U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST EFFECTIVE AMENDMENT NO. 1
TO FORM SB-2 - SEC FILE NO. 33-94470
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
LLOYD VENTURES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 6770 13-3812821
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(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification No.)
incorporation Code Number)
or organization)
41 East 57th Street, 39th Floor, New York, New York 10022
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(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
41 East 57th Street, 39th Floor, New York, New York 10022
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(Address of principal place of business or intended principal
place of business)
Herbert Maxwell, 440 East 56th Street, New York, New York 10022 (212) 888-2997
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(Name, address, including zip code, and telephone number, including
area code, of agent for service)
Copy to:
Joseph Sierchio, Esq. Michael W. Schley, Esq.
Sierchio & Albert, P.C. Larkin, Hoffman, Daly & Lindgren, Ltd.
41 East 57th Street, 39th Floor 1500 Norwest Financial Center
New York, New York 10022 7900 Xerxes Avenue South
(212) 446-9500 Bloomington, Minnesota 55431
(612) 896-3393
Approximate date of commencement of proposed sale to public:
As soon as practicable after the effective date of this Post-Effective
Amendment.
If any of the securities being registered on this form are to be offered
on a continuous or delayed basis pursuant to Rule 415 of the
Securities Act of 1933, check the following box [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Maximum Aggregate Amount of
Title of Each Class of Amount to be Offering Offering Registration
Securities to be Registered Registered Price Per Share Price(1) Fee(2)
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<S> <C> <C> <C> <C>
Common Stock, $.001 par value per share 200,000(3) $.50 $100,000 $21
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Total Registration Fee $100
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457.
(2) The minimum filing fee payable is $100, which fee has previously been paid.
(3) Adjusted to reflect a 1-for-5 reverse split to be effected immediately prior
to the acquisition contemplated herein.
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.
<PAGE>
CROSS REFERENCE SHEET
Furnished Pursuant to Item 501(b) of Regulation S-K
under the Securities Act of 1933, as amended
<TABLE>
<CAPTION>
ITEM NUMBER AND CAPTION
IN REGISTRATION STATEMENT CAPTION IN RECONFIRMATION PROSPECTUS
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<S> <C>
1. Forepart of the Registration Statement and Front of Registration Statement;
Outside Front Cover Page of Reconfirmation Prospectus Cover Page
2. Inside Front and Outside Back Cover Pages
of Reconfirmation Prospectus Inside Front and Outside Back Cover Pages
3. Summary Information and Risk Factors Reconfirmation Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page;
6. Dilution; Risk Factors Risk Factors; Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page; Investor's Rights and Substantive
Protection Under Rule 419; Method of Reconfirmation
9. Legal Proceedings Risk Factors (Risks Related to Gourmet)
10. Directors, Executive Officers, Directors and Executive Officers of Lloyd;
Promoters and Controlling Persons Directors and Executive Officers of Gourmet
11. Security Ownership of Certain Principal Stockholders
Beneficial Owners and Management
12. Description of Securities Description of Lloyd Securities
13. Interest of Named Experts and Counsel Legal Opinions; Experts
14. Disclosure of Commissions Distribution of Securities
Position on Indemnification of
Securities Act Liabilities
15. Organization within Last Five Years Lloyd; Lloyd's Plan of Operation; Lloyd Risk Factors;
16. Description of Business Lloyd's Plan of Operation; Gourmet
17. Management's Discussion and Lloyd's Plan of Operation; Gourmet Management's
Analysis or Plan of Operation Discussion and Analysis of Financial Condition
and Results of Operations
18. Description of Property Gourmet
19. Certain Relationships and Certain Transactions -- Lloyd; Certain Transaction
Related Transactions -- Gourmet
20. Market for Common Equity Cover Page; Risk Factors; Market for Lloyd Common
Related Stockholder Matters Stock Description of Lloyd Securities
21. Executive Compensation Directors and Executive Officers of Lloyd;
Directors and Executive Officers of Gourmet
22. Financial Statements Index to Financial Statements
23. Changes in and Disagreements Not Applicable
with Accountants on Accounting
and Financial Disclosure
</TABLE>
<PAGE>
PROSPECTUS
LLOYD VENTURES, INC.
(A Delaware Corporation)
RECONFIRMATION OF THE OFFER AND SALE OF 196,400 SHARES OF COMMON STOCK
OFFERING PRICE - $.50 PER SHARE
LLOYD VENTURES, INC. ("LLOYD") IS A RECENTLY ORGANIZED CORPORATION, FORMED FOR
THE PURPOSE OF ACQUIRING OR MERGING WITH AN UNSPECIFIED OPERATING BUSINESS. THIS
RECONFIRMATION PROSPECTUS RELATES TO THE RECONFIRMATION OFFER (THE
"RECONFIRMATION OFFER") PURSUANT TO RULE 419 ("RULE 419") PROMULGATED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT") OF THE SALE BY LLOYD OF ONE HUNDRED NINETY-SIX
THOUSAND FOUR HUNDRED (196,400) SHARES (THE "SHARES") OF COMMON STOCK, $.001 PAR
VALUE (THE "LLOYD COMMON STOCK"). SEE "DESCRIPTION OF SECURITIES." ALL SHARE AND
PER SHARE AMOUNTS IN THIS RECONFIRMATION PROSPECTUS HAVE BEEN ADJUSTED TO
REFLECT THE 1 - FOR - 5 REVERSE SPLIT TO BE EFFECTED IMMEDIATELY PRIOR TO THE
TRANSACTIONS CONTEMPLATED HEREBY. SEE "RECONFIRMATION PROSPECTUS SUMMARY."
IN NOVEMBER, 1996, LLOYD, PURSUANT TO A RULE 419 "BLANK CHECK OFFERING," OFFERED
A MINIMUM OF FIFTY THOUSAND (50,000) SHARES AND A MAXIMUM OF TWO HUNDRED
THOUSAND (200,000) SHARES AT A PRICE PER SHARE OF FIFTY CENTS ($.50) (THE
"ORIGINAL OFFERING"). THERE WERE ONE HUNDRED AND NINETY-SIX THOUSAND FOUR
HUNDRED (196,400) SHARES SOLD IN THE OFFERING. THE ORIGINAL OFFERING PROCEEDS
(LESS THE PERMITTED DEDUCTIONS, AS DEFINED BELOW) AND THE SECURITIES PURCHASED
BY INVESTORS (RESPECTIVELY, THE "DEPOSITED FUNDS" AND "DEPOSITED SECURITIES")
ARE BEING HELD IN ESCROW (THE "RULE 419 ESCROW") SUBJECT TO THE SATISFACTION OF
THE PROVISIONS OF THE RULE 419 ESCROW.
The Deposited Securities may not be released and the Deposited Funds may not be
released (except for the permitted release of ten percent (10%) thereof) (the
"Permitted Deductions"), until an acquisition meeting certain specified criteria
has been made and a sufficient number of investors reconfirm their investment in
accordance with the procedures set forth in Rule 419. Pursuant to these
procedures, this Reconfirmation Prospectus, which describes an acquisition
candidate and its business and includes audited financial statements (the
"Reconfirmation Prospectus"), is being delivered to all investors who purchased
Shares (the "Rule 419 Investors"). Lloyd must return the pro-rata portion of the
Deposited Funds (plus any interest earned thereon less the Permitted Deductions)
to any investor who does not elect to remain an investor. Unless a sufficient
number of investors (representing at least eighty percent (80%) of the Offering
Proceeds) elect to remain investors, all investors will be entitled to the
return of their investment (plus any interest earned thereon less the Permitted
Deductions), and none of the Deposited Securities will be delivered to
investors. In the event an acquisition is not consummated within eighteen (18)
months after November 12, 1996, the Deposited Funds (plus interest earned
thereon less the Permitted Deductions) will be returned on a pro-rata basis to
all investors. See "Investors' Rights and Substantive Protection under Rule
419."
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THESE SECURITIES ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS"
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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 RECONFIRMATION PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Price to Public(1) Proceeds to Lloyd(2)(3)
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Per Share $.50 $.50
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Total - 196,400 Shares $98,200.00 $88,380.00
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(1) The Shares were offered in the Original Offering directly by Lloyd on a
"best efforts, all or none basis" with respect to the first fifty thousand
(50,000) Shares and on a "best efforts basis" with respect to the remaining
hundred and fifty thousand (150,000) Shares. One hundred ninety-six thousand
four hundred (196,400) Shares were sold. Proceeds of the Original Offering
are being held in escrow by Bernard Herold & Co., Inc., pursuant to the
terms of the Rule 419 Escrow. Pursuant to the Rule 419 Escrow provisions,
the certificates evidencing the Shares were issued in the respective names
of the investors and deposited into the Rule 419 Escrow. The Deposited
Funds, after the release to Lloyd of an amount equal to ten percent (10%)
thereof (in the aggregate amount of Nine Thousand Eight Hundred Twenty
Dollars ($9,820)) remain deposited in the Escrow Account.
(2) All offers and sales of Shares were effected through Lloyd's officers and
directors. Lloyd's officers and directors did not and will not receive any
compensation for their services in connection therewith. Certain of Lloyd's
officers and directors purchased Shares on the same terms and conditions as
all other Rule 419 Investors.
<PAGE>
However, any Shares purchased by Lloyd's officers and directors were not be
included in determining whether the minimum offering criteria had been
satisfied.
(3) Adjusted to reflect a 1-for-5 reverse split to be effected immediately prior
to the acquisitions contemplated hereby.
The date of this Reconfirmation Prospectus is March , 1998
<PAGE>
RULE 15g-8 PROMULGATED PURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934 (THE
"EXCHANGE ACT") MAKES IT UNLAWFUL FOR ANY PERSON TO SELL OR OFFER TO SELL THE
DEPOSITED SECURITIES (OR ANY INTEREST IN OR RELATED TO THE DEPOSITED
SECURITIES). THUS, INVESTORS ARE PROHIBITED FROM MAKING ANY ARRANGEMENTS TO SELL
THE DEPOSITED SECURITIES UNTIL THEY ARE RELEASED FROM THE ESCROW ACCOUNT (SEE
"RISK FACTORS" AND "PROHIBITIONS AGAINST SALE OF SECURITIES BEFORE RELEASE FROM
ESCROW.")
No trading in the Shares can be effected during the term of the Rule 419 Escrow.
There can be no assurance that any trading market in the Shares will develop
hereafter or, if such a market does develop, that it will be sustained. Lloyd
has no present plans, proposals, arrangements or understandings with any person
with regard to the development of a trading market for the Shares. The public
offering price was arbitrarily determined by Lloyd and bore no relationship to
Lloyd's assets, prospective earnings, book value or any other recognized
criteria of value. The Original Offering was conducted by Lloyd without use of a
professional underwriter or securities dealer.
STATE SECURITIES REGULATION
THIS RECONFIRMATION PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION IN SUCH JURISDICTION.
LLOYD HAS REGISTERED THE SHARES ONLY IN THE STATE OF NEW YORK. SUBJECT TO THE
RULE 419 ESCROW, THE SHARES MAY ONLY BE TRADED IN SUCH JURISDICTION. PURCHASERS
OF THE SHARES, EITHER IN THIS OFFERING OR IN ANY SUBSEQUENT TRADING MARKET WHICH
MAY DEVELOP, MUST BE RESIDENTS OF THE STATE OF NEW YORK UNLESS AN APPLICABLE
EXEMPTION IS AVAILABLE OR A BLUE SKY APPLICATION HAS BEEN FILED AND ACCEPTED.
LLOYD MAY AMEND THIS RECONFIRMATION PROSPECTUS FOR THE PURPOSE OF DISCLOSING
ADDITIONAL STATES OR JURISDICTIONS, IF ANY, IN WHICH THE SHARES WILL HAVE BEEN
REGISTERED OR AN EXEMPTION IS AVAILABLE.
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AVAILABLE INFORMATION
Lloyd intends to furnish to its stockholders annual reports containing financial
statements audited and reported upon by its independent public accounting firm
and intends to make available quarterly reports for the first three quarters of
each year containing unaudited financial information.
Lloyd has filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form SB-2 (the "Registration Statement") under the
Securities Act with respect to the Shares. This Reconfirmation Prospectus does
not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. For further information with respect to Lloyd and this
offering, reference is made to the Registration Statement, including the
exhibits filed therewith, which may be examined at the Commission's principal
office, Room 1024, 450 Fifth Street, N.W., Washington, D. C. 20549, the
Northeast Regional
<PAGE>
Office of the Commission at 7 World Trade Center, Suite 1300, New York, New York
10048 and the Midwest Regional Office of the Commission, Northwest Atrium, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 where copies may
be obtained upon payment of the fees prescribed by the Commission. Descriptions
contained in this Reconfirmation Prospectus as to the contents of any contract
or other documents filed as an exhibit to the Registration Statement are not
necessarily complete and each such description is qualified by reference to such
contract or document. Lloyd will provide without charge to each person who
receives a Reconfirmation Prospectus, upon written request of such person, a
copy of any of the information that is incorporated by reference in the
Reconfirmation Prospectus.
RECONFIRMATION
IN ORDER TO RECONFIRM A PURCHASE OF SHARES, A TRANSMITTAL AND RECONFIRMATION
LETTER (THE "RECONFIRMATION LETTER") IN THE FORM ATTACHED TO THIS RECONFIRMATION
PROSPECTUS SHOULD BE FORWARDED TO BERNARD HEROLD & CO., INC., (A MEMBER OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD"), NEW YORK STOCK
EXCHANGE ("NYSE") AND SECURITIES INVESTORS PROTECTION CORPORATION ("SIPC"),
WHICH IS ACTING AS ESCROW AGENT PURSUANT TO RULE 419 AT 555 MADISON AVENUE, NEW
YORK, NEW YORK 10022, ATTN: RENATO VALENTE.
<PAGE>
RECONFIRMATION PROSPECTUS SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED IN THIS
RECONFIRMATION PROSPECTUS AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING
ELSEWHERE IN THE RECONFIRMATION PROSPECTUS AND IN THE REGISTRATION STATEMENT.
IMMEDIATELY PRIOR TO LLOYD'S PROPOSED ACQUISITION TRANSACTION DESCRIBED HEREIN,
LLOYD WILL EFFECT A 1-FOR-5 REVERSE SPLIT OF THE LLOYD COMMON STOCK. UNLESS
OTHERWISE STATED, ALL SHARE AND PER SHARE NUMBERS AND AMOUNTS SET FORTH HEREIN
HAVE BEEN ADJUSTED TO REFLECT SUCH 1-FOR-5 REVERSE SPLIT.
THIS RECONFIRMATION PROSPECTUS HAS BEEN PREPARED ASSUMING THAT GOURMET REGENCY
COFFEE COMPANY (DESCRIBED BELOW) HAS COMPLETED THE PENDING ACQUISITION, BY IT,
OF CAMERON'S COFFEE COMPANY, INC., AS DESCRIBED MORE FULLY BELOW. IF LLOYD IS
ADVISED BY GOURMET THAT COMPLETION OF SUCH ACQUISITION TRANSACTION HAS BECOME
UNLIKELY, LLOYD INTENDS TO PROMPTLY FILE ANOTHER POST-EFFECTIVE AMENDMENT TO
SUCH REGISTRATION STATEMENT. THE INFORMATION SET FORTH IN THIS RECONFIRMATION
PROSPECTUS REGARDING GOURMET REGENCY COFFEE COMPANY, CAMERON'S COFFEE COMPANY,
INC., ROBERT'S WHOLESALE FOODS, LLC AND ROBERT'S FUN TIME FOODS, INC., INCLUDING
WITHOUT LIMITATION THE FINANCIAL INFORMATION WITH REGARD TO SUCH COMPANIES, HAS
BEEN SUPPLIED TO LLOYD BY GOURMET REGENCY COFFEE COMPANY, ITS OFFICERS,
DIRECTORS AND REPRESENTATIVES, AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY LLOYD.
LLOYD
Lloyd Ventures, Inc. ("Lloyd") was organized under the laws of the State of
Delaware on February 28, 1995 for the purpose of acquiring or merging with an
unspecified operating business. Lloyd, since its incorporation, has not been
engaged in any business activities, other than those described herein. Lloyd's
address is 41 East 57th Street, 39th Floor, New York, New York 10022.
THE RULE 419 OFFERING
On November 12, 1996, Lloyd commenced the Original Offering pursuant to Rule
419, offering a maximum of two hundred thousand (200,000) shares of Lloyd Common
Stock, at a price of Fifty Cents ($.50) per Share. In the Original Offering, one
hundred ninety-six thousand four hundred Shares were sold, resulting in
Ninety-Eight Thousand Two Hundred Dollars ($98,200) of gross proceeds from
approximately three hundred twelve (312) Rule 419 Investors. Pursuant to Rule
419, Eighty Eight Thousand Three Hundred and Eighty Dollars ($88,380) of the
proceeds of the Original Offering (exclusive of interest thereon) as well as
Lloyd's shares purchased by the Rule 419 Investors are being held in escrow by
Bernard Herold & Co., as Escrow Agent (the "Escrow Agent") pending (i)
distribution of a prospectus to each of them describing a prospective business
acquisition by Lloyd (I.E. this Reconfirmation Prospectus) and (ii) the
subsequent confirmation by the holders of at least eighty percent (80%) of the
Shares that they elect to remain investors.
THE EXCHANGE AGREEMENT
Lloyd has entered into an Exchange Agreement (the "Exchange Agreement") dated
February 27, 1998, with Gourmet Regency Coffee Company ("Gourmet"), a Minnesota
corporation, pursuant to which each of the non-dissenting stockholders of
Gourmet will exchange his shares of common stock of Gourmet (the "Gourmet Common
Stock") for an equal number of shares of Lloyd Common Stock (the "Exchange").
After consummation of the Exchange, and assuming all of the Rule 419 Investors
reconfirm their
<PAGE>
investment in Lloyd, the Lloyd stock holders (including the Rule 419 Investors
will hold four hundred fifty-one thousand four hundred (451,400) shares of Lloyd
Common Stock which will constitute approximately eight and 82/100 percent
(8.82%) of the issued and outstanding shares of Lloyd. The current stockholders
of Gourmet will own four million six hundred sixty-nine thousand three hundred
fifty (4,669,350) shares of Lloyd or approximately ninety-one and 18/100 percent
(91.18%) of the issued and outstanding shares of Lloyd. The exchange ratio in
the Exchange was arbitrarily determined by negotiation between Lloyd and
Gourmet, does not necessarily bear any relationship to Lloyd's or Gourmet's
asset value (except with respect to establishing the minimum evaluation criteria
set forth in Rule 419), net worth or other established criteria of value and may
not be indicative of the actual value of Lloyd or Gourmet.
The Exchange is subject to the satisfaction, by each of Gourmet and Lloyd, of
certain conditions precedent, including but not limited to, the requirement that
Gourmet obtain the approval and consent of its stockholders as required under
Minnesota law and that Lloyd obtain the affirmative reconfirmation of Rule 419
Investors holding at least eighty percent (80%) of the shares of Lloyd Common
Stock held in the Rule 419 Escrow, in accordance with the procedures set forth
in Rule 419.
Management of Gourmet has indicated that, shortly following completion of the
Exchange, it intends to seek stockholder approval for the restatement of Lloyd's
Certificate of Incorporation, Bylaws and assumption of the Gourmet Regency
Coffee Company Incentive Stock Option Plan. As permitted by Delaware law, Lloyd
may obtain such stockholder approval by written consent of the stockholders
owning a majority of the then outstanding Lloyd Common Stock.
