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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 21, 1998
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PARADISE HOLDINGS, INC.
(FORMERLY JAVA CENTRALE, INC.)
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(EXACT NAME OF COMPANY AS SPECIFIED IN ITS CHARTER)
Delaware 1-12932 68-0412009
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(STATE OF OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
1610 Arden Way, Suite 145, Sacramento, California 95815
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Company's telephone number, including area code: (916) 568-2310
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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ITEM 5. OTHER EVENTS
The Company has amended its prospectus dated February 10, 1998
(Registration #333-43343) with Supplement No. 1 dated May 21, 1998.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
99.3 Letter of transmittal dated May 21, 1998
99.4 Supplement No. 1 dated May 21, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PARADISE HOLDINGS, INC.
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(Company)
Date: May 22, 1998
By: /s/ JEFFREY W. DUDLEY
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Jeffrey W. Dudley
Vice President and Chief
Financial Officer (Principal
Financial and Accounting Officer)
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EXHIBIT 99.3
May 21, 1998
TO: ALL HOLDERS OF STOCK PURCHASE WARRANTS AND/OR SHARES OF
COMMON STOCK REFERRED TO IN THE ATTACHED PROSPECTUS,
DATED FEBRUARY 10, 1998, AND CERTAIN TRANSFEREES
Dear Sir or Madam:
As you may be aware, effective as of February 10, 1998, Paradise Holdings,
Inc. (formerly Java Centrale, Inc.) (the "Company") registered a number of
shares of its Common Stock (the "Shares")with the United States Securities and
Exchange Commission (the "SEC"). According to the Company's records, some of
the shares so registered are currently held in your name, or are available for
issuance to you pursuant to the exercise of stock purchase warrants you
currently hold. The purpose of this letter is to provide you, and all of the
individuals and entities who or which currently hold such shares or warrants
(the "Selling Shareholders"), with a copy of Supplement No. 1 to the Prospectus
which was issued in connection with the Shares. Copies of the original
Prospectus and Supplement No. 1 are attached herewith.
The registration statement of which the accompanying Prospectus forms a
part allows you and the other Selling Shareholders (subject to certain
restrictions discussed below), to sell the Shares as securities registered
under the Securities Act of 1933, as amended (the "Securities Act") until the
registration statement expires on January 31, 2000. The Company's Common Stock
is currently listed for trading on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") Small Cap List under the symbol
PRDS. PLEASE NOTE, HOWEVER, THAT NOTWITHSTANDING SUCH REGISTRATION YOU MAY BE
SUBJECT TO THE RESTRICTION THAT UNTIL ONE YEAR FROM THE DATE ON WHICH YOU
PURCHASED YOUR UNIT(S) YOU MAY NOT RESELL ANY SHARES WHICH YOU THEN OBTAINED,
OR WHICH YOU MAY OBTAIN THROUGH THE EXERCISE OF YOUR WARRANTS, WITHOUT THE
PRIOR WRITTEN CONSENT OF E. C. CAPITAL, LTD., THE COMPANY'S PLACEMENT AGENT.
YOU ARE SUBJECT TO THIS RESTRICTION IF, ON THE CHART CAPTIONED "SELLING
SHAREHOLDERS" APPEARING ON PAGE 44 OF THE PROSPECTUS, YOU ARE LISTED AS HOLDING
CURRENTLY OUTSTANDING SHARES IN THE COLUMN HEADED "SHARES CURRENTLY OWNED," OR
IF YOU ACQUIRED YOUR WARRANTS OR SHARES FROM SUCH A PERSON. FOR MOST OF THE
SELLING SHAREHOLDERS, THIS RESTRICTION (IF IT APPLIES) WILL NOT EXPIRE UNTIL
SEPTEMBER OR OCTOBER OF 1998. For more information on this restriction please
see page 7 of the Prospectus, under the caption "Limitations on Sale of Shares
Applicable to Certain Selling Shareholders."
The U.S. securities laws require that any sale of Registered Shares by a
Selling Shareholder pursuant to the enclosed Prospectus must be preceded by the
delivery of a copy of the Prospectus. With the issuance of the enclosed
Supplement No. 1 the Prospectus has been effectively amended, so you are now
also required to deliver the Supplement as well. This may normally be done by
delivering a copy of the Prospectus (and the Supplement) to the broker or
dealer handling the transaction. From time to time the Company may be required
to further amend the registration statement of which the Prospectus forms a
part, so before any sale of Registered Shares is consummated you or your
representatives should contact the Company to ensure that the Prospectus being
delivered will be current (including any Supplements which may then be in
effect).
