ALI the number of shares of
Common Stock subscribed for, and ALI will be a shareholder of the Company in
respect of such Common Stock as of the date on which the shares representing
such Common Stock are issued by the Company's Transfer Agent and Registrar.
5. NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE. No person or entity shall
be considered to be a shareholder of the Company for any purpose until the
exercise of the Warrant as provided herein and the due and formal issuance of
Warrant Shares by the Company's Transfer Agent and Registrar thereupon.
6. NO RIGHTS AFTER THE EXPIRATION TIME. Nothing contained in this
Warrant, or in any instrument evidencing the Warrant, shall confer on any
person or entity any right to subscribe for or purchase, after the Expiration
Time, any security of or issued by the Company. From and after the
Expiration Time, this Warrant and all rights hereunder shall be valueless,
unexercisable, void, and of no further force or effect.
7. NONTRANSFERABILITY. This Warrant is not and shall not be
transferrable, and any attempt to sell, assign, transfer, hypothecate, or
otherwise convey or encumber any interest herein shall be void. The Company
shall have no obligation to recognize, give effect to, or cause to be reflected
on the official records of the Company any sale, assignment, transfer,
hypothecation, or other conveyance or encumbrance of this Warrant, or any
interest herein, or any attempted exercise, division, or subdivision of this
Warrant, in violation of any provision hereof.
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<PAGE>
8. SUBDIVISION. This Warrant may be divided and subdivided into two
or more certificates, evidencing the total number of Warrants provided
herein, upon written demand therefor delivered to the Company. This Warrant
may be exercised for all or any part of the Warrant Shares, and in such event
the Company shall issue a new Warrant Certificate, evidencing the balance of
the Warrant Shares not previously subscribed for. Notwithstanding the
foregoing sentences, however, no Warrant Certificate shall be issued, and no
exercise of a Warrant shall be permitted, involving any fraction of one Share.
9. MISCELLANEOUS.
(a) This Warrant shall be governed by and construed in accordance
with the internal laws of the State of California, without reference to the
choice of laws provisions thereof.
(b) The captions set forth in this Warrant are for convenience only,
and shall not be used in the construction hereof.
(c) If this Warrant, or any paragraph, sentence, term, or provision
hereof, is invalidated on any ground by any court of competent jurisdiction,
the remainder hereof shall, notwithstanding such invalidation, remain in full
force in effect, and each other provision of this Warrant shall thereafter be
construed and enforced in such a manner as to give the fullest possible
effect to the intention and purposes expressed herein.
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<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of July 11, 1996
TO: Java Centrale, Inc.
ATTENTION: Chief Financial Officer
1610 Arden Way, Suite 145
Sacramento, CA 95815
RE: Exercise of Stock Purchase Warrants
Pursuant to the terms of that certain Stock Purchase Warrant, dated as of
July 11, 1996 (the "Warrant"), which Warrant is attached to this Subscription
Form, the undersigned Artistic License, Inc. hereby subscribes for _____ whole
shares of the Company's no par value Common Stock, at a price of $______ per
share as may be applicable in accordance with the terms of the Warrant.
TOTAL SUBSCRIPTION PRICE: $_________________
The undersigned hereby directs and requires that the shares of Common Stock
being subscribed for hereby be issued and delivered as follows:
Full Name of Shareholder: Artistic License, Inc.
Full Address: _______________________________________________
_______________________________________________
_______________________________________________
Number of Shares for Which Subscribed: ___________________________
DATED: _____________
ARTISTIC LICENSE, INC.
By:__________________________
__________________________
Its_______________________
(IMPORTANT: SEE NOTE ON REVERSE)
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<PAGE>
NOTE: This Subscription Form must be signed and accompanied by payment to
Java Centrale, Inc., in full, of the appropriate subscription price, in cash or
by money order, bank draft, or certified check, payable to the Company at its
principal place of business in Sacramento, California, and must be received by
the Company prior to 5:00 PM, California time, on June 30, 2000 (the
"Expiration Time"), after which time all rights represented by the attached
Stock Purchase Warrant will expire.
JAVA CENTRALE, INC. ACCEPTS NO RESPONSIBILITY FOR THE DELIVERY TO IT OF
THIS SUBSCRIPTION FORM OR THE ACCOMPANYING STOCK PURCHASE AGREEMENT.