THE BUSINESS OF GOURMET
Present management of Lloyd (the "Lloyd Management") does not expect to become
involved as management of Gourmet.
Gourmet recently completed the acquisition of Cameron's Coffee Company, Inc.
("Cameron's"), another coffee roaster, and Fun Time Foods, Inc. ("Fun Time"), a
specialty food distributor. The description contained herein of Gourmet and its
business reflects such acquisitions. The PRO FORMA financial statements of
Gourmet included herein as of December 31, 1997, and for the year then ended
present such acquisitions, on a PRO FORMA basis, as if such acquisitions had
occurred on January 1, 1997. Gourmet's executive offices are located at 5500
Cottonwood Lane, Suite 108, Prior Lake, Minnesota 55372.
DISSENTERS' RIGHTS
The Rule 419 Investors will not have any dissenters' rights with respect to the
Exchange. However, they will have certain substantive rights under Rule 419. See
"Investor's Rights and Substantive Protection Under Rule 419."
CERTAIN INCOME TAX CONSEQUENCES
The Exchange is intended to qualify as a "tax-free reorganization" for purposes
of the Internal Revenue Code so that stockholders of Gourmet and Lloyd will not
recognize gain or loss from the Exchange pursuant to the Internal Revenue Code.
In addition, the Exchange is not expected to result in the recognition of gain
or loss to either Gourmet or Lloyd in the respective jurisdictions where each of
them is subject to taxation. No opinion of tax counsel has been obtained. See
"Information Concerning Gourmet."
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth (i) the historic book value per share at December
31, 1997 of Gourmet (on a PRO FORMA basis reflecting Gourmet's recent
acquisitions of Fun Time and Cameron's; restated to reflect the completion,
since such date by Gourmet, of a private placement raising Two Million Five
Hundred Thousand Dollars ($2,500,000)); (ii) the historic book value per share
at December 31, 1997 of Lloyd; (iii) the income per share for the year ended
December 31, 1997 of Gourmet; and (iv) the income per share for the year ended
December 31, 1997 of Lloyd. The table also sets forth as a comparison PRO FORMA
values after giving effect to the Exchange:
BOOK VALUE PER SHARE
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RESTATED PRO FORMA(2)
Gourmet(1) $.83 n/a
Lloyd $.01 $.76
NET INCOME PER SHARE
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RESTATED PRO FORMA(2)
Gourmet(1) ($.14) n/a
Lloyd ($.01) ($.13)
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(1) Restated, on a PRO FORMA basis to reflect the recent acquisition by Gourmet
of Cameron's and Fun Time and restated to reflect the completion, since such
date, by Gourmet, of a private placement raising Two Million Five Hundred
Thousand Dollars ($2,500,000).
(2) Restated to reflect the proposed acquisition of Gourmet by Lloyd which will
be accounted for as a reverse merger as if Gourmet had acquired Lloyd.
No cash dividends were declared or paid during the year ended December 31, 1997
by either Gourmet or Lloyd.
MARKET PRICE INFORMATION
Prior to the date hereof there has been no trading market for either the Gourmet
Common Stock or the Lloyd Common Stock. Upon consummation of the Exchange,
Gourmet has informed Lloyd that it intends to seek the listing of Lloyd's Common
Stock on the NASDAQ small-cap market. There is no assurance that a trading
market will develop or that such listing will be accepted.
RULE 419 AND THE RECONFIRMATION OFFER
This Reconfirmation Offer is being conducted in compliance with Rule 419 so as
to solicit from the Rule 419 Investors reconfirmation of their acquisition of
Shares. Receipt of affirmative Reconfirmation Letters from Rule 419 Investors
holding at least eighty percent (80%) of the Shares is a precondition to the
consummation of the Exchange. To reconfirm the acquisition of Shares, a fully
completed and signed Reconfirmation Letter should be forwarded to the Escrow
Agent.
Lloyd conducted the Original Offering as a "blank check" offering subject to
Rule 419. Under Rule 419,
<PAGE>
investors have certain rights and receive certain substantive protection.
Accordingly, the Deposited Securities and the Deposited Funds were deposited and
are being held in the Rule 419 Escrow until an acquisition meeting specific
criteria is completed. Before the acquisition can be completed and before the
Deposited Funds and Deposited Securities can be released from Escrow, Lloyd is
required to amend the Registration Statement with a post-effective amendment,
and within the five (5) days after the effective date thereof, Lloyd is required
to furnish investors with the prospectus produced thereby (I.E. this
Reconfirmation Prospectus) containing the terms of the Reconfirmation Offer and
information regarding the proposed acquisition candidate and its business,
including audited financial statements.
Pursuant to Rule 419, an investor must have no fewer than twenty (20) and no
more than forty-five (45) business days from the effective date of the
post-effective amendment to decide to reconfirm his investment and remain an
investor or alternately, require the return of his investment, less the
Permitted Deductions. Any investor not making any decision within said period
will automatically have his investment funds (plus interest thereon and less
Permitted Deductions) returned. Accordingly, if an investor does not reconfirm
his investment, he will receive approximately ninety percent (90%) of his
original investment plus interest thereon. Rule 419 further provides that if
Lloyd does not complete an acquisition meeting the specified criteria within
eighteen (18) months of November 12, 1996 (the "Effective Date"), all of the
Deposited Funds in the Rule 419 Escrow must be returned to investors. See
"Investors' Rights and Substantive Protection Under Rule 419."
Currently, Lloyd has four hundred fifty-one thousand four hundred (451,400)
shares issued and outstanding of which one hundred ninety-six thousand four
hundred (196,400) shares are subject to this Reconfirmation Offering. Of the
shares subject to the Reconfirmation Offer, sixty-three thousand one hundred
(63,100) are owned by officers, directors and/or certain of their family members
(as to which Shares such officers and directors disclaim beneficial ownership).
See "Investor's Rights and Substantive Protection Under Rule 419."
USE OF PROCEEDS
In the event that a sufficient number of Rule 419 Investors reconfirm their
investment, Lloyd will receive the balance of the Deposited Funds upon
consummation of the Exchange. The Deposited Funds will remain in the Rule 419
Escrow Account maintained by the Escrow Agent until the consummation of the
Exchange. See "Use of Proceeds" and "Gourmet."
Lloyd intends to apply a portion of the Deposited Funds to cover costs and
expenses incurred in the negotiation and consummation of the Exchange as well as
other unpaid costs and expenses. Rule 419 requires that the fair value of any
acquired business be equal to at least eighty percent (80%) of the maximum
offering proceeds, or Seventy-Eight Thousand Five Hundred Sixty Dollars
($78,560). Lloyd believes that the fair value of Gourmet satisfies this
requirement. However, Lloyd has not obtained any appraisal or other independent
valuation to support such belief.
RISK FACTORS
An investment in the securities of Lloyd is highly speculative and involves
extremely high risks, and potential investors should carefully review the entire
Reconfirmation Prospectus and, particularly, the sections relating to "Risk
Factors," "Dilution," "Use of Proceeds" and "Gourmet."
TRANSFER AGENT
<PAGE>
Lloyd's transfer agent is StockTrans, Inc., 7 East Lancaster Avenue, Ardmore,
Pennsylvania 19003, (610) 649-7300.
ESCROW AGENT
The Escrow Agent is Bernard Herold & Co., Inc., 555 Madison Avenue, New York,
New York 10022, a registered broker/dealer and member of NASD, SIPC and the
NYSE.
<PAGE>
RISK FACTORS
THE SHARES OFFERED HEREBY ARE HIGHLY SPECULATIVE IN NATURE AND INVOLVE AN
EXTREMELY HIGH DEGREE OF RISK. EACH PROSPECTIVE INVESTOR SHOULD, PRIOR TO
PURCHASE, CONSIDER VERY CAREFULLY THE FOLLOWING RISK FACTORS, AS WELL AS ALL OF
THE OTHER INFORMATION SET FORTH ELSEWHERE IN THIS RECONFIRMATION PROSPECTUS
INCLUDING "INFORMATION CONCERNING GOURMET." THIS RECONFIRMATION PROSPECTUS,
INCLUDING INFORMATION INCORPORATED HEREIN BY REFERENCE, CONTAINS
"FORWARD-LOOKING" INFORMATION WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND THE SECURITIES EXCHANGE ACT OF 1934. SUCH FORWARD-LOOKING INFORMATION MAY BE
INDICATED BY WORDS SUCH AS "WILL," "MAY BE," "EXPECTS" OR ANTICIPATES." ACTUAL
RESULTS COULD DIFFER SIGNIFICANTLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING
STATEMENTS AS A RESULT, IN PART, OF THE RISK FACTORS SET FORTH BELOW. IN
CONNECTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED IN THIS RECONFIRMATION
PROSPECTUS, PROSPECTIVE INVESTORS SHOULD BE AWARE OF THE RISK FACTORS DESCRIBED
HEREIN AND SHOULD CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS
RECONFIRMATION PROSPECTUS.
RISKS RELATED TO LLOYD
1. RULE 419 GENERALLY. Rule 419 generally requires that the securities to be
issued and the funds received in a blank check offering be deposited and held in
an escrow account until an acquisition meeting specified criteria is completed.
Before such acquisition can be completed and before the funds and securities can
be released, the blank check company is required to update the registration
statement with a post-effective amendment. After the effective date of any such
post-effective amendment, Lloyd is required to furnish investors with the
prospectus produced thereby (I.E. this Reconfirmation Prospectus) containing
information, including audited financial statements, regarding the proposed
acquisition candidate and its business. According to the Rule, the investors
must have no fewer than twenty (20) and no more than forty-five (45) business
days from the effective date of the post-effective amendment to decide to remain
an investor or require the return of their investment funds. Any investor not
making any decision within said period is to automatically receive a return of
his or her investment funds. Unless investors representing eighty percent (80%)
of the maximum offering proceeds elect to remain investors, the consummation of
an acquisition of or merger with a target business would be prevented. Rule 419
further provides that if the blank check company does not complete an
acquisition meeting specified criteria within eighteen (18) months of the
effectiveness of the initial registration statement, all of the Deposited Funds
in the Rule 419 Escrow, less amounts deducted therefrom pursuant to Rule 419,
must be returned to investors.
2. PROHIBITION PURSUANT TO RULE 15g-8 UNDER EXCHANGE ACT TO SELL OR OFFER TO
SELL SHARES IN RULE 419 ACCOUNT. Rule 15g-8 of the Exchange Act provides that it
is unlawful for any person to sell or offer to sell the Shares (or any interest
in or related to the Shares) held in the Rule 419 account other than pursuant to
a qualified domestic relations order as contemplated by the Act, which term
Lloyd believes includes an order of a court of competent jurisdiction
incorporating in an order of support or judgment of divorce provisions for
property distribution and/or support. However, each investor is urged to consult
with his own tax and legal counsel to determine the applicability of such
exemption to his particular circumstances. As a result, contracts for sale to be
satisfied by delivery of the Deposited Securities (E.G. contracts for sale on a
when, as, and if issued basis) are prohibited. Such rule prohibits sales of
other
<PAGE>
interests based on or in the Shares, whether or not physical delivery is
required.
3. RECENTLY ORGANIZED COMPANY. Lloyd was only recently organized and has no
operating history. Lloyd, therefore, must be considered promotional and in its
early formative and development stage. Potential investors should be aware of
the difficulties normally encountered by a new enterprise. There is nothing at
this time upon which to base an assumption that Lloyd's business plan will prove
successful, and there is no assurance that Lloyd will be able to operate
profitably. Lloyd has limited resources and has had no revenues to date.
4. MINIMAL TIME SPENT BY MANAGEMENT. All members of the Lloyd Management are
engaged full-time in other activities and, therefore, devote only a minimal
amount of time (not to exceed, in the aggregate, approximately ten (10) hours
per week) to Lloyd's business. It is unlikely that, prior to the Exchange, the
lack of full-time management will have a materially adverse effect upon Lloyd's
business. At present, Lloyd has no employees. Upon consummation of the Exchange,
Lloyd's Management will be comprised of the current officers and directors of
Gourmet.
5. EXPERIENCE OF MANAGEMENT. Although Management has general business
experience, potential investors should be aware that Lloyd Management has
limited experience in business combinations. Mr. Maxwell, however, has been
involved as a principal stockholder, director and officer of publicly held
corporations engaged in reverse merger activities.
6. POSSIBLE ISSUANCE OF ADDITIONAL SHARES. Lloyd's Certificate of Incorporation
authorizes the issuance of thirty-five million (35,000,000) shares of common
stock. Approximately ninety-four percent (94%) of Lloyd's authorized shares
remain unissued. Lloyd's Board of Directors has the power to issue any or all of
such additional shares without stockholder approval. Approximately four million
six hundred sixty-nine thousand three hundred fifty (4,669,350) shares of Lloyd
Common Stock will be issued in the Exchange. As a result, if the Exchange is
completed, Lloyd will have authorized, but unissued, approximately twenty-nine
million eighty hundred seventy-nine thousand two hundred fifty (29,879,250)
shares of its common stock. Lloyd may choose, in the future, to issue additional
shares for the purpose of raising additional capital. Lloyd stockholders, in
considering the Reconfirmation Offer, should be aware that any such stock
issuances may result in a reduction of the book value or market price, if any,
of the then outstanding shares. If Lloyd issues additional shares, such issuance
will reduce the proportionate ownership and voting power of its stockholders.
Also, any new issuance of shares may result in a change of control of Lloyd.
7. NO UNDERWRITER OR SELECTED BROKER/DEALERS. Lloyd has not retained an
underwriter or any selected broker/dealers to assist in connection with the
Exchange.
8. TAX CONSIDERATIONS. As a general rule, Federal and state tax laws and
regulations have a significant impact upon the structuring of business
combinations. The Exchange is intended to be tax-free to Lloyd, Gourmet, and
their respective stockholders. There can be no assurance, however, that the
Internal Revenue Service or appropriate state tax authorities will ultimately
assent to such tax treatment of the Exchange. To the extent the Internal Revenue
Service or state tax authorities ultimately prevail in recharacterizing the tax
treatment, there may be adverse tax consequences to Lloyd, Gourmet and their
respective stockholders. No opinion of tax counsel has been obtained.
9. CHANGE OF CONTROL. If the Exchange is consummated, the present stockholders
of Lloyd will no longer have control of Lloyd. In addition, in connection with
the Exchange, Lloyd's present officers and
<PAGE>
directors will resign from their positions with Lloyd. No assurance can be given
as to the experience or qualifications of the persons who will replace present
Lloyd Management respecting either the operation of Lloyd's activities or the
operation of the business, assets or property being acquired.
10. NO DIVIDENDS. No dividends have been paid on Lloyd Common Stock to date and
Lloyd does not intend to pay cash dividends. The payment of dividends after the
Exchange, if any, will be contingent upon Lloyd's revenues and earnings, if any,
capital requirements and general financial condition subsequent thereto. The
payment of any dividends subsequent to the Exchange will be within the
discretion of Lloyd's then Board of Directors. Management of Gourmet has
indicated that, if the Exchange is completed, it similarly does not intend that
Lloyd will pay cash dividends in the foreseeable future.
11. PENNY STOCK RULES. Under Commission Rule 15g-9, a broker or dealer may not
sell a "penny stock" (as defined in Rule 3a51-1) to, or effect the purchase of a
penny stock by, any person unless:
(a) such sale or purchase is exempt from Rule 15g-9; or
(b) prior to the transaction the broker or dealer has (a) approved the
person's account for transaction in penny stocks in accordance with Rule 15g-9
and (b) received from the person a written agreement to the transaction setting
forth the identity and quantity of the penny stock to be purchased.
The Commission adopted regulations that generally define a penny stock to be any
equity security other than a security excluded from such definition by Rule
3a51-1. Such exclusions include, but are not limited to (a) an equity security
issued by an issuer that has (i) net tangible assets of at least two million
dollars ($2,000,000), if such issuer has been in continuous operation for at
least three (3) years; (ii) net tangible assets of at least five million dollars
($5,000,000), if such issuer has been in continuous operation for less than
three (3) years; or (iii) average revenue of at least six million dollars
($6,000,000) for the preceding three (3) years; (b) except for purposes of
Section 7(b) of the Exchange Act and Rule 419, any security that has a price of
Five Dollars ($5.00) or more; and (c) a security that is authorized or approved
for authorization upon notice of issuance for quotation on NASDAQ. No assurance
can be given that Lloyd Common Stock will meet any of the exclusions and, as a
result, it is likely that Lloyd's Common Stock will be subject to the
regulations on penny stocks. Consequently, the market liquidity for Lloyd Common
Stock may be adversely affected by such regulations limiting the ability of
broker/dealers to sell Lloyd Common Stock and the ability of the present
stockholders of Lloyd to sell their securities in the secondary market
(following termination of the Rule 419 Escrow).
12. NO ASSURANCE OF A PUBLIC MARKET. There is no current trading market for
Lloyd Common Stock and there can be no assurance that a trading market will
develop, or, if such a trading market does develop, that it will be sustained.
The Shares, to the extent that a market develops for the Shares at all, will
likely appear in what is customarily known as the "pink sheets" or on the NASD
Bulletin Board, which may limit the marketability and liquidity of the Shares.
Although Gourmet has indicated its intention that Lloyd will apply for a listing
on the National Association of Securities Dealers Automated Quotation System
("NASDAQ"), no assurance can be given that such application for listing will be
accepted following consummation of the Exchange.
13. FAILURE TO CONSUMMATE THE EXCHANGE. Even if the requisite number of Rule 419
Investors reconfirm pursuant to this Reconfirmation Prospectus their acquisition
of shares in the Original Offering, there can be no assurance that all of the
other conditions precedent to the consummation of the Exchange will be satisfied
and, therefore, the Exchange may not be consummated. In such case, Lloyd will
not be
<PAGE>
able to identify another acquisition candidate and consummate a business
combination therewith within the time frame of Rule 419.
14. RISKS ASSOCIATED WITH THE BUSINESS OF GOURMET. If the Exchange is
consummated, Gourmet will become a subsidiary of Lloyd and will account for
virtually all of Lloyd's assets and operations and, accordingly, Lloyd's success
will be subject to those additional risks inherent in Gourmet's business
operations. See "Risk Factors--Risks Related to Gourmet" and "Gourmet."
RISKS RELATED TO GOURMET
THE RISK FACTORS SET FORTH HEREIN WITH REGARD TO GOURMET SET FORTH VARIOUS RISKS
RELATED TO THE BUSINESS OF GOURMET. BECAUSE THE ASSETS AND OPERATIONS OF GOURMET
WILL ACCOUNT FOR SUBSTANTIALLY ALL THE ASSETS AND OPERATIONS OF LLOYD AFTER THE
COMPLETION OF THE EXCHANGE, SUCH RISKS ALSO WILL, UPON COMPLETION OF THE
EXCHANGE, BE RISKS OF LLOYD.
15. LIMITED PROFITABILITY: LIKELIHOOD OF FUTURE LOSSES. Gourmet's financial
results, as restated on a PRO FORMA basis to reflect the acquisition of both
Cameron's and Fun Time (the "Acquisition Transactions") for 1996 and 1997
reflect operating losses of ($1,078,763) and ($680,030) respectively. No
assurance can be given that Gourmet will be able to operate on a profitable
basis in the future.