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If, through the ownership or exercise of warrants or otherwise, you are or
may become the holder of five percent (5%) or more of the Company's total
outstanding shares of Common Stock, you should also be aware that you may be
required to file certain reports with the SEC pursuant to Section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules
of the SEC thereunder. Similarly, if you are or may become a holder of ten
percent (10%) or more of the Company's outstanding shares of Common Stock you
may have additional filing requirements under Section 16 of the Exchange Act,
and you may in addition be subject to the "short swing trading" restrictions of
the Exchange Act and the rules and regulations of the SEC applicable thereto.
Finally, you should be aware that sate and federal laws will generally prohibit
any person who is in possession of material nonpublic information about the
Company from trading in its securities unless and until such information has
been publicly disseminated or directly communicated to the other party in such
transaction. The Company's registration of the Registered Shares did not and
will not affect these potential filing and sale restrictions. Each Selling
Shareholder should consult his, her, or its own legal advisors as to the
current and potential effect of these legal requirements.
The registration statement discussed above applies only to the Shares. It
does not apply to any of the stock purchase warrants. Such warrants may not be
sold within the United States, therefore, without registration or qualification
under applicable state and federal securities laws or an applicable exemption
from such requirements.
In addition to the legal restrictions applicable to the sale of the
Registered Shares and the warrants, there may also be tax implications
associated with such transactions. You should consult your own legal and tax
advisors as to the timing and effect of any sale of their Registered Shares.
If you have any questions about how to proceed with your shares, please do
not hesitate to give Jeffrey Dudley a call at (916) 568-2310.
Very truly yours,
/s/ BRADLEY B. LANDIN
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Bradley B. Landin
Senior Vice President
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Exhibit 99.4
PARADISE HOLDINGS, INC.
(FORMERLY JAVA CENTRALE, INC.)
SUPPLEMENT NO. 1 TO
PROSPECTUS DATED FEBRUARY 10, 1998
The date of this Supplement No. 1 is
May 21, 1998
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MAY 21, 1998
SUPPLEMENT NO. 1 TO
PROSPECTUS DATED FEBRUARY 10, 1998
PARADISE HOLDINGS, INC.
(a Delaware corporation)
(FORMERLY JAVA CENTRALE, INC.)
4,180,000 Shares of Common Stock
____________________
This Supplement No. 1 to Prospectus dated February 10, 1998 (the
"Prospectus") has been prepared by and on behalf of Paradise Holdings, Inc., a
Delaware corporation ("Paradise"), which is the successor to Java Centrale,
Inc., a California corporation ("Java"), the original issuer of the Prospectus.
Effective May 8, 1998, pursuant to the approval of Java's shareholders given at
its annual meeting held on November 25, 1997, Java merged with and into
Paradise, a corporation which had been formed as a wholly-owned subsidiary of
Java for the purpose of effecting a change in Java's state of incorporation
from California to Delaware. Following the merger, Java ceased to exist as a
separate corporation, and Paradise assumed all of its assets and liabilities.
(For purposes of this Supplement, Paradise and Java together may from time to
time be referred to as the "Company.")
THE PURPOSES OF THIS SUPPLEMENT ARE TO UPDATE THE INFORMATION GIVEN IN THE
PROSPECTUS AS TO CERTAIN RECENT DEVELOPMENTS WHICH HAVE HAD OR MAY HAVE A
MATERIAL EFFECT ON THE COMPANY'S BUSINESS, FINANCIAL CONDITION, AND PROSPECTS,
TO PROVIDE INVESTORS AND POTENTIAL INVESTORS MORE RECENT FINANCIAL INFORMATION
ABOUT THE COMPANY, AND TO PROVIDE INFORMATION AS TO THE EXERCISE OF CERTAIN
WARRANTS REFERRED TO IN THE PROSPECTUS.. THIS SUPPLEMENT IS NOT INTENDED TO
REPLACE THE PROSPECTUS, BUT TO ADD CERTAIN MATERIAL INFORMATION TO IT. NEITHER
THE PROSPECTUS NOR THIS SUPPLEMENT SHOULD BE READ INDEPENDENTLY; TOGETHER, THEY
ARE INTENDED TO FORM ONE SINGLE DOCUMENT.