SUFFICIENT TIME SHOULD BE ALLOWED FOR THE DELIVERY OF THESE DOCUMENTS PRIOR
TO THE EXPIRATION TIME.
Upon surrender of this Subscription Form and the Stock Purchase Warrant,
and payment of the subscription price as provided therein, the Company will
issue the number of shares of Common Stock subscribed for, and Artistic
License, Inc. will thereupon become a shareholder of the Company. If a
lesser number of shares is subscribed for than the number of shares described
in the Stock Purchase Warrant, the Company shall issue a further Stock
Purchase Warrant in respect of the unsubscribed shares of Common Stock not
subscribed for hereby.
A-6
<PAGE>
EXHIBIT 4.2
STOCK PURCHASE WARRANT
FIFTY THOUSAND (50,000) WARRANTS
TO PURCHASE COMMON STOCK OF
JAVA CENTRALE, INC.
THIS WARRANT IS TO CERTIFY THAT JAVA CENTRALE, INC., a California
corporation (the "Company") has, effective as of the execution date indicated
below, authorized the issuance to ALTA PETROLEUM, INC., a California
corporation, ("API"), of rights to purchase (the "Warrants") an aggregate of
Fifty Thousand (50,000) fully-paid and non-assessable shares of the no par
value Common Stock of the Company (the "Warrant Shares"), on the basis of one
Share for each Warrant, exercisable at any time prior to 5:00 PM, California
time, on June 30, 2000 (the "Expiration Time"), at the principal office of
the Company, on payment of the price per Share specified in Section 2 of this
Warrant and subject to the terms and conditions governing this Warrant
hereinafter expressed.
THIS IS TO CERTIFY ALSO THAT, for value received, the Company agrees,
subject to the terms and conditions hereinafter expressed, to sell and deliver
to API 50,000 fully-paid and nonassessable Warrants.
This Warrant is nontransferable, shall be subject to all of the terms
hereof as set forth below, and shall become void, and terminate and lapse, at
the Expiration Time, after which this Warrant shall be of no further force nor
effect.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
the undersigned, duly authorized thereunto.
DATED as of October 21, 1996.
JAVA CENTRALE, INC.
By: /S/ GARY C. NELSON
--------------------------
Gary C. Nelson
Its President
B-1
<PAGE>
WARRANTS TO PURCHASE COMMON STOCK
The terms and conditions with respect to the holding and exercise of these
Stock Purchase Warrants are as follows.
1. NUMBER OF SHARES ACQUIRABLE UPON EXERCISE; CERTAIN ADJUSTMENTS.
(a) API shall be initially entitled to receive, upon exercise hereof,
up to Fifty Thousand (50,000) shares of the Company's Common Stock, subject,
however, to adjustment as provided below.
(b) If, following the date hereof and prior to the Expiration Time
(as defined below), the outstanding shares of the Company's Common Stock
shall be increased or decreased through a stock split, stock dividend, stock
consolidation, or otherwise, without consideration to the Company, an
appropriate and proportionate adjustment shall be made in the number and kind
of shares as to which any remaining unexercised Warrants may be exercised. By
way of example only, if the Company should undergo a one-for-two reverse
stock split of its outstanding shares of Common Stock prior to the exercise
of any such warrants, the number of shares for which the Warrants may be
exercised would thereupon decrease to 25,000 shares.
(c) Any increase or decrease in the number of shares obtainable
through the exercise of the Warrants shall become effective immediately
following the effective time of the stock split or consolidation causing such
increase or decrease, or in the case of an increase required by a stock
dividend, shall become effective as of the payment or distribution date of such
dividend.
(d) No fractional shares of stock shall be issued or made available
under the this Warrant on account of any such adjustment, and fractional share
interests shall be disregarded.
2. EXERCISE PRICE.
(a) The Exercise Price for the Warrant Shares shall be equal to the
lowest closing sale price recorded on the National Association of Securities
Dealers, Inc. Automated Quotation System, SmallCap Market, for the Company's
Common Stock on any trading day which falls (i) at least one (1) business day,
prior to the date on which notice of exercise of such Warrants is sent to the
Company as provided in Section 3, below, and (ii) between July 10, 1996 and
April 30, 1997.