16. NEED FOR ADDITIONAL FINANCING. Gourmet's planned continued expansion will
likely result in requirements for funds in excess of cash flow generated from
operations, and will likely require future debt or equity financing to meet its
planned business requirements. Although Gourmet recently completed a private
placement of its stock raising Two Million Five Hundred Thousand Dollars
($2,500,000), no assurance can be given that any such financing will be
available on terms acceptable to Gourmet.
17. RECENT ACQUISITION TRANSACTIONS--UNCERTAINTY OF OPERATING EFFICIENCY. No
assurance can be given that Gourmet's operations will not be adversely affected
by the Acquisition Transactions and no assurance can be given that the
operations of Gourmet, Cameron's and Fun Time can be successfully integrated. If
Gourmet is unable to, or is delayed in, its integration of these previously
separate businesses, operating ability, cash flow, profitability, and other
attributes will be adversely affected.
18. COMPETITION. The market for gourmet coffee and other specialty products is
large, intensely competitive, and dominated by corporations significantly larger
than Gourmet. Although Gourmet's strategy is to distinguish itself and its
products by focusing on "gourmet" coffee products, and Gourmet attempts to
distinguish itself from competitors by increasing its involvement in the
distribution process and by marketing other related products, no assurance can
be given that such strategy will be successful, or that Gourmet will be able to
compete with such competitors, many of whom have broader consumer identification
and greater resources. Further, as Gourmet seeks to expand its geographic market
area, it will encounter new competitors, all of which will likely be established
in their respective markets.
19. DEPENDENCE ON SIGNIFICANT CUSTOMERS. During the years ended December 31,
1996 and 1997, sales to each of three (3) customers, Bradley Distributing, Inc.,
Milwaukee Biscuit and La Minita Coffee which accounted for more than ten percent
(10%) of the combined sales of Gourmet, Cameron's and Fun Time. Gourmet does not
believe that Bradley Distributing, Inc. will account for more than ten percent
(10%) of the sales of Gourmet in 1998 due to the formation of Robert's, a
captive distributor which now serves as the primary distributor of Gourmet's
gourmet coffee and other specialty products in the geographic area previously
served by Bradley Distributing, Inc.
<PAGE>
20. CLAIM BY PRIOR DISTRIBUTOR. In December 1997, Bradley Distributing, Inc.
filed suit against Cameron's in the United States District Court for the
District of Minnesota based on various claims including breach of contract and a
claim that Bradley was a franchisee of Cameron's and that its franchise was
wrongfully terminated. Prior to October 1997, Bradley was a distributor of
Cameron's products but such distributorship was terminated effective October 15,
1997. Bradley was also a distributor of Gourmet's products and its
distributorship of Gourmet's products was similarly terminated. However, no
litigation has been commenced against Gourmet by Bradley. See footnote 8 to the
financial statements of Cameron's.
21. NO LONG-TERM CONTRACTS WITH CUSTOMERS. Consistent with industry practice,
Gourmet does not operate under long-term written contracts with any of its
customers. Gourmet's business could be materially adversely affected by the loss
of any significant customers.
22. DISTRIBUTOR RELATIONSHIPS. Gourmet primarily relies on independent
distributors to distribute its products to grocers. Consistent with industry
practice, Gourmet does not have long-term contracts with such distributors. If
one or more distributors ceases to distribute Gourmet's products, there would
likely be a significant decrease in the number of supermarkets and other retail
outlets to which Gourmet's products are sold, which would result in a
corresponding decrease in sales to consumers.
23. RELIANCE ON A SINGLE PRODUCT. Even if Gourmet is successful in increasing
the range and number of products which its distributes, Gourmet, particularly in
the short-term, will remain primarily dependent upon it's ability to produce and
market its coffee products. As a result, Gourmet will be largely dependent upon
a single category of products for its success. Further, even if Gourmet is
successful in expanding its market for other products, Gourmet will,
nonetheless, remain dependent upon the broader category of retail food
distribution. Any significant event that adversely affects coffee consumption in
general, or gourmet coffee consumption in particular, such as cost, change in
taste, or health concerns about coffee, would adversely affect Gourmet's
operating results.
24. AVAILABILITY OF SHELF/DISPLAY SPACE. Central to Gourmet's operations and
plan of operations is increasing the availability of its coffee and other
products in grocery stores. Such availability is affected by access to limited
shelf space. Food retailers typically seek concessions, allowances or other
discounts from food manufacturers and suppliers, such as Gourmet and its
distributors, in return for access to shelf space. Such costs, typically
consisting of displays, samples, "start-up" inventory, and similar items have
been, and are expected to be, a significant use of Gourmet's funds from
operations. An inability to obtain such shelf/display space and/or significant
increases in the cost of obtaining shelf/display space could adversely affect
Gourmet's business.
25. MARKET ACCEPTANCE. Consumer preferences for coffees and other products
distributed and proposed to be distributed by Gourmet are continually changing
and are extremely difficult to predict. The ability of Gourmet to successfully
market its products will depend upon consumer acceptance. No assurance can be
given that Gourmet's products will achieve or maintain a significant degree of
market acceptance.
26. DEPENDENCE ON AVAILABILITY AND COST OF COFFEE BEANS. Gourmet is largely
dependent upon independent brokers to supply coffee beans, its primary raw
material. Coffee trades on a negotiated basis with the price subject to
fluctuation depending upon the supply and demand at the time of purchase. Any
increase in the prices of coffee, or interruption in Gourmet's supply of coffee
beans, could have a significant adverse effect upon Gourmet's profitability. In
the past, when coffee bean prices have increased, Gourmet
<PAGE>
has been able to maintain its gross margins by increasing the prices it charges
to customers, however, no assurance can be given that Gourmet will be able to do
so in the future without significant declines in sales volume. Although Gourmet
has followed, and intends to follow, a strategy of varying the length of coffee
bean purchase agreements and purchasing coffee futures contracts, to hedge
against such increases, no assurance can be given that Gourmet will be
successful in its strategy. Further, such strategies involve costs to Gourmet,
which costs may become significant.
27. VOTING CONTROL. Gourmet's executive officers and directors will own a
majority of the shares of Lloyd Common Stock upon the consummation of the
Exchange. Accordingly, Gourmet's management will continue to be able to exercise
substantial control over the election of directors and over the operations of
Lloyd. This concentration of ownership could also have the effect of delaying,
deferring or preventing a change in control of Lloyd.
28. DEPENDENCE UPON AND NEED FOR KEY PERSONNEL AND OTHER EMPLOYEES. Gourmet's
future success is dependent, in significant part, upon the abilities of Robert
Paschke, James Cameron, James Farrell, Jay Klovstad and Leonard Unruh. The
inability of such persons to perform their duties or the inability of Gourmet to
attract and retain other highly qualified personnel, when needed, would likely
have a material adverse affect upon Gourmet's business and operations. Gourmet
does not maintain, nor does it contemplate obtaining, "key man" life insurance
with respect to any such employees. The employment of all personnel of Gourmet,
including such employees, is on an "at-will" basis.
29. FINANCIAL STATEMENTS. The financial statements of Gourmet, Cameron's and Fun
Time, set forth elsewhere in this Reconfirmation Prospectus, do not reflect the
recent completion of the Acquisition Transactions (except that the operations of
Fun Time for the last two weeks of 1997--I.E. after completion of the
acquisition of Fun Time--are included). Although PRO FORMA financial statements
of Gourmet reflecting the Acquisition Transactions are included as of and for
the year ended December 31, 1997, such PRO FORMA financial statements are merely
a mathematical combination of the separate operations of each of Gourmet,
Cameron's and Fun Time. No assurance can be given that Gourmet, conducting the
operations of all three companies on a combined basis, will be able to perform
as successfully as the three companies operating separately. Further, no
assurance can be given that the hoped-for business efficiencies and increased
marketing capability will, in fact, occur.
30. PROTECTION OF TRADEMARKS AND COPYRIGHTS. Gourmet has trademarked both the
"Gourmet Regency" and "Cameron's" names. No assurance can be given that such
trademarks are, in fact, of value; that such trademarks do not, or will not,
infringe the proprietary rights of other companies; that such trademarks would
be upheld if challenged; or that Gourmet will not be prevented from using such
trademarks, any of which could have an adverse affect upon Gourmet. In addition
there can be no assurance that Gourmet would have the financial resources to
enforce or defend its trademarks if challenged or used by others.
31. GOVERNMENT REGULATION. The packaged food industry is subject to numerous
federal, state and local government regulations, including those relating to the
preparation, labeling and marketing of food products. If such standards are
modified in the future, Gourmet would likely incur significant costs in order to
comply with the new packaging requirements.
32. PRODUCT LIABILITY CLAIMS. As a manufacturer and marketer of food products,
Gourmet may be subject to various product liability claims. While no such
claims, to date, have been made against Gourmet
<PAGE>
and while Gourmet maintains product liability insurance, there can be no
assurance that such insurance would be adequate to cover any loss or exposure
for product liability, or that such insurance will continue to be available on
terms acceptable to Gourmet. Any product liability claim not fully covered by
insurance, as well as any adverse publicity from a product liability claim,
could have a material adverse effect on the financial condition and results of
operation of Gourmet.
33. OUTSTANDING OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES. Gourmet is
authorized to issue up to seven hundred fifty thousand (750,000) options to
purchase shares of Gourmet Common Stock under its Employee Incentive Stock
Option Plan. As of the date of this Reconfirmation Prospectus, options,
exercisable at between $.6668 and $2.00 per share, to purchase seven hundred
forty-four thousand nine hundred and forty-eight (744,948) shares of Gourmet
Common Stock are outstanding. Additionally, Gourmet has issued a warrant
entitling the holder thereof to purchase up to thirty-seven thousand five
hundred (37,500) shares of Gourmet Common Stock. Such warrant holders have
limited "piggyback" rights. Gourmet also has issued nonqualified stock options
to purchase up to four hundred forty-seven thousand five hundred (447,500)
shares of Gourmet Common Stock exercisable at between Two Dollars ($2.00) and
Four Dollars ($4.00) per share. All such options and warrants will be converted,
pursuant to the terms of the Exchange, to the right to acquire shares of Lloyd
Common Stock on substantially the same basis. The price which Lloyd may receive
upon exercise of such options and warrants, and upon conversion of such
obligation, may be less than the value of Lloyd Common Stock at the time such
options and warrants are exercised or such obligation is converted. So long as
such options and warrants remain outstanding and such obligation remains
convertible, the terms under which Lloyd could obtain additional equity capital
may be adversely effected. To the extent that any such options or warrants are
exercised, or such obligation is converted, the interests of Lloyd stockholders
may be diluted.
INVESTORS' RIGHTS AND SUBSTANTIVE PROTECTION UNDER RULE 419
DEPOSITED FUNDS AND DEPOSITED SECURITIES
Pursuant to Rule 419, the Deposited Funds, after delivery to Lloyd of the
Permitted Deductions (equal to ten percent (10%) of the proceeds), and the
Deposited Securities have been deposited into and are held in the Rule 419
Escrow, which escrow is governed by an agreement which contains certain terms
and provisions specified by Rule 419. Under Rule 419, the Deposited Funds and
Deposited Securities will be released to Lloyd only after Lloyd has satisfied
certain criteria as follows:
(1) PRESCRIBED ACQUISITION CRITERIA. Rule 419 requires that before the Deposited
Funds and the Deposited Securities can be released, Lloyd must execute an
agreement to acquire an acquisition candidate(s) meeting specified criteria. The
agreement(s) must provide for the acquisition(s) of a business(es) or assets for
which the fair value of the business(es) represents at least eighty percent
(80%) of the maximum offering proceeds, excluding underwriting commissions and
dealer allowances payable to non-affiliates and amounts permitted to be
delivered to Lloyd. Lloyd believes the Exchange Agreement satisfies such
conditions. Consequently, for purposes of this Offering, the fair value of the
business(es) or assets to be acquired must be at least eighty percent (80%) of
Ninety-Eight Thousand and Two Hundred Dollars ($98,200), or Seventy-Eight
Thousand Five Hundred and Sixty Dollars ($78,560), which condition Lloyd
believes will be satisfied upon consummation of the Exchange. The agreement(s)
must include, as a condition precedent to their consummation, a requirement that
the number of Rule 419 Investors representing eighty percent (80%) of the
maximum offering proceeds must elect to reconfirm their investment. See "Lloyd's
Selected Financial Data," "Gourmet's Selected Financial Data" and "Gourmet."
<PAGE>
(2) POST-EFFECTIVE AMENDMENT. Once the agreement governing a business
combination meeting the above criteria has been executed, Rule 419 requires
Lloyd to update the registration statement with a post-effective amendment.
Therefore, following the execution of the Exchange Agreement, Lloyd filed such a
post-effective amendment of which this Reconfirmation Prospectus is a part. The
post-effective amendment contains information about the business to be acquired
including audited financial statements as required by the Act or the rules and
regulations promulgated thereunder, the results of the original offering, and
the use of the funds disbursed from the Rule 419 Escrow. See "Use of Proceeds"
and "Information Concerning Gourmet."
(3) RECONFIRMATION OFFER. The Reconfirmation Offer will commence within five (5)
business days after the date of this Reconfirmation Prospectus. Pursuant to Rule
419, the terms of the Reconfirmation Offer include the following conditions:
(a) A copy of this Reconfirmation Prospectus will be sent to each Rule
419 Investor within five (5) business days of the effective date of the
registration statement of which this Reconfirmation Prospectus is a part.
(b) Each investor will have no fewer than twenty (20) and no more than
forty-five (45) business days from the date of this Reconfirmation Prospectus to
notify Lloyd in writing by delivery of the Letter of Transmittal and
Reconfirmation that the investor elects to remain an investor.
(c) If Lloyd does not receive written notification from any investor
within forty-five (45) business days following the date of this Reconfirmation
Prospectus, the portion of the Deposited Funds (plus any interest earned thereon
less the Permitted Deductions) held in the Rule 419 Escrow on such investor's
behalf will be returned to the investor within five (5) business days by first
class mail or other equally prompt means.
(d) The Exchange may be consummated only if a minimum number of Rule
419 Investors, representing eighty percent (80%) of the maximum offering
proceeds of the original offering, elect to reconfirm their investment.
(e) If a business combination is not consummated, in any event, by May
11, 1998, the Deposited Funds (plus any interest earned thereon less the
Permitted Deductions) held in the Rule 419 Escrow shall be returned to all
investors on a pro-rata basis within five (5) business days by first class mail
or other equally prompt means and the Deposited Securities will be returned to
Lloyd.
(4) RELEASE OF DEPOSITED SECURITIES AND DEPOSITED FUNDS. The Deposited Funds and
Deposited Securities may be released to Lloyd and the Rule 419 Investors,
respectively, after:
(a) The Escrow Agent has received a signed representation from Lloyd or
other evidence acceptable by the Escrow Agent that:
(i) Lloyd has executed an agreement for a business combination
for which the fair market value of the business represents at least eighty
percent (80%) of the maximum offering proceeds and has filed the required
post-effective amendment;
(ii) the post-effective amendment has been declared effective,
the mandated Reconfirmation Offer having the conditions prescribed by Rule 419
has been completed and Lloyd has
<PAGE>
satisfied all of the prescribed conditions of the Reconfirmation Offer; and
(b) A business combination with an acquired business having a fair
value of at least eighty percent (80%) of the maximum proceeds from this
offering has been or is being consummated. See "Lloyd's Plan of Operation" and
"Gourmet."
LLOYD
Lloyd is a Delaware corporation incorporated on February 28, 1995. Lloyd was
organized for the purpose of acquiring or merging with (collectively, a
"Business Combination") an unspecified operating business entity. Lloyd, since
its incorporation, has not been engaged in any business activities other than
those described herein.
Lloyd's office is located at c/o Sierchio & Albert, P.C., 41 East 57th Street,
39th Floor, New York, New York 10022.
USE OF PROCEEDS
In the event that a sufficient number of Rule 419 Investors reconfirm their
investment, Lloyd will receive the balance of the Deposited Funds upon
consummation of the Exchange. The Deposited Funds will remain in the Rule 419
Escrow Account maintained by the Escrow Agent until the consummation of the
Exchange.
Lloyd intends to retain Twenty-Five Thousand Dollars ($25,000) of the Deposited
Funds for working capital, and to apply the balance of the net proceeds from the
offering to cover costs and expenses incurred in consummating the Exchange,
including selecting and evaluating Gourmet and structuring and consummating an
Exchange. Rule 419 requires that the fair value of any acquired business be
equal to at least eighty percent (80%) of the maximum offering proceeds. Lloyd
believes the fair value of Gourmet satisfies this requirement.
LLOYD'S CAPITALIZATION
The following table sets forth the capitalization of Lloyd as of the date of
December 31, 1997 and as adjusted to reflect the Exchange. See "Description of
Lloyd Securities."
<TABLE>
<CAPTION>
BEFORE THE EXCHANGE AFTER THE EXCHANGE(1)
------------------- ---------------------
<S> <C> <C>
Long-Term Debt
Long-Term Debt ........................... -- $ 255,794
Lease Obligations ........................ -- --
-------------- --------------
Total Long-Term Debt .......................... -- $ 255,794
-------------- --------------
Commitments and Contingencies(2)
Stockholders Equity
Common Stock, $.001 par value, 35,000,000
shares authorized; issued and outstanding:
451,400 shares ....................... $ 451
5,120,750 shares, as adjusted ........ $ 51,208
<PAGE>
Additional Paid-in-Capital ............... $ 130,249 $ 5,785,130
Retained Earnings (Deficit) .............. $ (68,407) $ (2,105,662)
-------------- --------------
Total Stockholders' Equity (Deficit) .......... $ 62,293 $ 3,730,676
-------------- --------------
Total Capitalization .......................... $ 62,293 $ 3,986,470
============== ==============
</TABLE>
- ----------------------
(1) Restated, on a PRO FORMA basis, to reflect the recent acquisition by Gourmet
of Cameron's and Fun Time and restated to reflect the completion since such
date, by Gourmet, of a private placement raising Two Million Five Hundred
Thousand Dollars ($2,500,000).
(2) See footnotes 11 and 13 to the financial statements of Gourmet and footnote
8 to the financial statements of Cameron's, for the year ended September 30,
1997, both of which are included herein.
MARKET FOR LLOYD COMMON STOCK
Prior to the date hereof, there has been no trading market for Lloyd Common
Stock. Pursuant to the requirements of Rule 15g-8 of the Exchange Act, a trading
market will not develop (whether prior to or after the effectiveness of the
Post-Effective Amendment to Registration Statement of which this Reconfirmation
Prospectus is a part) while the Deposited Securities remain in the Rule 419
Escrow. The Deposited Securities under this offering will remain in the Rule 419
Escrow until, among other things, Lloyd's consummation of a business combination
pursuant to the requirements of Rule 419. The Exchange, if completed, will
satisfy this requirement. There can be no assurance that a trading market will
develop upon the consummation of the Exchange and the subsequent release of the
Deposited Securities from the Rule 419 Escrow.