Certain forward-looking statements may be included herein and in the
Prospectus to which this Supplement is attached. They use such words as "may,"
"will," "expect," "believe," "plan," "anticipate" and other similar
terminology. These statements reflect management's expectations at the time
they were issued, and involve a number of risks and uncertainties. Actual
results could differ materially depending on the success or failure of the
Company's current and projected business and financing strategies and due to
changes in global and local business and economic conditions; the Company's
management and/or commercial and contractual relationships; legislation and
governmental regulation; competition; success of operating initiatives and
advertising and promotional efforts; food, labor and other operating costs;
availability and cost of leasehold space and construction; accounting policies
and practices; consumer preferences, spending patterns and demographic trends;
and interest rates.
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RECENT DEVELOPMENTS
REINCORPORATION AS A DELAWARE CORPORATION AND CHANGE OF NAME
Effective as of May 8, 1998, the Company changed its state of
incorporation from California to Delaware through a merger of Java Centrale,
Inc., a California corporation, the Company's prior corporation entity
("Java"), into its wholly-owned subsidiary Paradise Holdings, Inc., a Delaware
corporation which was created for the sole purpose of the re-incorporation
("Paradise"). As a result of the re-incorporation, the Company formally
changed its name from Java Centrale, Inc. to Paradise Holdings, Inc. and Java
ceased to exist as a corporate entity. Paradise survived the merger as the
Company's current corporate entity, with all of the rights and properties, and
all of the liabilities and obligations, of Java, and each outstanding share of
Java's no par value Common Stock immediately prior to the merger was exchanged
for and converted into one fully-paid and non-assessable share of Common Stock
of Paradise, $.001 par value per share. The merger and reincorporation were
approved by the Company's shareholders at its 1997 Annual Meeting.
Consummation of the merger and re-incorporation has not resulted in the
transfer of assets from Java, Paradise, or any of their subsidiaries, or
altered the Company's headquarters location or management.
CHANGE IN CORPORATE STRATEGY
In recent months, the Company has undertaken a comprehensive review of its
business plan and strategic direction, including the potential for a new public
or private financing, merger with or the acquisition of other companies, and
the possible sale or merger of the Company's wholly-owned subsidiary, Paradise
Bakery, Inc. After consideration of the Company's financial position and the
alternatives available to it, the Company's Board of Directors has decided that
its best available alternative is to sell its Paradise Bakery & Cafe line,
including all of its Company-owned and franchised cafes, and focus the
Company's business in another direction, most likely outside the food and
beverage industry. The sale of the Paradise Bakery & Cafe assets would leave
the Company without any significant operating assets, until another acquisition
or merger could be completed. The Company is currently in the process of
implementing this new strategy and has entered into a letter of intent to
acquire a company outside the food and beverage industry (see Purchase of
Certain Assets of Axxess, Inc.).
SALE OF PRINCIPAL OPERATING ASSETS
On May 12, 1998 the Company signed a conditional letter of intent for the
sale of its Paradise Bakery & Cafe retail operations to AFC Enterprises of
Atlanta, Georgia ("AFC"), for $5,000,000 in cash and an additional amount,
potentially as much as $2,000,000, in the form of either cash or stock in AFC
at the Company's election, to be paid on an earn-out basis tied to store level
contributions, two years after the closing date. The sale would include all 15
company-owned cafes, its 34 franchised units, and a commissary that is a
fulfillment house of proprietary items for use in the cafes. The transaction is
expected to be structured as an asset purchase, to include all of the assets of
the Company's wholly-owned operating subsidiary,
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Paradise Bakery, Inc. Certain of the liabilities of Paradise Bakery, Inc.
would also be assumed, including primarily those arising under its franchise
agreements and real estate leases. A copy of the letter of intent is attached
to this Supplement as Exhibit A.
The conditions to closing the transaction include: the completion of a
satisfactory due diligence review by AFC; receipt of all necessary consents
from the Boards of the Company and AFC, and any other necessary third parties,
negotiation of a mutually acceptable asset purchase agreement; and receipt of a
favorable fairness opinion. The Company will submit it for shareholder
approval.
The parties have agreed to work towards a closing date of June 30, 1998.