(b) Subject to all of the other terms of this Warrant, API may
purchase any or all of the Warrant Shares at any time during the term of this
Warrant; PROVIDED, HOWEVER, that any subsequent fluctuation in the closing
sales prices of the Company's Common Stock shall not affect any prior sale or
sales.
B-2
<PAGE>
3. METHOD OF EXERCISE. API may exercise its right to purchase Warrant
Shares pursuant to this Warrant at any time prior to the Expiration Time, by
(a) completing in the manner indicated, and executing, the attached
Subscription Form for that number of Warrant Shares which it is entitled, and
desires, to purchase; (b) surrendering the Warrant to the Company at its
principal place of business in Sacramento, California; and (c) paying the
appropriate purchase price for the Warrant Shares (rounded to the nearest
whole cent), by cash, money order, bank draft, or certified check, payable to
the Company at its principal place of business in Sacramento, California.
Upon such surrender and payment, the Company will issue to API the number of
Warrant Shares so subscribed for.
4. EFFECT OF EXERCISE. Upon surrender of this Warrant and due payment
of the exercise price, the Company will issue to API the number of shares of
Common Stock subscribed for, and API will be a shareholder of the Company in
respect of such Common Stock as of the date on which the shares representing
such Common Stock are issued by the Company's Transfer Agent and Registrar.
5. NO RIGHTS AS SHAREHOLDER PRIOR TO EXERCISE. No person or entity shall
be considered to be a shareholder of the Company for any purpose until the
exercise of the Warrant as provided herein and the due and formal issuance of
Warrant Shares by the Company's Transfer Agent and Registrar thereupon.
6. NO RIGHTS AFTER THE EXPIRATION TIME. Nothing contained in this
Warrant, or in any instrument evidencing the Warrant, shall confer on any
person or entity any right to subscribe for or purchase, after the Expiration
Time, any security of or issued by the Company. From and after the
Expiration Time, this Warrant and all rights hereunder shall be valueless,
unexercisable, void, and of no further force or effect.
7. NONTRANSFERABILITY. This Warrant is not and shall not be
transferrable, and any attempt to sell, assign, transfer, hypothecate, or
otherwise convey or encumber any interest herein shall be void. The Company
shall have no obligation to recognize, give effect to, or cause to be reflected
on the official records of the Company any sale, assignment, transfer,
hypothecation, or other conveyance or encumbrance of this Warrant, or any
interest herein, or any attempted exercise, division, or subdivision of this
Warrant, in violation of any provision hereof.
B-3
<PAGE>
8. SUBDIVISION. This Warrant may be divided and subdivided into two or
more certificates, evidencing the total number of Warrants provided herein,
upon written demand therefor delivered to the Company. This Warrant may be
exercised for all or any part of the Warrant Shares, and in such event the
Company shall issue a new Warrant Certificate, evidencing the balance of the
Warrant Shares not previously subscribed for. Notwithstanding the foregoing
sentences, however, no Warrant Certificate shall be issued, and no exercise
of a Warrant shall be permitted, involving any fraction of one Share.
9. MISCELLANEOUS.
(a) This Warrant shall be governed by and construed in accordance
with the internal laws of the State of California, without reference to the
choice of laws provisions thereof.
(b) The captions set forth in this Warrant are for convenience only,
and shall not be used in the construction hereof.
(c) If this Warrant, or any paragraph, sentence, term, or provision
hereof, is invalidated on any ground by any court of competent jurisdiction,
the remainder hereof shall, notwithstanding such invalidation, remain in full
force in effect, and each other provision of this Warrant shall thereafter be
construed and enforced in such a manner as to give the fullest possible
effect to the intention and purposes expressed herein.
B-4
<PAGE>
JAVA CENTRALE, INC.
WARRANT SUBSCRIPTION FORM
Stock Purchase Warrants dated as of October 21, 1996
TO: Java Centrale, Inc.