DILUTION
If the Exchange is consummated, Lloyd's stockholders will own four hundred
fifty-one thousand four hundred (451,400) shares of Lloyd Common Stock following
the consummation of the Exchange (assuming that all of Lloyd's Rule 419
Investors accept the transaction) or approximately eight and 82/100 percent
(8.82%) of the then issued and outstanding Lloyd Common Stock. The net tangible
book value of such shares, as of December 31, 1997 and, prior to any adjustment
to reflect completion of the Exchange, was an aggregate of Sixty-Two Thousand
Two Hundred Ninety-Three Dollars ($62,293) or Fourteen Cents ($.14) per share.
Assuming the completion of the Exchange, and assuming the completion of the
Acquisition Transactions as reflected in the PRO FORMA financial statements of
Gourmet as of December 31, 1997, and restated to reflect the completion, since
such date, by Gourmet, of a private placement raising Two Million Five Hundred
Thousand Dollars ($2,500,000), but assuming no other changes in such net
tangible book value since such date, the net tangible book value per share of
the Lloyd Common Stock then outstanding would be Thirty-Six Cents ($.36) per
share, an increase of Twenty-Four Cents ($.24) per share.
LLOYD'S SELECTED FINANCIAL DATA
Lloyd has a limited history of operations and has not generated any operating
revenues. The following table sets forth, for the periods and the dates
indicated, selected financial data for Lloyd. The selected financial data should
be read in conjunction with the Financial Statements and notes thereto of Lloyd
contained elsewhere in this Reconfirmation Prospectus.
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED:
---------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------- ----------------------- -----------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net revenues -- --
Net loss ($29,410) ($12,353)
Net loss per share ($.01) ($.01)
AS OF:
DECEMBER 31, 1997
-----------------------
BALANCE SHEET DATA:
Working capital(1) $62,293
Total assets(1) $99,317
Long-term debt -0-
Stockholders' equity (deficit) $62,293
</TABLE>
- ------------------------
(1) Virtually all of Lloyd's assets are restricted pursuant to the Rule 419
Escrow. See "Investors' Rights and Substantive Protection Under Rule 419."
LLOYD'S PLAN OF OPERATION
Lloyd was organized for the purpose of acquiring or merging with an operating
business entity. Lloyd has no history of operations and has not generated any
operating revenues.
Year Ended December 31, 1997, Compared to Year Ended December 31, 1996
Lloyd's cash position decreased during the year ended December 31, 1997, as
compared to the year ended December 31, 1996, as a result of the payment of
expenses incurred in connection with the original offering of its securities.
The balance of Lloyd's cash is being held in escrow pending consummation of a
business combination satisfying the criteria of Rule 419.
PLAN OF REORGANIZATION AND EXCHANGE OFFER
During November of 1997, Mr. Paschke, President of Gourmet and Mr. Maxwell,
President of Lloyd, began to negotiate a possible transaction between Lloyd and
Gourmet. These discussions and negotiations resulted in execution of the
Exchange Agreement dated as of February 27, 1998, which was approved and
ratified by Gourmet's Board of Directors and Lloyd's Board of Directors on that
date.
The Exchange Agreement sets forth an offer by Lloyd to acquire from the
stockholders of Gourmet all of the outstanding capital stock of Gourmet. The
transaction contemplated by the Exchange Agreement is conditioned upon, among
other things, the acceptance of the transaction by holders of at least eighty
percent (80%) of the shares owned by the Rule 419 Investors.
The result of the Exchange will be that the holders of the shares of Gourmet
Common Stock immediately prior to the consummation of the Exchange will own
ninety-one and 18/100 percent (91.18%) of Lloyd Common Stock, and the Lloyd
Stockholders, including the Rule 419 Investors, will own eight and 82/100
percent (8.82%) of Lloyd Common Stock, after the Exchange. It is expected that
the directors and
<PAGE>
officers of Gourmet will continue to be the directors and officers of Gourmet,
and will become the directors and officers of Lloyd after the Exchange. See
"Information Concerning Gourmet."
Of the shares owned by the Rule 419 Investors, approximately thirty-two percent
(32%) are owned by directors or officers of Lloyd, all of whom have indicated an
intention to confirm their respective investments. Consummation of the Exchange
is not subject to any governmental approvals.
CERTAIN INCOME TAX CONSEQUENCES
The Exchange is intended to qualify as a "tax-free reorganization" for purposes
of the Internal Revenue Code so that stockholders of Lloyd not recognize gain or
loss from the Exchange pursuant to the Internal Revenue Code. In addition, the
transaction is not expected to result in the recognition of gain or loss to
either Gourmet or Lloyd in the respective jurisdictions where each of them is
subject to taxation. THE FOREGOING IS FOR GENERAL INFORMATION ONLY AND GOURMET
AND LLOYD'S STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE
SPECIFIC TAX CONSEQUENCES OF THE EXCHANGE TO THEM. No opinion of tax counsel has
been requested.
FEES AND EXPENSES
Pursuant to the terms of the Exchange, Gourmet and Lloyd are to bear their own
respective costs and expenses incurred in connection with the Exchange.
APPROVAL BY THE BOARD OF DIRECTORS AND STOCKHOLDERS OF LLOYD
The Board of Directors of Lloyd approved the Exchange Agreement by unanimous
written consent dated February 27, 1998. Lloyd's Board of Directors believes
that the Exchange is in the best interest of Lloyd's stockholders.
GOURMET SELECTED FINANCIAL INFORMATION
The following table sets forth selected PRO FORMA financial information
regarding Gourmet as of December 31, 1997 and for the two (2) years then ended.
Such information has been restated to include, on a PRO FORMA basis (i) the
assets, liabilities and results of operations of Cameron's and (ii) the assets,
liabilities and results of operations of Fun Time. Such PRO FORMA financial
information is based upon (i) the financial statements of Gourmet as of and for
the years ended December 31, 1996 and 1997; (ii) the financial statements of Fun
Time as of and for the years ended December 31, 1996 and 1997 (which are not
included herein); and (iii) the financial statements of Cameron's as of and for
the years ended September 30, 1996 and 1997 (except that balance sheet
information as to Cameron's, is based upon Cameron's unaudited balance sheet as
of December 31, 1997). Gourmet believes that transactions between the three (3)
companies are nominal and such transactions have not been eliminated. Such
information has been restated to reflect the recent completion, since such date,
by Gourmet, of a private placement raising Two Million Five Hundred Thousand
Dollars ($2,500,000).
<TABLE>
<CAPTION>
YEARS ENDED:
------------------------------------------------------
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------- ------------------------
<S> <C> <C>
PRO FORMA INCOME STATEMENT DATA:
Sales $8,239,524 $7,927,307
Cost of sales 6,101,907 5,875,258
------------------------- ------------------------
Gross profit 2,137,617 2,052,049
<PAGE>
Operating expenses 2,597,306 2,885,982
------------------------- ------------------------
Income (loss) from operations (459,689) (833,933)
Other income (expense) (221,616) (245,534)
------------------------- ------------------------
Net loss ($681,305) ($1,079,467)
========================= ========================
AS OF:
DECEMBER 31, 1997
-------------------------
PRO FORMA BALANCE SHEET DATA
Working capital (deficiency) $839,773
Total assets $6,773,160
Long-term debt 255,794
Stockholders' equity (deficit) $3,730,676
</TABLE>
GOURMET MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
NET REVENUES. Gourmet's net revenues increased by approximately
$284,729, or 3.59%, from $7,927,307 in 1996 to $8,212,036 in 1997.
GROSS MARGIN. Gourmet's gross profit margin increased by $85,568, or
4.2%, from $2,052,049 in 1996 to $4,137,617 in 1997. As a percentage of net
revenues, this represents an increase of less than one-half of one percentage
point from 25.89% in 1996 to 26.03% in 1997.
OPERATING EXPENSES. Gourmet's operating expenses decreased by $288,676,
or 10%, from $2,885,982 in 1996 to $2,597,306 in 1997. As a percentage of net
revenues, this represents a decrease of 4.78 percentage points from 36.41% in
1996 to 31.63% in 1997.
NET OPERATING INCOME. Gourmet's net operating loss decreased by
$374,244, or 44.88%, from $833,933 in 1996 to $459,689 in 1997. As a percentage
of net revenues, this represented a decrease of 4.9 percentage points from
10.52% in 1996 to 5.6% in 1997.
NET INCOME AND EARNINGS PER SHARE.
[TO BE INSERTED]
FINANCIAL CONDITION
[TO BE INSERTED]
GOURMET
AS DISCUSSED BELOW, GOURMET RECENTLY ACQUIRED CAMERON'S, A PREVIOUSLY
INDEPENDENT COMPANY WHICH WAS ENGAGED IN A BUSINESS SIMILAR TO GOURMET'S.
ADDITIONALLY, GOURMET RECENTLY ACQUIRED FUN TIME, A WISCONSIN BASED DISTRIBUTOR
OF COFFEE AND OTHER PRODUCTS. EXCEPT WHERE THE CONTEXT OTHERWISE REQUIRES,
<PAGE>
REFERENCES IN THIS SECTION TO "GOURMET" INCLUDE THE OPERATIONS OF CAMERON'S AND
FUN TIME.
GENERAL, HISTORY AND ACQUISITIONS
Gourmet is an integrated roaster, wholesaler and distributor of high quality
gourmet coffee and other specialty products. Gourmet was founded to roast,
market and distribute gourmet coffee to supermarkets and other retail outlets.
Gourmet has over twelve hundred (1,200) accounts to which it sells Gourmet brand
and Cameron's brand coffee and other specialty products. Gourmet custom batch
roasts over twenty (20) different types of high quality coffee beans to make
approximately ninety (90) different varieties of gourmet coffees. Custom batch
roasting, which is slow and not necessarily the most cost-effective process, is
the key to the distinctive flavor of Gourmet coffee and is unique among coffee
roasters. The coffee is then air-cooled, another unique process, before it is
packaged.
Gourmet uses a network of independent distributors to assist in the distribution
of its coffee and other specialty products. These independent distributors
deliver and stock Gourmet's and Cameron's coffee and other specialty products in
many of the supermarkets or other retail outlets that they are already serving
with other products. These independent distributors also keep the shelves neat
and orderly at each of the retail outlets which greatly enhances product
presentation. Gourmet believes that the use of these independent distributors is
a significant reason why the volume of its coffee being distributed has
increased significantly and why it has received additional shelf space for its
other products. In addition to such independent distributors, Gourmet recently
acquired Fun Time, a Wisconsin-based distributor of coffee and other products.
Additionally, Gourmet and Cameron's, prior to the acquisition of Cameron's by
Gourmet, had formed, and are co-owners of, Robert's Wholesale Foods, LLC
("Robert's") to market Gourmet Regency-brand and Cameron's-brand coffee as well
as other specialty products in the Twin Cities metropolitan area.
The geographic areas in which Gourmet and Cameron's have historically
distributed their coffee overlap one another significantly and many retail
outlets distribute both Gourmet and Cameron's brand coffees. Gourmet believes
that significant economies of scale will be effected by common ownership and
common distribution of Gourmet's and Cameron's products. Additionally, Gourmet
believes it can successfully consolidate Gourmet's and Cameron's production
facilities and thereby realize significant cost savings in production while
continuing to maintain the identity of the coffees produced by each.
More recently, Gourmet has expanded, and intends to continue to expand, the
number of products distributed through its independent distributor network by
the introduction, and intended introduction, of products such as single-serve
teas, cocoas, cappuccinos, homemade jams and jellies, wild rice and specialty
barbecue sauces. The distribution of these and other specialty products is
intended to accelerate the growth of Gourmet and to solidify its market share.
Gourmet recently completed a private placement of Gourmet Common Stock, raising
gross proceeds of Two Million Five Hundred Thousand Dollars ($2,500,000), which
proceeds it intends to use to expand its operations to include additional
independent distributors to distribute Gourmet Regency-brand and Cameron's-brand
coffee and other specialty products. Gourmet has identified, and intends to
market its coffee and other specialty products to, sixty (60) independent
distributors currently servicing over six thousand (6,000) supermarkets and
other retail outlets in fifteen (15) states.
Gourmet was incorporated under the laws of the state of Minnesota on November 9,
1993 and its offices are located at 5500 Cottonwood Lane, Suite 108, Prior Lake,
Minnesota 55372. Gourmet's telephone number
<PAGE>
is (612) 226-4100 and its facsimile number is (612) 226-4106. Cameron's, which
upon recent completion of the Acquisition Transactions, became a wholly-owned
subsidiary of Gourmet, was incorporated under the laws of the state of Wisconsin
on March 29, 1985. Robert's Fun Time Foods, Inc. ("Fun Time"), a wholly-owned
subsidiary of Gourmet, was incorporated on November 17, 1997 under the laws of
the state of Minnesota and, in December 1997, acquired the business and assets
of Fun Time Foods, Inc., a Wisconsin-based distributor. References herein to
"Fun Time" include both the recently formed subsidiary and Fun Time Foods, Inc.
INDUSTRY OVERVIEW
The gourmet coffee industry, a large and growing category of the overall coffee
market, is highly fragmented and is characterized by local and regional
competition. The United States coffee market consists of three (3) distinct
product categories: (i) commercial ground roast, mass-merchandised coffee, which
includes such brands as FOLGER'S and MAXWELL HOUSE; (ii) premium coffees, which
are slightly higher quality coffees recently introduced into the marketplace by
the national roasters; and (iii) gourmet coffees, typically defined as
super-premium, specialty coffees, which are generally roasted and distributed by
locally- or regionally-based roasters, wholesalers and distributors, such as
Gourmet. Gourmet coffees are made only from the highest quality coffee beans and
are found in supermarkets, gourmet food stores and specialty coffee shops.
Gourmet coffees exclusively use Arabica beans grown in Colombia, Kenya,
Indonesia, Mexico, Costa Rica, Guatemala and other Central American, South
American and African countries. As a result of their richer and milder taste,
lower acidity and lower caffeine content, Arabica beans are considered to be
superior to the Robusta beans typically used in commercial ground roast coffee.
Currently, coffee is the second most popular beverage consumed in the United
States. In fact, more than one-half of the people in the United States drink
coffee. Market research shows that consumers purchase, at retail, approximately
$8 billion of coffee per year with the sales of gourmet coffee for home
consumption estimated to be approximately $1.5 billion. It is projected that
sales of gourmet coffee for home consumption will reach approximately $4 billion
per year by the turn of the century with the vast majority being purchased at
supermarkets.
Gourmet believes that several factors are leading to the increase in demand for
gourmet coffee. As the United States population ages and moves into more
affluent income brackets, it has spawned an increasing demand for all premium
food products, including gourmet coffee. Gourmet coffee is seen by many as an
"affordable luxury," where the differential in price from the commercial brands
is small compared to the improvement in product quality and taste. The
increasing availability of gourmet coffee has led to greater awareness of its
attributes and has accelerated this trend. In addition, the advent and
improvement of the automatic drip coffee makers, the increased freshness of the
product due to improvements in packaging techniques such as the one-way valve
bag and the brick pack, and improved methods of decaffeination have dramatically
increased the shelf life of gourmet coffees and increased their ease of
preparation in the home.
Gourmet believes that supermarkets will continue to be the leading distribution
channel for gourmet coffee purchases. The evolution of the supermarket as the
primary distribution channel for gourmet coffee has occurred, in part, because
of the high profit margins the product can offer to the supermarket operator as
compared to the average grocery item as well as the growing demand for gourmet
coffee in the United States. Supermarket sales have continued to move from whole
bean sales to packaged products which have significantly higher gross margin
than do whole bean coffees. In addition to the high profit margins of gourmet
coffee, Gourmet believes that supermarket operators are drawn to the upscale
image associated with selling gourmet coffee as well as the minimal service
requirements on their part. Although there has also
<PAGE>
been a significant growth in distribution of gourmet coffees through coffee
shops and other specifically-targeted outlets, such as Starbucks and Caribou,
Gourmet currently believes that the market for such coffee shops is approaching
full penetration and Gourmet does not intend to directly market its coffees to
such coffee shops. Gourmet believes that consumer demand for gourmet coffee will
continue to grow and gain market share from commodity coffee because gourmet
coffee is a higher quality product than commodity ground roast coffee and
gourmet coffee is an affordable luxury.
BUSINESS STRATEGY
Gourmet's business strategy is to capitalize on its position as a leading
roaster, wholesaler and distributor of gourmet coffee in Minnesota and Wisconsin
by maintaining a consistently high quality product; by increasing its
penetration in both the wholesale and retail channels of distribution; by
further developing its brand franchise and consumer loyalty; and by pursuing
selective acquisitions to enhance its growth prospects.
HIGH QUALITY PRODUCTS. Gourmet believes that the growth in
sales of gourmet coffee has its foundation in the consumer's awareness
of, and appreciation for, high quality products. In order to maintain
consistently high quality products for its customers, Gourmet roasts,
packages and markets its own gourmet coffee. Gourmet purchases only the
highest quality whole green Arabica coffee beans from producing
countries in Central and South America, Africa and Asia for use in its
various blends. Quality control professionals oversee all purchases,
which are judged on taste and quality. Gourmet combines its purchasing
of high-quality coffee beans with stringent roasting standards and
quality testing.
BRAND RECOGNITION. Gourmet believes its products have strong
brand name recognition and believes that consumers recognize its
products for quality, freshness, variety and value. Gourmet's primary
brands are Gourmet Regency and Cameron's. Gourmet is also considering
developing a private label program. Gourmet expects to capitalize on
its brand franchise to increase customer loyalty, gain greater shelf
space in supermarkets and capture a larger market share both at the
wholesale and retail levels.
EXTENSIVE LINE OF COFFEES. Gourmet also differentiates itself
in the marketplace by offering a wide and varied line of products with
particular emphasis on flavored coffees. Gourmet believes that it
markets one of the broadest product lines in the gourmet coffee
industry.
Gourmet believes that the gourmet coffee category remains highly fragmented with
competition occurring primarily on a local or regional basis. Gourmet intends to
continue to capitalize on this fragmentation by making strategic acquisitions of
wholesale and retail coffee companies to improve its market position and to
enhance its growth.
PRODUCTS
MANUFACTURING. Gourmet produces both Gourmet Regency-brand and
Cameron's-brand coffee by roasting over twenty (20) varieties of high-quality
Arabica beans to produce over ninety (90) types of coffees. A list of Gourmet's
coffee products is available on the Internet at www.regencycoffee.com. Gourmet
purchases only premium-grade coffee through its long-standing relationships with
brokers and importers and then only from certain regions and growers known to
produce quality coffee beans. This helps Gourmet ensure that only the highest
quality coffee is produced.
<PAGE>
After purchasing their premium-grade coffee, Gourmet slow-roasts the coffee
beans under strict quality control. As is noted earlier, the custom batch
roasting process is slow and not necessarily the most cost-effective process.
However, it is necessary to maintain the quality and distinctive flavor of the
gourmet coffee. The custom batch roasting is done by the master roasters who
have over thirty years of combined experience in roasting coffee. During the
roasting process, the master roasters constantly monitor the coffee beans to
ensure proper roasting. After the beans have been properly roasted, the beans
are then air-cooled. It is anticipated that the roasting operations related to
both the Gourmet and Cameron's brands of coffee will be combined in Hayward,
Wisconsin.
Traditional coffee roasters generally cool the coffee beans with water. This is
done so as to replace a portion of the weight of the coffee bean that is lost
during the roasting process as well as to quicken the manufacturing process.
However, Gourmet believes that this process produces an inferior-tasting coffee.
Therefore, although slow-roasting is not the most cost-effective method, it is
the only way to fully develop the optimum flavor and aroma of the coffee bean.