Prior to that date, the Company has agreed not to solicit or initiate
discussions or negotiations with any other party regarding a sale of its
Paradise Bakery assets. Because of the conditional nature of the letter of
intent, and because some of the conditions to closing the foregoing
transactions are not within the Company's control, there can be no assurance
that this transaction will in fact take place, or if it does that the final
terms of such a transaction will not vary, in material respects, from those
disclosed above.
PUCHASE OF CERTAIN ASSETS OF AXXES, INC.
On May 15, 1998 the Company signed a conditional letter of intent to
purchase the Internet publications known collectively as the "FinancialWeb"
from Axxess, Inc. of Altamonte Springs, Florida. The FinancialWeb family of
investor sites are distributed over the Internet and include free real-time
quotes; technical analysis, charting and portfolio analysis; news and market
data; fundamental research; recommendations and analysis from Wall Street;
financial humor; EDGAR filings; investigative reporting; short selling
strategies and a site devoted to the Small Cap market or derive income from
banner advertising sales, syndication of editorial content, licensing of data
and technology, list rentals and sales of premium services.
The transaction is expected to be structured as an asset purchase. The
assets to be purchased by the Company include various domain names, technology,
hardware, software, trademarks, clients, customers, etc. Additionally, the
Company would assume certain contractual obligations with respect to data and
technology providers, and key programmers and consultants necessary to the
operation of the web sites. The purchase price is to be a combination of
$750,000 in cash and 2,000,000 shares of the Company's common stock, payable at
closing, plus an additional 2,000,000 shares of common stock if the a specified
number of additional websites are open and operating as of one year after the
closing, and the average daily traffic of page impressions on the "Financial
Web" websites being acquired increases to certain specified benchmarks. A copy
of the letter of intent is attached to this Supplement as Exhibit B.
The closing of this transaction is subject to the completion of a due
diligence review by the Company; receipt of all requisite board, shareholder
and other approvals; and the negotiation of a mutually acceptable asset
purchase agreement. The parties to the agreement are contemplating the closing
of the transaction described herein prior to July 31, 1998. Axxess has agreed
not to initiate any discussions or negotiations with any third parties
regarding the sale of the Financial
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Web family of web sites and the related assets. Because of the conditional
nature of the letter of intent, and because some of the conditions to closing
the foregoing transactions are not within the Company's control, there can be
no assurance that this transaction will in fact take place, or if it does
that the final terms of such a transaction will not vary, in material
respects, from those disclosed above.
RESIGNATION OF RICHARD J. CROSBY
Effective as of May 12, 1998, Richard J. Crosby, the Company's Chairman of
the Board, resigned from the Company.
ANTICIPATED DEPARTURE
With the anticipated sale and acquisition, the Company's Vice President &
Chief Financial Officer, Jeffery W. Dudley intends to leave the Company no
later than June 30, 1998.
CHANGE IN THE COMPANY'S INDEPENDENT AUDITORS
On April 27, 1998, the Company notified Grant Thornton, LLP ("GT") that
they were dismissed as the Company's independent auditor and the Company
appointed Burnett Umphress & Company ("Burnett") its independent accountant and
Burnett accepted such appointment. The Company and GT have not, in connection
with the audit of the Company's financial statements for each of the prior two
years ended March 31, 1997 and 1996 or for any subsequent interim period prior
to and including April 27, 1998, had any disagreement on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement, if not resolved to GT's satisfaction,
would have caused GT to make reference to the subject matter of the
disagreement in connection with its reports.
The reports of GT on the Company's financial statements for the past two
fiscal years did not contain an adverse opinion or a disclaimer of opinion and
were not modified as to uncertainty, audit scope or accounting principles,
except that the report of GT on the Company's financial statements for the year
ended March 31, 1997 included an explanatory paragraph relating to an
uncertainty about the Company's ability to continue as a going concern.
The decision to change accountants was approved by the Company's board of
directors. The Company had no relationship with Burnett required to be
reported pursuant to Regulation S-K item 304(a)(2) during the two fiscal
periods ended March 31, 1997 and 1996, or the subsequent interim period prior
to and including March 31, 1998.
PARTIAL EXERCISE OF THE WARRANTS DESCRIBED IN THE PROSPECTUS
Through May 18, 1998, the Company has had 1,692,500 of the warrants
described elsewhere herein exercised, producing net proceeds to the Company of
approximately $1,770,000.