ATTENTION: Chief Financial Officer
1610 Arden Way, Suite 145
Sacramento, CA 95815
RE: Exercise of Stock Purchase Warrants
Pursuant to the terms of that certain Stock Purchase Warrant, dated as of
October 21, 1996 (the "Warrant"), which Warrant is attached to this
Subscription Form, the undersigned Artistic License, Inc. hereby subscribes
for _____ whole shares of the Company's no par value Common Stock, at a price
of $______ per share as may be applicable in accordance with the terms of the
Warrant.
TOTAL SUBSCRIPTION PRICE: $___________________
The undersigned hereby directs and requires that the shares of Common Stock
being subscribed for hereby be issued and delivered as follows:
Full Name of Shareholder: Artistic License, Inc.
Full Address: _______________________________________________
_______________________________________________
_______________________________________________
Number of Shares for Which Subscribed: ___________________________
DATED: _____________
ARTISTIC LICENSE, INC.
By:__________________________
__________________________
Its_______________________
(IMPORTANT: SEE NOTE ON REVERSE)
B-5
<PAGE>
NOTE: This Subscription Form must be signed and accompanied by payment to
Java Centrale, Inc., in full, of the appropriate subscription price, in cash or
by money order, bank draft, or certified check, payable to the Company at its
principal place of business in Sacramento, California, and must be received by
the Company prior to 5:00 PM, California time, on June 30, 2000 (the
"Expiration Time"), after which time all rights represented by the attached
Stock Purchase Warrant will expire.
JAVA CENTRALE, INC. ACCEPTS NO RESPONSIBILITY FOR THE DELIVERY TO IT OF
THIS SUBSCRIPTION FORM OR THE ACCOMPANYING STOCK PURCHASE AGREEMENT.
SUFFICIENT
TIME SHOULD BE ALLOWED FOR THE DELIVERY OF THESE DOCUMENTS PRIOR TO THE
EXPIRATION TIME.
Upon surrender of this Subscription Form and the Stock Purchase Warrant,
and payment of the subscription price as provided therein, the Company will
issue the number of shares of Common Stock subscribed for, and Artistic
License, Inc. will thereupon become a shareholder of the Company. If a
lesser number of shares is subscribed for than the number of shares described
in the Stock Purchase Warrant, the Company shall issue a further Stock
Purchase Warrant in respect of the unsubscribed shares of Common Stock not
subscribed for hereby.
B-6
<PAGE>
EXHIBIT 5
ROSENBLUM,
PARISH &
ISAACS
--------------
A Professional
Corporation
March 19, 1997
Board of Directors
Java Centrale, Inc.
1610 Arden Way, Suite 299
Sacramento, CA 95815
Dear Sirs:
We refer to Pre-Effective Amendment No. 2 to the Form S-3 Registration
Statement filed on November 21, 1996 (Commission File No. 333-16575), by Java
Centrale, Inc. (the "Company") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, relating to 437,284 shares of
the Company's no par value Common Stock (the "Common Stock").
As counsel to the Company, we have examined such corporate records, other
documents, and such questions of law as we have considered necessary or
appropriate for purposes of rendering this opinion and, on the basis of such
examination, advise you that in our opinion the shares of Common Stock have
been duly and validly authorized, and, when issued and sold in the manner
contemplated in the Registration Statement, will be validly issued, fully
paid, and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this firm under the caption
"Legal Matters" in the Prospectus contained therein. This consent is not to
be construed as an admission that we are a person whose consent is required
to be filed with the Registration Statement under the provisions of Section 7
of the Securities Act of 1933, as amended.
Very truly yours,
ROSENBLUM, PARISH & ISAACS, PC
By: /S/ PHILIP S. BOONE, JR
----------------------------
A Member of the Firm
555 Montgomery Street, 15th Floor, San Francisco, CA 94111
(415) 421-8232 FAX (415) 397-5383
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
We have issued our report dated June 18, 1996 (except for note W, to which the
date is July 11, 1996) accompanying the financial statements of Java Centrale,
Inc. appearing in the Company's Annual Report on Form 10-K for the year ended
March 31, 1996 which are incorporated by reference in this Registration
Statement. We consent to the incorporation by reference in the Registration
Statement of the aforementioned report and to the use of our name as it appears
under the caption "experts".
GRANT THORNTON LLP
Sacramento, California
March 18, 1997