The methods used by Gourmet (and which have been used by both Gourmet and
Cameron's) produce a "True Gourmet" coffee as defined by the Specialty Coffee
Association of America (a nonprofit trade organization for the coffee industry).
Products distributed by Fun Time and Robert's, other than coffee, are not
produced by Gourmet or Cameron's, but are purchased from unaffiliated
manufacturers for distribution.
COST AND SUPPLY OF COFFEE. Gourmet utilizes a combination of outside
brokers and direct relationships with estates for its supply of green coffee,
with the outside brokers providing the larger amount. Gourmet believes that the
recent acquisition of Cameron's, in addition to roasting and marketing
efficiencies, will also allow it to increase its ability to purchase coffee on a
direct container basis from origin country federations which, Gourmet believes,
will yield significant costs savings.
Coffee is the world's second largest traded commodity, and supply and price can
be volatile. Although most coffee trades in the commodity market, coffee of the
quality level sought by Gourmet tends to trade on a negotiated basis. The supply
and price can be affected by multiple factors, such as weather, politics and
economics in the producing countries, many of which are lesser developed
nations. In the past, certain countries have attempted to impose quotas on the
export of green coffee so as to maintain the commodity prices of green coffees.
The refusal of certain countries to participate in such a quota system has
generally resulted in such attempts being unsuccessful. Gourmet is unable to
predict whether any future attempts will be made to control world coffee prices.
Previously, when green coffee prices have increased, Gourmet has been able to
maintain its gross margins by passing along price increases to customers.
However, there can be no assurance that Gourmet will be able to do so in the
future.
The majority of Gourmet's green coffee supply is contracted for future delivery,
generally between four (4) and eight (8) months forward, to ensure both an
adequate supply and a reduced price risk. Green coffee is a large market with
well established brokers and importers through which Gourmet manages its
requirements. Gourmet believes that this is the best way to provide its
customers with a fair price for its coffee. There can be a significant risk in
fixing prices further in the future since the true available supply of green
coffee from around the world is not known. In addition to forward purchases,
Gourmet keeps physical inventory in its roasting facility representing anywhere
from six (6) to twelve (12) weeks of supply requirements.
DISTRIBUTION
<PAGE>
INDEPENDENT DISTRIBUTORS. Gourmet primarily distributes its coffee and
other specialty products through a network of more than eighty independent
distributors located in over fifteen states. Gourmet believes that, except for
the high quality of its coffee, it is this type of direct store delivery system
that is the most important ingredient to its success. The use of the independent
distributors creates benefits both for the independent distributors and Gourmet
for a variety of reasons:
First, this distribution network is currently in place and, therefore,
will not require any immediate capital expenditures by Gourmet.
Second, the independent distributors are already visiting the
supermarkets and other retail outlets on a regular basis. Therefore,
the independent distributors enjoy excellent long-term relationships
with the owners and managers of the supermarkets and other retail
outlets.
Third, independent distributors benefit by adding Gourmet Regency-brand
and Cameron's-brand coffee and Gourmet's other products to the mix of
products they distribute since they can generate significant additional
profits without incurring significant additional costs. Because the
distributors are already visiting the supermarkets and other retail
outlets on a regular basis and are already incurring the costs
associated with such visits, these additional profits are also an
incentive for the independent distributors to place Gourmet's coffee
and other products in each of the supermarkets and other retail outlets
that they serve. Gourmet believes its products compete favorably in
securing and maintaining such distributors' interests for several
reasons: coffee is a widely purchased product, with a significant
portion of supermarket shelf space dedicated to it; Gourmet
Regency-brand and Cameron's-brand coffees both are well accepted by
consumers; both provide significant profit to such distributors; and
both perform significant marketing efforts related to such products.
Fourth, because Gourmet is constantly promoting each coffee and other
specialty products to potential new supermarkets and other retail
outlets each new supermarket and other retail outlet must then be
serviced by an independent distributor. Such distributor then has the
opportunity to develop a relationship with the new supermarket or other
retail outlet and the opportunity to distribute additional products to
the supermarket or other retail outlet.
CAPTIVE DISTRIBUTORS. In addition to its independent network of
distributors, Gourmet distributes its products through two captive distributors.
Fun Time, a Mondovi, Wisconsin-based distributor, which is wholly-owned by
Gourmet, continues the business of a previously independent distributor, which
business was acquired in December 1997. Robert's, which was formed by Gourmet
and Cameron's prior to the acquisition of Cameron's by Gourmet, is the
distributor in the seven-county Twin Cities metropolitan area. Both distribute
Gourmet's coffees (including both the Gourmet Regency brand and the Cameron's
brand). Additionally, both Fun Time and Robert's distribute, and intends to
distribute, other specialty foods such as homemade jams and jellies, wild rice,
gourmet barbecue sauce and specialty horseradishes, mustards and salad dressings
through a direct store delivery system. Gourmet intends to continue to develop a
direct store delivery system through internal growth as well as by purchasing
certain independent distributors which currently exist. Gourmet intends to
develop its direct store delivery system to encompass the majority of Minnesota
and Wisconsin. In certain other industries, this sort of consolidation has
proven to be profitable and an excellent method of generating growth. By
consolidating currently existing independent distributors under common
ownership, Gourmet believes that it can become a significant presence in the
grocery distribution industry.
Gourmet has focused, and intends to continue to focus, its distribution efforts
(whether by Fun Time, by
<PAGE>
Robert's, or by other to-be-acquired or to-be-formed distributors) on Gourmet
Regency-brand and Cameron's-brand coffees and on specialty food products which
generally have extremely high profit margins relative to other traditional
grocery products. Twenty (20) years ago, over ninety percent (90%) of all
products sold in a traditional grocery store was distributed through the giant
warehouse companies such as SuperValu. Today, however, less than fifty percent
(50%) of what is sold in a typical grocery store is distributed through these
giant warehouse companies. Direct store delivery accounts for the vast majority
of the remainder. Gourmet has sought, through the formation of Robert's and the
acquisition of Fun Time, and may, through the potential acquisition of
additional distributors, seek to consolidate small independent distributors
currently existing so as to create a distribution system to more effectively and
efficiently distribute a variety of specialty food products.
FUTURE DISTRIBUTOR EXPANSION. For the foreseeable future, Gourmet
believes that independent distributors will continue to be the primary method by
which it distributes its coffee and other specialty products. However, Gourmet
believes that both its Fun Time and Robert's distributorships were appropriate
expansions of its marketing strategy. Gourmet is currently considering the
possibility of purchasing one or more of the independent distributors in smaller
metropolitan areas in Minnesota and Wisconsin so as to further build its own
direct store delivery system. Gourmet has not entered into any agreements
regarding the acquisition of any such distributors and any such purchases or
other acquisitions will depend upon various factors including adequate funding
(either from operations or from capital-raising transactions); the willingness
of the sellers of such distributors to accept Lloyd Common Stock as full or
partial payment; and Gourmet's ongoing assessment of this strategy. Gourmet
believes that the ability to market non-coffee high-volume products may be a
significant factor in evaluating this strategy.
MARKETING
Gourmet's marketing strategy for the wholesale distribution of its coffee is to
maintain an integrated program designed to increase same-store sales and develop
new accounts through the delivery of a complete product line consisting of a
wide variety of high quality gourmet coffees and related products in an
attractive display format. The primary focus is to obtain increased and
preferred shelf space for Gourmet's products in the coffee aisle and in other
locations within the store. In order to achieve this objective, Gourmet has
developed an integrated wholesale marketing program with the following elements:
(i) continually redesigning and upgrading the "in-store" fixtures, displays and
carts showcase Gourmet's products, attract consumers and allow for a broad
product mix; (ii) emphasizing the consumer convenience and attractiveness of its
innovative product packaging; and (iii) using promotions and advertising to
stimulate brand awareness, induce trial usage and facilitate the introduction of
new products by Gourmet.
Currently, the specialty food product category is one of the fastest growing and
most profitable areas of the grocery business. In fact, changing demographics
indicate that, as the baby-boom generation ages, and its disposable income
increases, they will continue to demand higher quality products. This means that
the products that currently exist will begin to be replaced with better-tasting
and higher-quality specialty products.
It is the intent of Gourmet to constantly talk with the owners and managers of
supermarkets and other retail outlets to determine the consumer's changing
tastes. The direct store delivery system may be especially valuable because it
is designed to allow Gourmet to identify and react to the consumers' changing
tastes more quickly than larger competitors. This strategy should allow it to
bring new and innovative products to the market first thereby allowing it to
establish a significant initial market share.
<PAGE>
Gourmet owns trademarks which are the subject of registrations in the Trademark
Office for GOURMET REGENCY COFFEE and CAMERON'S. Gourmet believes that its
trademarks have significant value and goodwill and that some of its trademarks
are instrumental to its ability to create demand for and market its products.
There can be no assurance that Gourmet's trademarks do not violate the
proprietary rights of others, that they would be upheld if challenged or that
Gourmet would, in such an event, not be prevented from using the trademarks, any
of which could have an adverse effect on Gourmet.
COMPETITION
Competition in the specialty coffee industry is fragmented and is typically
local or regional in nature. The coffee industry is dominated by several large
companies, many of which have significantly greater name recognition and
financial resources than Gourmet and which produce commercial ground roast
coffees such as FOLGER'S and MAXWELL HOUSE. Some of these competitors have
introduced premium coffee products in recent years which are of slightly higher
quality and which are increasingly competing with Gourmet's coffees. Gourmet
competes directly against gourmet coffees sold in supermarkets and other retail
outlets such as Brothers, Millstone and McGarvey's. Specialty coffee is also
sold (both in ready-to-drink and in take-home style) at a growing number of
gourmet coffee shops. While the specialty coffee segment is becoming
increasingly competitive as it continues to grow, Gourmet does not believe that
the coffee produced by many of its competitors in this market segment is of the
quality that is produced and marketed by Gourmet. This is because many of these
companies, although using "gourmet" beans, do not roast their coffee to the
"True Gourmet" standard which is how Gourmet's coffee is roasted.
Among the competitive factors facing the food retailing industry are the
requirement that food product companies, including coffee producers such as
Gourmet, pay fees to grocers in order to obtain shelf space, primarily for new
product introductions, and the increasing trend of supermarkets to sell products
(including gourmet coffee) packaged under their own private labels.
Gourmet believes that the principal competitive factors among roasters and
distributors of gourmet coffee are quality of product, shelf space, store
location, packaging and brand name recognition and the ability to operate
efficient, low cost roasting and packaging facilities and distribution
operations. There can be no assurance that any of the national brand coffee
companies with greater name recognition and financial resources than Gourmet
will not enter the gourmet coffee market in the future.
Gourmet competes primarily by providing fresh, high-quality coffee with
excellent customer service. Gourmet believes that its ability to distribute its
coffee through direct store delivery is an important factor in its ability to
compete. Through this delivery system, Gourmet can continuously provide
retailers with a wide variety of fresh coffee, excellent customer service and
regular display maintenance. This maintenance is very important for the daily
presentation to consumers of a high quality product.
FACILITIES
Gourmet's headquarters are located in Prior Lake, Minnesota and consist of
approximately twenty thousand (20,000) square feet of leased office, warehouse
and manufacturing space which is also used by Robert's for its distributing
operations. The operations related to Cameron's are located in approximately
thirty thousand (30,000) square feet of office, warehouse and manufacturing
space in Hayward, Wisconsin. Fun Time operates out of approximately ten thousand
(10,000) square feet of leased office and warehouse space in Mondovi, Wisconsin.
It is anticipated that the roasting operations related to both the Gourmet and
Cameron's brands of coffee will be combined in Hayward, Wisconsin. The Prior
Lake facility will continue to be used as the corporate headquarters and as a
distribution and warehouse center.
<PAGE>
EMPLOYEES
Gourmet currently employs sixty-eight (68) employees, of which approximately
thirty-four (34) are engaged in coffee roasting and processing, twenty-four (24)
are engaged in sales and distribution, and ten (10) are engaged in management
and administration.
DIRECTORS AND EXECUTIVE OFFICERS OF LLOYD
The following persons are the directors and executive officers of Lloyd and have
served in such capacities since the dates indicated below:
NAME AGE POSITION
---- --- --------
Herbert Maxwell 73 President and Director (Since February 28, 1995)
Anthony R. Russo 53 Vice President and Director (Since June 30, 1995)
A. Paul Shapansky 45 Secretary and Director (Since June 30, 1995)
All directors and officers of Lloyd are elected annually to serve for one (1)
year or until their successors are duly elected and qualified.
Lloyd Management's business experience during the past five (5) years is as
follows:
Herbert Maxwell has been an independent businessman for the past five (5) years.
He has been a consultant for troubled companies and a principal in investment
groups for the past two (2) decades. Mr. Maxwell has served as a director and
officer (and was a principal stockholder) of four publicly held companies, which
although not engaged in blank check offerings nevertheless consummated
acquisitions of the type described in this Reconfirmation Prospectus. These
include:
(1) Zachary Ventures, Inc. was organized in December, 1993. It
conducted an offering pursuant to Rule 419 which offering was concluded
in March, 1994. Zachary Ventures, Inc. did not effect a business
combination pursuant to Rule 419 and in June, 1996 returned the
deposited proceeds to the investors as required by such Rule. Mr.
Maxwell has been a director and officer of Zachary Ventures, Inc. since
its formation.
(2) C.S. Primo Corp. was organized in 1986 initially as an inactive
publicly held corporation pursuing a business acquisition. Mr. Maxwell
became a principal stockholder and a director of C.S. Primo Corp. on or
about June 3, 1988. On or about March 4, 1991, C.S. Primo Corp.
acquired approximately ninety-eight (98%) of the issued and outstanding
common stock of Dynasty World Express, Inc. in exchange for
approximately ninety percent (90%) of C.S. Primo Corp.'s common stock;
since then, C.S. Primo Corp. has changed its name to Phoenix
Information Systems Corp. and its common stock trades on the
over-the-counter market. Mr. Maxwell served as a director from June,
1988 to March, 1991.
(3) Lewis Resources, Inc. was organized in 1987, initially through a
stock dividend distribution, as an inactive publicly held corporation
pursuing a business acquisition. Mr. Maxwell was one of the initial
stockholders and directors of Lewis Resources, Inc. On September 28,
1993, Lewis Resources, Inc. acquired from Lema Investments Ltd. all of
the outstanding shares of Gallium Arsenide Industries Ltd., a
development stage Israeli company. Since then, Lewis Resources, Inc.
has changed its name to Israel Semiconductor Corporation and its common
stock trades on the over-
<PAGE>
the-counter market. Mr. Maxwell served as a director from its formation
through September, 1993.
(4) Lewison Enterprises Inc. was organized in 1988 initially, through a
stock dividend distribution, as an inactive publicly held corporation
pursuing a business acquisition. Mr. Maxwell was one of the initial
stockholders and directors of Lewison Enterprises Inc. In July, 1993
Lewison issued eight million (8,000,000) shares of common stock to the
stockholders of Omega Development Corp. ("Omega") in exchange for all
of the issued and outstanding shares of common stock of Omega. Since
then, Lewison Enterprises Inc. has changed its name to Omega
Development, Inc. To date, no trading market has developed for shares
of its common stock. Mr. Maxwell has been a director since its
formation.
Except for Zachary Ventures, Inc., and Omega Development, Inc. Mr. Maxwell is no
longer a principal stockholder, director or officer of any of the foregoing
corporations. Except as set forth above, Mr. Maxwell does not presently serve as
a director of any public company. He is an active investor and writes a
newsletter on the New York theater. Mr. Maxwell has been a director and officer
of Lloyd since February 28, 1995.
Anthony R. Russo is President, Chairman, Chief Executive Officer and a
co-founder of Cartilage Technologies, Inc. Cartilage is a privately held
corporation engaged in the manufacture and sale of food supplements. Prior
thereto he was Chairman and Chief Executive of Sherwood Corporation, a NASDAQ
listed diversified financial services company since 1973. Prior to joining
Sherwood Corporation, Mr. Russo was employed by Arthur Andersen & Co. and is a
Certified Public Accountant having received his B.B.A. in Accountancy Practice
with honors from Pace University in 1967. Concurrent with developing his
professional and business experience, Mr. Russo served in the New York Air
National Guard from 1961 through 1967; was a director of Lloyds Electronics,
Inc., an AMEX listed consumer electronics company from 1980 through 1984 (no
relation to Lloyd Ventures, Inc.) and has served on the boards of several
Sherwood Corporation portfolio companies. Mr. Russo has been an officer and
director of Lloyd since June 30, 1995.
Mr. Shapansky has been President and controlling stockholder of A. G. Group
Inc., an investment banking firm since 1988. Mr. Shapansky also has been the
Chairman, President and Chief Executive Officer of Omega Development, Inc. since
January, 1996. Omega Development, Inc. is primarily engaged in real estate
financing activities. Mr. Shapansky also was President of Struthers Industries,
Inc., a company in the aerospace industry, from May, 1991 to January, 1992. He
was formerly Vice-President Finance, Secretary and a Director of C.I.S.
Technologies, Inc. from January, 1985 to January, 1988. Mr. Shapansky has a
Bachelor of Commerce (Honours) degree in actuarial mathematics and finance, from
the University of Manitoba in Winnipeg, Canada. Mr. Shapansky has been a
director of Lloyd since June 30, 1995.
There are no agreements, arrangements or understandings between Lloyd Management
and anyone else pursuant to which other management is to be selected for a
particular office or position. Lloyd's officers and directors will resign from
their respective positions upon consummation of the Exchange.
EXECUTIVE COMPENSATION OF LLOYD MANAGEMENT
Lloyd has not paid any of its Management any compensation since its formation.
Pursuant to an oral understanding, Mr. Maxwell will be paid a consulting fee of
Twenty Thousand Dollars ($20,000) if the Exchange is consummated.
<PAGE>
CERTAIN TRANSACTIONS-LLOYD
Lloyd was incorporated in the State of Delaware on February 28, 1995. Prior to
the Original Offering, Lloyd issued two hundred and fifty-five thousand
(255,000) shares for an aggregate price of $32,500. Of such shares, Fifty
Thousand (50,000) and Twenty Thousand (20,000), respectively, were issued to Mr.
Maxwell and Mr. Shapansky, for consideration of Five Thousand Dollars ($5,000)
and Three Thousand Dollars ($3,000), respectively.
Mr. Maxwell may be deemed a "parent" or "promoter" as those terms are defined in
the rules and regulations adopted pursuant to the Act.
DIRECTORS AND EXECUTIVE OFFICERS OF GOURMET
The following persons are the directors and executive officers of Gourmet:
NAME AGE POSITION(S) HELD AT GOURMET:
---- --- ----------------------------
Robert Paschke 46 Director, President
Jacquelyn Paschke 46 Director, Secretary
James Cameron 50 Director, Vice President and President of Cameron's
James Farrell 39 Vice President
Jay Klovstad 34 Vice-President of Robert's
Leonard Unruh 49 President - Fun Time
Upon completion of the Exchange, it is expected that Robert Paschke, Jacquelyn
Paschke and Jim Cameron will become the Directors of Lloyd and that Robert
Paschke will become President and Jacquelyn Paschke will become Secretary and
Treasurer of Lloyd.
Directors of Gourmet are elected at each regular meeting of the stockholders of
Gourmet to serve until the next regular meeting of the stockholders of Gourmet
or until their successors are duly elected and qualified. There are no family
relationships between any director or officer except that Robert Paschke and
Jacquelyn Paschke are husband and wife.