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CERTAIN RISK FACTORS
RELIANCE ON ADDITIONAL FUNDING SOURCES
Management believes that the sale of the Company's Paradise Bakery & Cafe
operating assets, as described above, will provide enough cash to permit it to
implement its business plan, which calls for diversification into other lines
of business. However, given the Company's continuing operating losses, as
discussed below, if the anticipated asset sale transaction is delayed or does
not occur within the time frame discussed above, the result will likely have an
adverse material impact on to the Company's ability to implement its business
plan. Therefore, the Company would need to raise additional funds through the
issuance of common, preferred or debt securities, the sale of assets or through
a commercial bank credit facility. The inability of the Company to raise
additional funds would have an adverse affect on the Company's ability to
implement its business plan and continue operations.
LIQUIDITY; LIMITED CAPITAL RESOURCES
At the Company's current level of development, including the operations of
its Paradise Bakery subsidiary, it does not generate net cash from operations.
To fund its current operations, the Company requires either additional
financing, rapid sales of additional franchises, or a substantial increase in
its network of Company-owned and or franchised cafes and kiosks, such as
through acquisition. For the years ended March 31, 1997 and 1996, the Company
incurred a net loss of $5,326,000 and $3,966,000 and used net cash of
$3,062,000 and $2,391,000 in operating activities. For the nine months ended
December 31, 1997 and 1996, the Company incurred, on a consolidated basis, a
net loss of $3,441,000 and $2,160,000 and used net cash of $451,000 and
$2,764,000. These losses have continued into the current fiscal quarter.
Additionally, the Company's corporate debts, some of which are past due, exceed
the net value of its corporate and other assets. (See the Company's Quarterly
Report on Form 10-Q for the period ended December 31, 1997, a copy of which is
attached hereto as Exhibit C, under the heading "Form 10-Q.") The Company's
debt situation and overall financial condition have not materially improved
since the date of that Quarterly Report.
The Company has developed a specific operating plan to meet the ongoing
liquidity needs of the Company's existing operations, including its Paradise
Bakery & Cafe line, both for the year ended March 31, 1998, and thereafter.
Management believes that the Company's operating and financing plan, if
carried out successfully, will be sufficient to meet the Company's liquidity
needs for the year ended March 31, 1998 and thereafter. However, the
operating and financing plan currently includes the sale of the Company's
Paradise Bakery & Cafe related assets, as discussed above. If the Company
completes the sale of its Paradise Bakery & Cafe related assets, as described
above, and once the Company has paid all debt, the Company will have
approximately $1,000,000 in cash and $2,000,000 in deferred compensation
expected to be received from AFC after a two year evaluation period.
Additionally, if the Selling Shareholders continue to exercise all warrants,
the Company would receive an additional $2,788,000 in cash (see Use of
Proceeds). However, if the Company is unable to complete the sale of these
assets, or to complete such a sale on terms sufficiently favorable to the
Company, management believes that it is unlikely to have sufficient liquidity
to continue operations for the medium to long term, and will need to raise
additional funds, whether through the issuance of common, preferred or debt
securities, the sale of assets, obtaining a commercial bank credit facility, or
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otherwise. Under these circumstances, there can be no assurance that the
Company will achieve the necessary liquidity, or that the Company's liquidity
goals will be reached in the immediate future, if ever.
USE OF PROCEEDS
Through May 18, 1998, 1,692,500 of the warrants described in the attached
Prospectus have been exercised, producing net proceeds to the Company of
approximately $1,770,000, of which the Company has used $850,000 to retire
corporate debts and the balance for working capital. If the remaining
1,862,500 outstanding warrants are exercised in accordance with their terms,
the Company would receive approximately $2,788,000 in additional proceeds,
which are expected to be used for general corporate purposes, including to
reduce existing corporate debt and as working capital, including potentially
payment or partial payment for any new Company acquisitions.
OTHER MATTERS
Effective as of May 11, 1998, the Company changed its NASDAQ trading
symbol from JAVC to PRDS in association with the merger between Java Centrale,
Inc. and Paradise Holdings, Inc. as described in "Recent Developments".
LIST OF EXHIBITS
Attached to this Supplement are the following documents, all of which are
incorporated herein as Exhibits and made a part hereof:
A. Letter of Intent, dated May 12, 1998, between the Company and AFC
Enterprises.
B. Letter of Intent, dated May 15, 1998, between the Company and Axxess,
Inc.
C. The Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1997.