Mr. Paschke is the founder of Gourmet and has served as Gourmet's President
since its inception. Mr. Paschke is involved in all aspects of the operation of
Gourmet and is responsible for overseeing contract negotiations with
supermarkets and other retail outlets, development of advertising and
promotional programs, maintaining long-term relationships with the independent
distributors and investor relations. Prior to founding Gourmet in 1993, Mr.
Paschke was primarily involved with real estate development companies.
Mrs. Paschke has served as a Director of Gourmet, as well as its Vice President
and Secretary, since its inception in 1993. Mrs. Paschke has also been actively
involved in the development and growth of Gourmet, assisting Mr. Paschke in
managing the operations of Gourmet. Mrs. Paschke is the wife of Robert Paschke.
Mr. Cameron was the founder of Cameron's and has served as Cameron's President
since its inception in 1980. Mr. Cameron was elected a Vice-President of Gourmet
upon completion of Gourmet's acquisition of Cameron's and remains President of
Cameron's. Mr. Cameron is responsible for the overall coffee operations of
Gourmet.
Mr. Farrell is a Vice-President of Gourmet. Previously, Mr. Farrell was employed
by Barrel O'Fun Snack
<PAGE>
Foods, Inc., a producer of potato chips and other snack foods and the director
of a significant network of independent distributors, where he was responsible
for the supervision of ten (10) regional sales managers, the development and
growth of such company's independent distributor network, implementation of
promotion schedules and new product roll-outs, and development of pricing
schedules and corporate chain store customer relations. Mr. Farrell has also
owned his own independent distributor business.
Mr. Klovstad is a Vice-President of Robert's. Previously, Mr. Klovstad was
employed as a Regional Sales Manager of Barrel O'Fun Snack Foods, Inc., where he
played a significant part in the growth and development of such company's
independent distributor network, was responsible for managing sales and
distribution in ten Midwestern states, developed key account relationships with
major retailers and distributors in the Midwest and managed over $5 million of
business in the Minneapolis/St. Paul metropolitan area.
Mr. Unruh is President of Fun Time. Previously, Mr. Unruh worked in, and has
extensive contacts with persons throughout the grocery and distribution
industries. In addition, Mr. Unruh established his own successful independent
distribution company in western Wisconsin (Fun Time Foods, Inc., predecessor to
Robert's Fun Time Foods, Inc.).
EXECUTIVE COMPENSATION
The following table sets forth the compensation paid or accrued, during the
years ended December 31, 1997, 1996 and 1995, for services rendered in all
capacities, on a PRO FORMA basis, to Robert Paschke, Jacquelyn Paschke and James
Cameron:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
CASH COMPENSATION PAID COMPENSATION
--------------------------------- ----------------
YEAR ENDED OPTIONS ALL OTHER
NAME DECEMBER 31 SALARY BONUS GRANTED COMPENSATION
- --------------------- ------------------ ---------------- ------------- ---------------- --------------
<S> <C> <C> <C> <C>
$ $ # $
Robert Paschke 1997 $59,709 $27,500 180,000 --
1996 $66,462 -- 136,237 --
1995 -- -- 136,237 --
Jacquelyn Paschke 1997 $11,709 -- 67,500 --
1996 $2,769 -- 136,237 --
1995 -- -- 136,237 --
James Cameron 1997 $98,931 -- -- --
1996 $239,870 -- -- --
1995 $143,835 $200,000 -- --
</TABLE>
STOCK OPTION PLAN
On December 11, 1995, the directors of Gourmet adopted, and the stockholders
approved, the Gourmet's Employee Incentive Stock Option Plan (the "Plan")
pursuant to which Gourmet may grant stock options to employees and directors of
Gourmet. The Plan permits the granting of "incentive stock options" meeting the
requirements of Section 422 of the Internal Revenue Code, as amended, and
nonqualified stock options which do not meet such requirements. Gourmet has
reserved seven hundred and
<PAGE>
fifty thousand (750,000) shares of Gourmet Common Stock for issuance upon
exercise of options granted under the Plan.
The Plan is administered by the Board of Directors of Gourmet, or a committee
thereof, which has the discretion to select the optionees and to establish the
terms and conditions of each option, subject to provisions of the Plan. The
exercise price for an incentive stock option granted under the Plan may not be
less than the fair market value of the of Gourmet's Common Stock as of the date
the option is granted. The term of each incentive stock option is determined by
the Board but may not exceed ten (10) years from the date the option is granted.
Options granted under the Plan are not transferable, except by will or by the
laws of descent and distribution, and are subject to certain other transactions
and restrictions. Nonqualified stock options are not subject to exercise price
and transfer restrictions required with respect to incentive stock options. As
of the date of this Reconfirmation Prospectus, seven hundred forty-four thousand
nine hundred and forty-eight (744,948) options had been granted under the Plan.
All such options will be converted, pursuant to the terms of the Exchange, to
the right to acquire shares of Lloyd Common Stock on substantially the same
basis.
OPTION GRANTS
The following table sets forth information with respect to options granted to
the officers of Gourmet during 1995, 1996 and 1997:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL OPTIONS
DATE OF OPTIONS PURSUANT GRANTED TO EXERCISE EXPIRATION
NAME GRANT GRANTED TO PLAN EMPLOYEES PRICE DATE
- ---- ----- ------- ------- --------- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Robert Paschke 12/11/95 136,237 Yes 11.42% $.734 12/10/00
Jacquelyn Paschke 12/11/95 136,237 Yes 11.42% $.734 12/10/00
Robert Paschke 01/05/96 136,237 Yes 11.42% $.734 01/04/01
Jacquelyn Paschke 01/05/96 136,237 Yes 11.42% $.734 01/04/01
Robert Paschke 03/01/97 67,500 Yes 5.66% $1.48 02/28/02
Jacquelyn Paschke 03/01/97 67,500 Yes 5.66% $1.48 02/28/02
Robert Paschke 03/06/97 50,000 No 4.19% $2.00 03/05/07
Jay Klovstad 11/01/97 50,000 No 4.19% $2.00 10/31/07
James Farrell 11/01/97 125,000 No 10.48% $2.00 10/31/07
Robert Paschke 11/25/97 62,500 No 5.24% $2.00 11/24/07
Robert Paschke 02/01/98 60,000 No 5.07% $2.00 01/31/08
</TABLE>
DIRECTOR COMPENSATION
Directors of Gourmet who are also employees of Gourmet do not receive any
compensation for their services as Director.
Although Directors of Gourmet who are not employees of Gourmet receive
reimbursement of travel and other expenses, such Directors are not otherwise
compensated for their services as Director. Management of Gourmet intends, after
completion of the Exchange, to have Lloyd consider various options for
compensation of such non-employee Directors and may adopt an equity-based
compensation arrangement for such non-employee Directors.
CERTAIN TRANSACTIONS - GOURMET
<PAGE>
ISSUANCE OF SHARES. In 1993, Gourmet issued six hundred thousand
(600,000) shares of Gourmet Common Stock to Robert Paschke in connection with
the contribution of certain properties to Gourmet. In October 1994, September
1995, and November 1995, Gourmet issued three hundred seventy-five thousand
(375,000), four hundred fifty thousand (450,000), and seventy-five thousand
(75,000) shares of Gourmet Common Stock to Robert Paschke in exchange for the
cancellation, by Robert Paschke, of debts owed to Robert Paschke in the amounts
of Two Hundred Thousand Dollars ($200,000), Three Hundred Thousand Dollars
($300,000), and Fifty Thousand Dollars ($50,000), respectively. In July 1996 and
November 1996, Gourmet issued twelve thousand five hundred (12,500) and thirty
thousand (30,000) shares of Gourmet Common Stock, respectively, to Robert
Paschke in exchange for Robert Paschke guaranteeing certain debts of Gourmet.
See "Guarantees". In November 1995, the Company issued one hundred thousand
(100,000) shares of Gourmet Common Stock to James Farrell for Fifty Thousand
Dollars ($50,000) cash.
ACQUISITION TRANSACTIONS. Gourmet recently acquired all of the
outstanding common stock of Cameron's, from James Cameron, in exchange for (i) a
cash payment of Eight Hundred Fifty Thousand Dollars ($850,000); and (ii) five
hundred fifty thousand (550,000) shares of Gourmet Common Stock.
Gourmet recently formed a wholly-owned subsidiary, Robert's Fun Time Foods,
Inc., which acquired all of the assets and business of Fun Time Foods, Inc.
(which was one hundred percent (100%) owned by Leonard Unruh) in exchange for
(i) Gourmet's twelve (12) month promissory note in the amount of Two Hundred
Thousand Dollars ($200,000); and (ii) fifty thousand (50,000) shares of Gourmet
Common Stock.
GUARANTEES. All of Gourmet's bank debt which, as of December 31, 1997,
was approximately Three Hundred Fifty-Eight Thousand Seven Hundred Seventy-Eight
Dollars ($358,778), has been personally guaranteed by Robert Paschke. In March
1997, Gourmet entered into a five (5) year lease for its facility in Prior Lake.
Up to Forty-Five Thousand Dollars ($45,000) of the payments under such lease
were also guaranteed by Robert Paschke. In addition, Robert's recently leased
equipment and vehicles to begin distributing Gourmet's products. Robert Paschke
agreed to guarantee Robert's obligations (aggregating approximately Two Hundred
Thousand Dollars ($200,000)) thereunder. In connection with these transactions,
Robert Paschke has been granted options to purchase up to one hundred
seventy-two thousand five hundred (172,500) shares of Gourmet Common Stock at
Two Dollars ($2.00) per share and has been issued forty-two thousand five
hundred (42,500) shares of Gourmet Common Stock.
OFFICER/DIRECTOR LOAN. As of the date of this Reconfirmation
Prospectus, Gourmet has loaned funds to Robert Paschke and Leonard Unruh. These
loans are non-interest bearing and do not have a defined repayment term. As of
December 31, 1997 the amount owing is approximately One Hundred Seventy-Four
Thousand Eight Hundred Thirty-Nine Dollars ($174,839).
In August, 1996, Robert Paschke loaned Gourmet approximately One Hundred
Twenty-Six Thousand Dollars ($126,000) pursuant to a thirty-six (36) month
promissory note, due August 1, 1999, which bears interest at 11% per annum. Such
note is unsecured.
FACILITIES. The land and building used by Gourmet in Hayward, Wisconsin
are owned by James Cameron and are leased to Gourmet. Gourmet intends to enter
into a lease agreement, for a term to be negotiated, which will provide that
Gourmet will pay Three Thousand Five Hundred Dollars ($3,500) per month plus
utility costs.
<PAGE>
The land and building used by Gourmet for Fun Time, located in Mondovi,
Wisconsin, are owned by Leonard Unruh and are leased to Gourmet. Gourmet has
entered into a lease agreement, for a term of twenty-four months, which provides
that Gourmet will pay One Thousand Seven Hundred Dollars ($1,700) per month plus
utility costs.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Lloyd Common Stock as of the date of this Reconfirmation
Prospectus, and as adjusted to reflect completion of the Exchange by: (i) each
person who is known by Lloyd to own beneficially more than five percent (5%) of
the outstanding Lloyd Common Stock; (ii) each of Lloyd's officers and directors;
(iii) all directors and officers of Lloyd as a group; (iv) each person who is
know by Gourmet to own beneficially more than five percent (5%) of the
outstanding Gourmet Common Stock; (v) each of Gourmet's officers and directors;
and (vi) all directors and officers of Gourmet as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK APPROXIMATE PERCENTAGE
BENEFICIALLY OWNED OWNED
------------------------------------ --------------------------------
BEFORE AFTER BEFORE AFTER
NAME OF BENEFICIAL OWNER EXCHANGE EXCHANGE EXCHANGE EXCHANGE
- ------------------------ -------- -------- -------- --------
<S> <C> <C> <C> <C>
Herbert Maxwell(1) 110,000 110,000 24.4% 2.2%
440 East 56th Street
New York, N.Y. 10022
Leo Bloom 32,000 32,000 7.1% *
484 West 43rd Street
Apt. 37N
New York, N.Y. 10036
Anthony Russo(2) 25,000 25,000 5.5% *
200 Clearbrook Road
Elmsford, N.Y. 10523
A. Paul Shapansky 20,000 20,000 4.4% *
Omega Capital Corporation
4200 East Shelly Drive
Suite 150
Tulsa, Oklahoma 74135
Joe Sierchio(3) 28,125 28,125 6.2% *
41 East 57th Street
New York, N.Y. 10019
All Lloyd Officers and Directors as a 155,000 155,000 34.3% 3.0%
Group (3 persons(1),(2),(3))
Robert and Jacquelyn Paschke(4) -- 2,389,825 -- 40.0%
4070 Wagon Bridge Circle
Prior Lake, Minnesota 55372
Roger Pitsenbarger(5) -- 504,500 -- 10.7%
708 Ironwood Court
Fargo, North Dakota 58104
James Cameron -- 425,000 -- 8.3%
<PAGE>
5310 Triton Drive
Golden Valley, Minnesota 55422
All Gourmet Officers and Directors as a -- 3,064,825 -- 50.3%
Group (5 persons)(6)
</TABLE>
- -------------------
* Less than one percent (1%)
(1) Does not include twelve thousand one hundred (12,100) shares owned by
Phyllis Maxwell, Mr. Maxwell's wife, or twenty thousand (20,000) shares
owned by Victoria Maxwell, Mr. Maxwell's daughter as to which Mr. Maxwell
disclaims any beneficial interest. Mr. Maxwell may be deemed a "parent" or a
"promoter" of Lloyd as those terms are defined in the rules and regulations
adopted pursuant to the Act.
(2) Includes twenty thousand (20,000) shares owned by Woodsher Resolution Corp.
but does not include two thousand (2,000) shares owned by members of Mr.
Russo's family as to which Mr. Russo disclaims any beneficial interest.
(3) Does not include two thousand (2,000) shares owned by Mr. Sierchio's family
as to which Mr. Sierchio disclaims any beneficial interest. Mr. Sierchio was
a former officer and director of Lloyd. He resigned shortly after the
organization of Lloyd and prior to its filing the registration statement of
which this Reconfirmation Prospectus forms a part.
(4) Robert Paschke and Jacquelyn Paschke are husband and wife and each is deemed
to own beneficially, the shares held by the other. This amount also includes
seven hundred ninety-two thousand four hundred fifty (792,450) shares
issuable upon exercise of outstanding options.
(5) Includes fifty thousand (50,000) shares issuable upon the exercise of
outstanding options.
(6) Includes an aggregate of nine hundred seventy-seven thousand four hundred
fifty (977,450) shares issuable upon the exercise of outstanding options.
DESCRIPTION OF LLOYD SECURITIES
LLOYD HAS INDICATED THAT, IMMEDIATELY PRIOR TO COMPLETION OF THE EXCHANGE,
CERTAIN OF ITS STOCKHOLDERS (WHO OWN A MAJORITY OF THE OUTSTANDING LLOYD COMMON
STOCK) INTEND TO CAUSE LLOYD'S CERTIFICATE OF INCORPORATION TO BE RESTATED. THE
FOLLOWING DESCRIPTION ASSUMES THAT SUCH RESTATEMENT HAS OCCURRED.
COMMON STOCK
Lloyd is authorized to issue thirty-five million (35,000,000) shares of common
stock, $.001 par value per share, of which four hundred fifty-one thousand four
hundred (451,400) shares were issued and outstanding as of the date of this
Reconfirmation Prospectus. Each outstanding share of Lloyd Common Stock entitles
the holder to one (1) vote, either in person or by proxy, on all matters that
may be voted upon by the owners thereof at meetings of the stockholders.
The holders of Lloyd Common Stock (i) have equal rights to dividends from funds
legally available therefor, when, as and if declared by the Board of Directors
of Lloyd; (ii) are entitled to share ratably in all of the assets of Lloyd
available for distribution to holders of Lloyd Common Stock upon liquidation,
dissolution or
<PAGE>
winding up of the affairs of Lloyd; (iii) do not have preemptive, subscription
or conversion rights, and (iv) are entitled to one (1) non-cumulative vote per
share on all matters on which stockholders may vote at all meetings of
stockholders.
REPORTS TO STOCKHOLDERS
Lloyd intends to furnish its stockholders with annual reports containing audited
financial statements as soon as practicable after the end of each fiscal year.
Lloyd's fiscal year ends on December 31. In addition, Lloyd intends to issue
unaudited interim reports and financial statements on a quarterly basis.
DIVIDENDS
Lloyd has not declared any dividends since inception, and has no present
intention of paying any cash dividends on its common stock in the foreseeable
future. Gourmet Management has indicated that it intends to continue this
policy. The payment by Lloyd of dividends, if any, in the future, rests within
the discretion of its Board of Directors and will depend, among other things,
upon Lloyd's earnings, its capital requirements and its financial condition, as
well as other relevant factors.
TRANSFER AGENT
Lloyd's transfer agent is StockTrans, Inc., 7 East Lancaster Avenue, Ardmore,
Pennsylvania 19003, (610) 649-7300.
EXPERTS
The Financial Statements of Lloyd included in this Reconfirmation Prospectus as
of December 31, 1997 and for the two (2) years then ended have been audited by
Goldman & Krinitz, PC, independent public accountants as indicated in their
report with respect thereto and are included in reliance upon the authority of
said firm as an expert in accounting and auditing in giving said report.
The Financial Statements of Gourmet included in this Reconfirmation Prospectus
as of December 31, 1997 and 1996 and for the years then ended, have been audited
by Larson, Allen, Weishair & Co., LLP independent public accountants as
indicated in their report with respect thereto, and are included in reliance
upon the authority of said firm as an expert in accounting and auditing in
giving said report.
The Financial Statements of Cameron's included in this Reconfirmation Prospectus
as of September 30, 1997 and 1996 and for the years then ended, have been
audited by Larson, Allen, Weishair & Company, LLP, independent public
accountants as indicated in their report with respect thereto, and are included
in reliance upon the authority of said Firm as an expert in accounting and
auditing in giving said report.
METHOD OF RECONFIRMATION
Rule 419 Investors should send the attached Letter of Transmittal and
Reconfirmation directly to the Escrow Agent and should indicate thereon, where
indicated, whether (a) they elect to reconfirm their investment or (b) desire to
rescind their investment and receive the return of ninety percent (90%) of their
original investment (plus interest earned thereon) through the date of the
Letter of Transmittal and Reconfirmation.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
1. PRO FORMA financial statements (unaudited) of Gourmet, as December 31,
1997 and for the year then ended, reflecting the acquisition of
Cameron's and Fun Time, as if such acquisitions had occurred on January
1, 1997 and reflecting the acquisition of Gourmet by Lloyd (accounted
for as a reverse acquisition as if Gourmet had acquired Lloyd) as if
such acquisition had occurred on January 1, 1997.
Balance Sheet ____
Statement of Operations ____
2. Gourmet Financial Statements for the years ended December
31, 1997 and 1996:
Independent Auditor's Report ____
Balance Sheet ____
Statements of Operations ____
Statements of Changes in Stockholders' Equity ____
Statements of Cash Flows ____
Notes to Financial Statements ____
3. Cameron's Financial Statements for the years ended September
30, 1997 and 1996:
Independent Auditor's Report ____
Balance Sheet ____
Statements of Income ____
Statements of Retained Earnings ____
Statements of Cash Flows ____
Notes to Financial Statements ____
4. Cameron's Financial Statements (unaudited) as of and for the
three months ended December 31, 1997:
Balance Sheet ____
Statement of Income ____
5. Lloyd Financial Statements for the years ended December
31, 1997 and 1996:
Independent Auditor's Report ____
Balance Sheet ____
Statements of Income ____
Statements of Retained Earnings ____
Statements of Cash Flows ____
Notes to Financial Statements ____
<PAGE>
LLOYD VENTURES, INC.
PRO FORMA CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
The following PRO FORMA condensed financial statements give effect to
the proposed acquisition of Gourmet Regency Coffee Company, Inc. ("Gourmet") by
Lloyd Ventures, Inc. ("Lloyd"), a "blank check" company, as if such acquisition
had occurred on January 1, 1997. Such acquisition is subject to approval by the
shareholders of Gourmet and is expected to be completed in April 1998. The
acquisition of Gourmet by Lloyd has been accounted for, in these PRO FORMA
financial statements, as a "reverse acquisition" as if Gourmet had acquired
Lloyd. Such PRO FORMA financial statements also give effect to the recent
acquisitions by Gourmet, as if such acquisitions had occurred on January 1,
1997, of all of the outstanding common stock of Cameron's Coffee Company, Inc.,
("Cameron's"), and of the assets and operations of Fun Time Foods, Inc. ("Fun
Time"). The acquisitions of Cameron's and Fun Time by Gourmet will be accounted
for as a "purchase" transaction. The pro forma balance sheet presents the
combined financial position of Lloyd, Gourmet, Cameron's and Fun Time as if such
acquisitions had taken place at January 1, 1997. The pro forma statement of
operations combines the results of operations of Gourmet, Cameron's, Fun Time
and Lloyd (which had no operations and only nominal assets) as if such
acquisitions had taken place at January 1, 1997. The pro forma financial
statements give effect to certain adjustments described in the notes below.
The pro forma information presented does not purport to represent the
actual results which would have occurred if such acquisitions had occurred on
January 1, 1997. The pro forma financial statements and notes should be read in
conjunction with the historical financial statements and notes thereto of Lloyd,
Gourmet and Cameron's included elsewhere in this Reconfirmation Prospectus. The
financial statements of Fun Time, because of the relatively small size of Fun
Time in relation to Gourmet, have not been separately presented.
<PAGE>
LLOYD VENTURES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1997
1997
----------
ASSETS
CURRENT ASSETS
Cash $1,504,392
Accounts Receivable 838,868
Inventory 1,247,773
Other Current Assets 35,430
----------
Total Current Assets 3,626,463
----------
NET PROPERTY AND EQUIPMENT (at Cost) $ 916,762
----------
OTHER ASSETS
Notes Receivable - Stockholders $ 174,839
Goodwill 1,955,240
Other Assets 99,856
----------
Total Other Assets $2,229,935
----------
Total Assets $6,773,160
==========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
1997
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes Payable - Bank $ 692,359
Current Maturities of Long-Term Debt 397,365
Current Portion of Notes Payable - Stockholders 149,808
Accounts Payable 1,247,309
Advances from Stockholder 200,000
Other Current Liabilities 99,849
-----------
Total Current Liabilities $ 2,786,690
-----------
LONG-TERM LIABILITIES
Notes Payable - Stockholders $ 171,591
Long-Term Debt 84,203
-----------
Total Long-Term Liabilities $ 255,794
-----------
Total Liabilities $ 3,042,484
-----------
STOCKHOLDERS'S EQUITY
Common Stock $ 5,836,338
Accumulated Deficit (2,105,662)
-----------
Total Stockholders' Equity $ 3,730,676
-----------
Total Liabilities and Stockholders' Equity $ 6,773,160
===========
<PAGE>
LLOYD VENTURES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
1997
-------------
SALES $ 8,239,524
COST OF SALES 6,101,907
-------------
GROSS PROFIT $ 2,137,617
-------------
OPERATING EXPENSES $ 2,597,306
-------------
LOSS FROM OPERATIONS $ (459,689)
-------------
OTHER (INCOME) EXPENSE $ (221,616)
-------------
NET LOSS $ (681,305)
=============
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
LLOYD VENTURES, INC.
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Assumes that no shareholders of Lloyd decline Lloyd's Rule 419
Reconfirmation.
2. Gives effect to the issuance, by Lloyd, of Four Million Six Hundred
Sixty-Nine Thousand Three Hundred Fifty (4,669,350) shares of Lloyd
Common Stock in exchange for all of the outstanding Common Stock of
Gourmet (after giving effect to the acquisition, by Gourmet, of
Cameron's).
3. Gives effect to the issuance, by Lloyd, of One Million Two Hundred
Fifty Thousand (1,250,000) shares of Lloyd Common Stock in exchange for
a similar number of shares of Gourmet Common Stock which Gourmet
shares were acquired by the holders thereof in Gourmet's private
placement which was completed in March 1998 and which raised (also
included) Two Million Five Hundred Thousand Dollars ($2,500,000).
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Gourmet Regency Coffee Company and Subsidiaries
Prior Lake, Minnesota
We have audited the accompanying consolidated balance sheets of Gourmet Regency
Coffee Company and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above presents
fairly, in all material respects, the consolidated financial position of Gourmet
Regency Coffee Company and Subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ LARSON, ALLEN, WEISHAIR & CO., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
February 12, 1998
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 11,851 $ --
Accounts Receivable - Trade, Less Allowance for Doubtful
Accounts of $20,000 and $5,000 for 1997 and 1996, Respectively 518,283 281,272
Inventory 363,736 173,133
Unamortized Slotting Allowances and Initial Free Fills 20,317 5,317
Prepaid Expenses 13,358 2,390
------------- -------------
Total Current Assets 927,545 462,112
------------- -------------
PROPERTY AND EQUIPMENT (at Cost)
Equipment - Coffee Centers $ 796,578 $ 785,832
Equipment - Brewers and Grinders 274,976 226,129
Vehicles 51,610 --
Leasehold Improvements 23,809 19,897
Equipment - Office 12,121 9,917
Furniture and Fixtures 11,825 --
------------- -------------
Total $ 1,170,919 $ 1,041,775
Less: Accumulated Depreciation (724,861) (601,224)
------------- -------------
Net Property and Equipment (at Depreciated Cost) $ 446,058 $ 440,551
------------- -------------
OTHER ASSETS
Notes Receivable - Stockholders $ 174,839 $ 167,138
Goodwill (Less Accumulated Amortization of $21,986 and
$13,125 in 1997 and 1996, Respectively) 382,287 52,507
Other Assets 26,805 --
------------- -------------
Total Other Assets $ 583,931 $ 219,645
------------- -------------
Total Assets $ 1,957,534 $ 1,122,308
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
1997 1996
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Notes Payable - Bank $ 74,948 $ --
Current Maturities of Long-Term Debt 341,602 270,065
Current Portion of Notes Payable - Stockholders 149,808 4,606
Accounts Payable 588,604 372,709
Advances from Stockholder 200,000 7,386
Accrued Expenses 66,587 102,570
Checks Written in Excess of Cash in Bank -- 24,869
------------- -------------
Total Current Liabilities $ 1,421,549 $ 782,205
------------- -------------
LONG-TERM LIABILITIES
Notes Payable - Stockholders (Net of Current
Maturities Shown Above) $ 171,591 $ 121,545
Long-Term Debt (Net of Current Maturities Shown Above) 17,176 --
------------- -------------
Total Long-Term Liabilities $ 188,767 $ 121,545
------------- -------------
Total Liabilities $ 1,610,316 $ 903,750
------------- -------------
MINORITY INTEREST IN SUBSIDIARY $ 14,783 --
------------- -------------
STOCKHOLDERS'S EQUITY
Common Stock, No Par Value; Authorized 12,500,000 Shares,
Issued and Outstanding 2,944,850 Shares in 1997 and
2,613,650 Shares in 1996 $ 2,205,638 $ 1,623,838
Accumulated Deficit (1,873,203) (1,405,280)
------------- -------------
Total Stockholders' Equity $ 332,435 $ 218,558
------------- -------------
Total Liabilities and Stockholders' Equity $ 1,957,534 $ 1,122,308
============= =============
</TABLE>
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
SALES $ 2,653,774 $ 2,126,250
COST OF SALES 1,862,068 1,410,016
------------- -------------
GROSS PROFIT $ 791,706 $ 716,234
------------- -------------
EXPENSE
Selling $ 376,218 $ 774,540
General and Administrative 846,515 717,658
------------- -------------
Total Expense $ 1,222,733 $ 1,492,198
------------- -------------
LOSS FROM OPERATIONS $ (431,027) $ (775,964)
------------- -------------
OTHER (INCOME) EXPENSE
Interest Expense $ 38,757 $ 49,721
Interest Income (11,690) --
Miscellaneous Income (4,754) (6,002)
------------- -------------
Total Other Expense $ 22,313 $ 43,719
------------- -------------
NET LOSS BEFORE PROVISION FOR INCOME TAXES $ (453,340) $ (819,683)
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARY (14,283) --
PROVISION FOR INCOME TAXES (300) (300)
------------- -------------
NET LOSS $ (467,923) $ (819,983)
============= =============
NET LOSS PER COMMON SHARE $ (0.16) $ (0.35)
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Common Stock Total
------------------------------ Accumulated Stockholders'
Shares Amount Deficit Equity
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 1,946,250 $ 757,500 $ (585,297) $ 172,203
Common Stock Issued 569,350 746,600 -- 746,600
Common Stock Issued for Services
Performed 98,050 119,738 -- 119,738
Net Loss -- -- (819,983) (819,983)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1996 2,613,650 $ 1,623,838 $ (1,405,280) $ 218,558
Common Stock Issued 244,250 324,000 -- 324,000
Common Stock Issued for Fun Time
Foods, Inc. Acquisition 50,000 100,000 -- 100,000
Common Stock Issued for Services
Performed and Equipment Purchased 86,950 157,800 -- 157,800
Net Loss -- -- (467,923) (467,923)
------------- ------------- ------------- -------------
BALANCE, DECEMBER 31, 1997 2,994,850 $ 2,205,638 $ (1,873,203) $ 332,435
============= ============= ============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Cash Received from Customers $ 2,558,375 $ 2,038,496
Cash Paid to Suppliers and Employees (2,960,794) (2,353,592)
Interest Received 11,690 --
Interest Paid (45,615) (74,580)
Income Taxes Paid (300) --
------------- -------------
Net Cash Used by Operating Activities $ (436,644) $ (389,676)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property and Equipment $ (98,945) $ (426,984)
Proceeds from the Sale of Property and Equipment 2,143 --
Increase in Due from Affiliates (500) --
------------- -------------
Net Cash Used by Investing Activities $ (97,302) $ (426,984)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Notes Receivables - Officer -- $ (73,615)
Net Borrowings on Line of Credit 74,948 --
Proceeds from Long-Term Debt 15,588 270,065
Payments on Long-Term Debt (31,732) (62,991)
Payments on Notes Payable - Stockholders (12,138) (191,690)
Proceeds from Notes Payable - Stockholders 200,000 126,151
Net Decrease in Checks Written in Excess of Cash in Bank (24,869) (33,060)
Proceeds from the Issuance of Common Stock 324,000 781,800
------------- -------------
Net Cash Provided by Financing Activities $ 545,797 $ 816,660
------------- -------------
NET INCREASE IN CASH $ 11,851 $ --
Cash - Beginning of Year -- --
------------- -------------
CASH - END OF YEAR $ 11,851 $ --
============= =============
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (467,923) $ (819,983)
Adjustments to Reconcile Net Loss to Cash
Used by Operating Activities:
Depreciation and Amortization 142,911 323,113
Loss on Sale of Assets 2,145 --
Issuance of Common Stock in Exchange for Services 139,800 119,738
Reduction of Common Stock for Direct Costs Associated
with Issuance of Common Stock -- (35,200)
Minority Interest 14,783 --
(Increase) Decrease in Current Assets:
Accounts Receivable (110,182) (94,918)
Inventories (113,956) (22,280)
Prepaid Expenses (10,607) 33,810
Slotting Allowance (15,000) 21,400
Other Assets (26,305) --
Increase (Decrease) in Current Liabilities:
Accounts Payable 57,907 84,644
Accrued Expenses (50,217) --
------------- -------------
Net Cash Used by Operating Activities $ (436,644) $ (389,676)
============= =============
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 1 DESCRIPTION OF BUSINESS
Gourmet Regency Coffee Company and Subsidiaries (the Company) is a
producer and wholesale distributor of specialty gourmet coffee. In
addition to distributing specialty gourmet coffee, the Company
distributes jams, chips, and other food products. The Company purchases
their raw coffee through their proprietary relationships with brokers,
importers and origin country federations. The main sales focus of the
Company is in the United States within the wholesale supermarket arena.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements as of December 31, 1997 and for
the year then ended, include the accounts of Gourmet Regency Coffee
Company, Robert's Fun Time Foods, Inc. and Robert's Wholesale Foods,
LLC. On October 14, 1997, Gourmet Regency Coffee Company formed
Robert's Wholesale Foods, LLC with another company, in which they are
equal owners. The consolidated financial statements include the
accounts of Robert's Wholesale Foods, LLC because the Company has the
ability to exercise control over the 50% owned subsidiary. All
significant intercompany transactions have been eliminated.
REVENUE RECOGNITION
The Company's policy is to invoice customers upon shipment and
recognize revenue and associated expenses accordingly.
ACCOUNTS RECEIVABLE
The Company accounts for estimated uncollectible accounts by the
reserve method. As of December 31, 1996, one customer's balance was
approximately 23.7% of accounts receivable.
SALES TO MAJOR CUSTOMER
As of December 31, 1997 and 1996, sales to one customer accounted for
13.4% and 19.6%, respectively, of gross sales of the Company.
INVENTORY
Inventory is valued at the lower of cost (first-in, first-out) or
market and consists primarily of finished goods.
SLOTTING ALLOWANCES AND INITIAL FREE FILLS
Gourmet Regency Coffee Company has elected to capitalize certain
up-front costs incurred for the benefit of obtaining favorable shelf
space and for providing the customer one initial free fill within
certain locations and facilities. These capitalized costs are being
amortized on a straight-line basis, over a six-month period. The
unamortized balance of these slotting allowances and initial free fills
at December 31, 1997 and 1996 was $20,317 and $5,317, respectively.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEPRECIATION AND AMORTIZATION
Property and equipment are recorded at cost. Depreciation is provided
for by straight-line and accelerated methods based on the estimated
useful lives of the assets.
Equipment - Coffee Centers 3 Years
Equipment - Brewers and Grinders 7 Years
Equipment - Office 5 Years
Vehicles 5 Years
Furniture and Fixtures 7 Years
Leasehold Improvements 5 Years
GOODWILL
The Company is amortizing goodwill on a straight-line method over 15
years. Goodwill shown in the consolidated financial statements relates
to the purchase of Wholesale Regency Coffee in 1993 and Robert's Fun
Time Foods, Inc. on December 15, 1997. Amortization expense was $8,861
and $4,375 in 1997 and 1996, respectively. The Company periodically
reviews the value of goodwill to determine if impairment has occurred.
Based upon its review, the Company does not believe that an impairment
of its goodwill has occurred.
INCOME TAXES
Effective April 1, 1996, Gourmet Regency Coffee Company voluntarily
terminated their S corporation election and began being taxed as a
regular C corporation. Income taxes are provided based upon the
provisions of Statement of Financial Accounting Standards (SFAS) No.
109, Accounting for Income Taxes, which, among other things, requires
that deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
Company's assets and liabilities. A valuation allowance is recorded
when it is more likely than not that a deferred tax asset will not be
realized.
Robert's Wholesale Foods, LLC has elected to be taxed as a partnership
under the provisions of the Internal Revenue Code. As a limited
liability company, taxable income is reported by its members on a
pro-rata basis and income taxes are paid by the individual members.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could vary
from the estimates that were used.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
Advertising costs are charged to operations when incurred because they
generally occur in the same period as the benefit is derived. The
Companies do not incur any direct response advertising costs.
Advertising expense was approximately $54,000 and $153,000 during the
years ended December 31, 1997 and 1996, respectively.
LOSS PER SHARE
The Company adopted SFAS #128 Earnings per Share (EPS) in 1997 and has
reported basic EPS, which is the net loss divided by the
weighted-average number of common shares outstanding for the period.
The calculation of diluted loss per share is not presented because all
common stock equivalents are anti-dilutitive. All prior periods have
been restated for this new accounting standard. Weighted shares
outstanding were 2,860,349 and 2,352,003 at December 31, 1997 and 1996,
respectively.
SUMMARY OF NON-CASH TRANSACTIONS
The Company recorded the following non-cash transactions during the
years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------------- --------------------
Shares Amount Shares Amount
------- --------- ------ ---------
<S> <C> <C> <C> <C>
Common Stock Issued for
Services Performed and
Equipment Purchased 86,950 $ 157,800 98,050 $ 119,738
Common Stock Issued as
Part of Acquisition of Fun
Time Foods, Inc. 50,000 100,000 - -
------- --------- ------ ---------
136,950 $ 257,800 98,050 $ 119,738
======= ========= ====== =========
</TABLE>
Also, as part of the acquisition of Fun Time Foods, Inc., the Company
entered into a $200,000 twelve-month promissory note with the first
payment becoming due and payable in March 1998.
During 1996, the Company reduced the proceeds from the issuance of
common stock by $35,200 resulting from direct costs associated with the
sale of shares of common stock.
RECLASSIFICATIONS
Certain amounts in the December 31, 1996 financial statements have been
reclassified to conform with the presentation in the current year
consolidated financial statements. There is no effect on the net loss
or total equity as a result of these reclassifications.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3 ACQUISITION
On December 15, 1997, Gourmet Regency Coffee Company, through its
wholly owned subsidiary, Robert's Fun Time Foods, Inc., acquired 100%
of the stock of Fun Time Foods, Inc. in exchange for a 6% twelve-month
promissory note in the amount of $200,000 and 50,000 shares of Gourmet
Regency Coffee Company's stock valued at $2.00 per share. The seller
guarantees the collection of the accounts receivable balance of
$125,182 purchased in the acquisition. The balance of the note payable
will be reduced on a pro rata basis if any of the accounts receivable
prove to be uncollectible. The acquisition has been accounted for as a
purchase and the results of operations of Robert's Fun Time Foods, Inc.
have been included in the Company's consolidated financial statements
since the acquisition. The purchase price was allocated based on the
estimated fair values at the date of the acquisition. The excess of the
purchase price over assets acquired was $338,641 and is being amortized
over 15 years on a straight-line basis.
The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Fun Time Foods,
Inc. as if the acquisition had occurred at the beginning of 1996, with
pro forma adjustments to give effect to amortization of goodwill,
interest expense on the note payable and certain other adjustments.
1997 1996
------------- -------------
Net Sales $ 4,161,600 $ 3,754,594
============= =============
Net Loss $ (507,661) $ (808,463)
============= =============
Net Loss Per Share $ (0.17) $ (0.34)
============= =============
NOTE 4 NOTES RECEIVABLE - STOCKHOLDERS
During the years ended December 31, 1997 and 1996, the Company made
various non-interest bearing advances to two stockholders with no
defined repayment terms. The balances under these arrangements were
$174,839 and $167,138 at December 31, 1997 and 1996, respectively.
NOTE 5 NOTES PAYABLE - BANK
At December 31, 1997, two of the Companies had separate revolving lines
of credit with maximum borrowing limits of $25,000 and $100,000,
respectively. All borrowings under the lines are personally guaranteed
by an officer and stockholder of the Company and bear variable rates of
interest (17.5% and 9.5% at December 31, 1997, respectively). Amounts
outstanding on these lines at December 31, 1997 were $24,948 and
$50,000, respectively.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 LONG-TERM DEBT
<TABLE>
<CAPTION>
Description Security/Guaranties 1997 1996
----------- ------------------- ----------- -----------
<S> <C> <C> <C>
Long Lake State Bank - Refinanced in Secured by substantially
December 1997, five monthly payments of all assets of Gourmet
$5,000, which includes interest at 11% Regency Coffee
beginning December 27, 1997. Entire Company and personal
unpaid principal and accrued interest guaranty by a
due May 27, 1998. stockholder. $ 239,904 $ 270,065
Prior Lake State Bank - Monthly Vehicle and personal
payments of $346 which includes interest guaranty by a
at 8.15%. Due May 15, 2000. stockholder. 15,298 -
Charter Bank of Eau Claire, Wisconsin -
Monthly payments of $1,455, which Vehicle and personal
includes interest at 10.9%. Due guaranty by a
January 19, 1999. stockholder. 17,611 -
Charter Bank of Eau Claire, Wisconsin - Vehicle and personal
Monthly payments of $397, which includes guaranty by a
interest at 8.75%. Due October 15, 1999. stockholder. 7,932 -
Charter Bank of Eau Claire, Wisconsin -
Monthly payments of $2,683, which Vehicle and personal
includes interest at 10.25%. Due guaranty by a
March 1, 1998. stockholder. 57,965 -
Charter Bank of Eau Claire, Wisconsin -
Single payment of $20,068 was due on
December 31, 1997; note has been Vehicle and personal
extended and is in the process of being guaranty by a
refinanced. stockholder. 20,068 -
----------- -----------
Total $ 358,778 $ 270,065
Less: Current Maturities (341,602) -
----------- -----------
Total Long-Term Debt $ 17,176 $ 270,065
=========== ===========
</TABLE>
As of December 31, 1997, the future principal payments on the above
long-term debt are as follows:
Year Ending December 31, Amount
------------------------ ------
1998 $ 341,602
1999 8,171
2000 9,005
----------
Total $ 358,778
==========
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7 NOTES PAYABLE - STOCKHOLDERS
<TABLE>
<CAPTION>
Description 1997 1996
----------- ---------- ----------
<S> <C> <C>
Note Payable - Stockholder - $100,000 payment
due March 1, 1998; $50,000 payment due June 1,
1998, which includes interest at 6%. Entire
remaining unpaid principal and accrued interest
due January 2, 1999. $ 200,000 -
Note Payable - Stockholder - Monthly payments
of $1,425, which includes interest at 11%. Due
August 1999. 121,399 126,151
---------- ----------
Total $ 321,399 $ 126,151
Less: Current Portion (149,808) (4,606)
---------- ----------
Long-Term Notes Payable - Stockholders $ 171,591 $ 121,545
========== ==========
</TABLE>
NOTE 8 DUE TO STOCKHOLDERS
During the years ended December 31, 1997 and 1996, the Company received
advances from officers and stockholders. The notes are non-interest
bearing and have no defined repayment terms. At December 31, 1997 and
1996, the balance under these advances was $200,000 and $7,386,
respectively. All advances were repaid by January 31, 1998.
NOTE 9 STOCKHOLDERS' EQUITY
The Gourmet Regency Coffee Company Board of Directors authorized the
following transactions:
* On November 25, 1997, the Board of Directors of Gourmet Regency
Coffee Company authorized a 2 for 1 reverse stock split. All
references in the financial statements with regard to the common
stock have been restated to reflect the reverse stock split.
* On March 20, 1997, 52,500 common shares were issued for services
performed in 1997 on behalf of Gourmet Regency Coffee Company by
assisting in the distribution of products to retail supermarkets
in the Twin Cities area.
* On October 28, 1997, 4,950 common shares were issued for services
performed in 1997 and another 4,500 common shares were issued in
exchange for equipment, which was purchased from a stockholder.
On November 26, 1997, 25,000 common shares were issued for
services performed in 1997 by a stockholder.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 9 STOCKHOLDERS' EQUITY (CONTINUED)
* On December 15, 1997, 50,000 common shares were issued to the
former owner of Fun Time Foods, Inc. as part of the acquisition.
* In 1996, Gourmet Regency Coffee Company issued 98,050 common
shares to four different stockholders as consideration for
services performed.
In 1997 and 1996, as a result of certain transactions, Gourmet Regency
Coffee Company recorded compensation expense of $139,800 and $119,738,
respectively, and capitalized equipment costs of $18,000 and $-0-,
respectively, based on the fair market value of the services performed
or equipment acquired.
NOTE 10 INCOME TAXES
The provision for income tax expense consists of the following
components:
Federal State Total
---------- ---------- ----------
Year Ended December 31, 1997
-- Current $ -- $ 300 $ 300
-- Deferred -- -- --
---------- ---------- ----------
Tax Provision, Net $ -- $ 300 $ 300
========== ========== ==========
Year Ended December 31, 1996
-- Current $ -- $ 300 $ 300
-- Deferred -- -- --
---------- ---------- ----------
Tax Provision, Net $ -- $ 300 $ 300
========== ========== ==========
Temporary differences between financial statement carrying amounts and
the tax basis of assets and liabilities and tax credit and operating
loss carryforwards that create deferred tax assets and liabilities are
as follows:
1997 1996
----------- -----------
Deferred Tax Assets:
Net Operating Loss Carryforward $ 403,000 $ 227,000
Less: Valuation Allowance (403,000) (227,000)
----------- -----------
Net Deferred Tax Asset $ -- $ --
=========== ===========
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 10 INCOME TAXES (CONTINUED)
Actual income expense varied from "expected" tax benefit (computed by
applying the United States Federal corporate income tax rate of 35
percent for the years ended December 31, 1997 and 1996 to loss before
taxes) as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Computed "Expected" Tax Benefit $ (159,000) $ (287,000)
S-Corporation Losses -- 72,000
------------ ------------
Sub-total $ (159,000) $ (215,000)
Increase (Benefit) in Income Taxes Resulting from:
State Income Taxes 300 300
Other (17,000) (12,000)
Increase in Valuation Allowance 176,000 227,000
------------ ------------
Total Provision for Income Taxes $ 300 $ 300
============ ============
</TABLE>
At December 31, 1997, the Company has available federal and state net
operating loss (NOL) carryforwards which expire as follows:
Year Originating Year Expiring Amount
---------------- ------------- ------
1996 2011 $ 610,000
1997 2012 450,000
-----------
Total $ 1,060,000
===========
NOTE 11 OPERATING LEASES AND RELATED PARTY TRANSACTIONS
During a portion of the year ended December 31, 1997 and all of 1996,
Gourmet Regency Coffee Company leased warehouse/plant space on a
month-to-month basis plus its pro rata share of utilities and other
common area maintenance expenses. Gourmet Regency Coffee Company
entered into a lease agreement for its new warehouse and office space,
which commenced on March 1, 1997 and extends through February 28, 2002.
The lease calls for minimum base rent of $7,578 per month plus the
Company's pro-rata share of operating expenses and real estate taxes.
The Company leases seven vehicles under operating lease agreements,
which expire at various dates through November 2002.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 11 OPERATING LEASES AND RELATED PARTY TRANSACTIONS (CONTINUED)
Effective December 15, 1997, the Company entered into an operating
lease with a stockholder for rental property used as warehouse space.
The lease requires monthly payments of $1,700 plus utilities. The
agreement terminates on December 31, 1999 and can be automatically
renewed on the same terms for an additional period of three years.
There was no lease expense for the year ended December 31, 1997.
Total rent expense during the years ended December 31, 1997 and 1996
was approximately $130,000 and $54,000, respectively. Future minimum
rent payments under non-cancelable leases are as follows:
Year Ending December 31, Amount
------------------------ ------
1998 $ 167,438
1999 160,425
2000 135,624
2001 129,960
2002 36,670
---------
Total $ 630,117
=========
As of December 31, 1997, the Company owes a related party $133,761 for
inventory acquired. The related party represents the other company
owning 50% of Robert's Wholesale Foods, LLC.
NOTE 12 STOCK OPTION PLANS AND WARRANTS
On December 11, 1995, the Directors of the Company adopted, and the
stockholders approved, the Company's Employee Incentive Stock Option
Plan (the "Plan") pursuant to which the Company may grant stock options
to employees and directors of the Company. The Plan permits the
granting of "incentive stock options" meeting the requirements of
Section 422 of the Internal Revenue Code, as amended, and nonqualified
stock options, which do not meet such requirements. The Company has
reserved 750,000 shares of Common Stock for issuance upon exercise of
options granted under the Plan.
The Plan is administered by the Board of Directors of the Company, or a
committee thereof, which has the discretion to select the optionees and
to establish the terms and conditions of each option, subject to
provisions of the Plan. The exercise price for an incentive stock
option granted under the Plan may not be less than the fair market
value of the Company's Common Stock as of the date the option is
granted. The term of each incentive stock option is determined by the
Board but may not exceed ten years from the date the option is granted.
Options granted under the Plan are not transferable, except by will or
by the laws of descent and distribution, and are subject to certain
other transactions and restrictions. Nonqualified stock options are not
subject to exercise price and transfer restrictions required with
respect to incentive stock options.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 12 STOCK OPTION PLANS AND WARRANTS (CONTINUED)
The Company applies APB Opinion No. 25 in accounting for its stock
options plans. Accordingly, no compensation cost has been recognized
for the Plan if the exercise price is equal to the fair market value of
the stock at the date of grant. Had compensation cost been determined
on the basis of fair value pursuant to SFAS No. 123, the net loss would
have been as follows:
1997 1996
---------- ----------
Net Loss as Reported $ (467,923) $ (819,983)
========== ============
Proforma $ (856,699) $ (1,034,126)
========== ============
The fair value of each option granted is estimated on the grant date.
The following assumptions were made in estimating the fair value for
options granted in 1997 and 1996:
1997 1996
------------ ------------
Dividend Yield 0% 0%
Risk Free Interest Rate 5.705% 6.265%
Weighted Average Expected Life 8.42 Years 6.13 Years
Weighted Average Fair Value $ .85 $ .61
Following is a summary of stock option transactions:
Number of Shares
--------------------------------
Incentive Stock Non Statutory
Option Plan Stock Options
--------------- -------------
Outstanding at December 31, 1995 272,474 -
Granted at $.668 to $4.00 per share 327,474 25,000
--------------- -------------
Outstanding at December 31, 1996 599,948 25,000
Granted at $1.48 to $2.00 per share 145,000 312,500
--------------- -------------
Outstanding at December 31, 1997 744,948 337,500
=============== =============
As of December 31, 1997, all shares are exercisable, however, no
options have been exercised under the option plans. On February 26,
1997, 37,500 warrants were issued in connection with the Company's
prior financing efforts. At December 31, 1997, these warrants remained
outstanding. Each warrant allows the holder to acquire one share of
common stock for a purchase price of $2.00 per share. The warrants are
exercisable at any time through February 20, 2002.
<PAGE>
GOURMET REGENCY COFFEE COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 13 CONTINGENCIES
LITIGATION
A stockholder of Gourmet Regency Coffee Company has asserted a claim
against either the Company or the majority stockholder claiming they
are entitled to $24,000 which represents the balance owed to the
stockholder under an employment agreement. The Company has denied
liability to this individual, and believes the litigation is without
merit. No accrual has been made in these financial statements related
to this contingency.
EMPLOYMENT AGREEMENT
Roberts Fun Time Foods, Inc. has an employment agreement with its
former owner, which provides for an initial five-year term and annual
renewal options. The employment agreement stipulates employment terms,
compensation, and other employment benefits, and provides for
noncompete provisions upon resignation or termination.
Gourmet Regency Coffee Company also has employment agreements with two
of its stockholders, which provide for an initial one-year term and
annual renewal options. The employment agreements stipulate employment
terms, compensation and other employment benefits, and provide for
noncompete provisions upon resignation or termination.
NOTE 14 PRIVATE PLACEMENT
On December 1, 1997, the Company authorized the private placement of
1,250,000 shares of its common stock. Subsequent to December 31, 1997,
and as a result of the private placement, the Company has issued
147,000 shares and has received proceeds of $294,000. All common shares
are being offered at $2.00 per share.
NOTE 15 PENDING COMBINATIONS
In late 1997, Gourmet Regency Coffee Company agreed to acquire all of
the outstanding common stock of Cameron's Coffee Company. The terms of
the agreement have not yet been finalized. The Company intends to
finance this transaction with a portion of the proceeds from the
Private Placement (See Note 14 above).
The Company has determined that a business combination with an existing
publicly held company might be advantageous to the stockholders of the
Company by increasing the likelihood of a market for shares of the
common stock of the Company. The Company is pursuing negotiations with
Lloyd Venture's, Inc.
<PAGE>
DRAFT
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Cameron's Coffee Company, Inc.
Hayward, Wisconsin
We have audited the accompanying balance sheets of Cameron's Coffee Company as
of September 30, 1997 and 1996, and the related statements of operations,
changes in stockholders' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cameron's Coffee Company as of
September 30, 1997 and 1996, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
DRAFT
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
March 12, 1998
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
BALANCE SHEETS - SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
ASSETS
CURRENT ASSETS:
Cash $ 17,874 $ 46,429
Accounts receivable (Note 2) 298,310 236,620
Inventory (Note 3) 683,668 778,600
Prepaid insurance 712 5,066
Prepaid income taxes (Note 7) -0- 59,979
----------- -----------
Total current assets $ 1,000,564 $ 1,126,694
----------- -----------
OTHER ASSETS:
Due from stockholder (Note 11) $ 778,260 $ 673,261
Off premise bins and fixtures (Note 4) 81,609 76,321
Trademark/start-up costs (Note 11) 4,982 4,982
----------- -----------
Total other assets $ 864,851 $ 754,564
----------- -----------
FIXED ASSETS (Note 5) $ 1,061,420 $ 1,079,830
Less- Accumulated depreciation (560,903) (470,599)
----------- -----------
Total fixed assets $ 500,517 $ 609,231
----------- -----------
Total assets $ 2,365,932 $ 2,490,489
=========== ===========
See notes to financial statements.
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
BALANCE SHEETS - SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Notes payable (Note 6) $ 626,411 $ 426,556
Current portion long-term debt (Note 6) 55,763 99,597
Accounts payable 363,514 329,377
Accrued liabilities 47,328 58,972
----------- -----------
Total current liabilities $ 1,093,016 $ 914,502
----------- -----------
LONG-TERM LIABILITIES:
Long-term debt (Note 6) $ 19,358 $ 274,604
Deferred income taxes (Note 7) 65,257 68,531
----------- -----------
Total long-term liabilities $ 84,615 $ 343,135
----------- -----------
Total liabilities $ 1,177,631 $ 1,257,637
----------- -----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 8)
STOCKHOLDERS' EQUITY:
Common stock, no par value-
Authorized, 2,800 shares
Issued, 2,800 shares, of which 1,400
shares are held in Treasury $ 32,396 $ 32,396
Retained earnings 1,179,905 1,224,456
----------- -----------
$ 1,212,301 $ 1,256,852
Less- Treasury stock, at cost (Note 9) (24,000) (24,000)
----------- -----------
Total stockholders' equity $ 1,188,301 $ 1,232,852
----------- -----------
Total liabilities and equity $ 2,365,932 $ 2,490,489
=========== ===========
See notes to financial statements.
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
SALES $ 4,077,924 $ 4,172,713
COST OF SALES 3,110,107 3,276,198
----------- -----------
Gross profit on sales $ 967,817 $ 896,515
Percent to sales 23.73% 21.49%
----------- -----------
Loss due to market decline of inventory $ 27,791 $ -0-
----------- -----------
OPERATING EXPENSES:
Occupancy expense $ 17,430 $ 19,345
Selling expense 361,964 332,774
Administrative expense 589,759 662,327
----------- -----------
Total operating expenses $ 969,153 $ 1,014,446
----------- -----------
Operating income (loss) $ (29,127) $ (117,931)
Percent to sales (.71)% (2.83)%
OTHER INCOME (Note 12) 65,741 54,150
----------- -----------
$ 36,614 $ (63,781)
----------- -----------
OTHER EXPENSE (Note 12) $ 84,260 $ 74,803
----------- -----------
Net income (loss) before income taxes $ (47,646) $ (138,584)
----------- -----------
PROVISION FOR INCOME TAXES: (Note 7)
Current $ 179 $ 25
Deferred (3,274) 6,076
----------- -----------
Total income taxes $ (3,095) $ 6,101
----------- -----------
Net income (loss) $ (44,551) $ 144,685)
Percent to sales (1.09)% (3.47)%
=========== ===========
See notes to financial statements.
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
STATEMENTS OF RETAINED EARNINGS
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
BALANCE, BEGINNING OF YEAR $ 1,224,456 $ 1,369,141
Net income (loss) for the year (44,551) (144,685)
----------- -----------
BALANCE, END OF YEAR $ 1,179,905 $ 1,224,456
=========== ===========
See notes to financial statements.
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
CASH PROVIDED BY OPERATIONS:
Net income (loss) $ (44,551) $(144,685)
Adjustments to reconcile net income to net cash
provided by operations-
Loss (gain) from sale of assets, net of losses (gains)
from asset sales/retirements 12,262 (5,977)
Depreciation and amortization 125,825 120,581
Deferred taxes (3,274) 6,076
(Increase) decrease in:
Accounts and notes receivable (61,690) 100,792
Inventories 94,932 57,180
Other current assets 64,333 (10,669)
Other assets (5,288) 1,556
Increase (decrease) in:
Bank overdraft -0- (32,475)
Accounts payable 34,137 150,072
Accrued liabilities (11,644) 13,477
--------- ---------
Cash provided by operations $ 205,042 $ 255,928
--------- ---------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Capital expenditures $ (46,679) $(191,666)
Proceeds from sale of equipment 17,306 20,336
Net transfers to shareholder (104,999) (105,840)
Trademarks/set-up costs -0- (4,982)
--------- ---------
Cash (used for) investing activities $(134,372) $(282,152)
--------- ---------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Short-term borrowing $ 549,855 $ 206,000
Long-term borrowing -0- 73,270
Reduction- short-term debt (350,000) (160,007)
Reduction- long-term debt (299,080) (100,947)
--------- ---------
Cash provided by financing activities $ (99,225) $ 18,316
--------- ---------
Increase (decrease) in cash $ (28,555) $ (7,908)
Cash at beginning of year 46,429 54,337
--------- ---------
Cash at end of year $ 17,874 $ 46,429
========= =========
</TABLE>
See notes to financial statements.
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for-
Interest $ 62,872 $ 74,632
======== ========
Income taxes $ 179 $ 9,374
======== ========
NONCASH FINANCING ACTIVITIES:
On March 1, 1996, Chevrolet trucks were purchased and financed with
Heritage Bank of Hayward, in the amount of $34,003.
<PAGE>
CAMERON'S COFFEE COMPANY, INC.
HAYWARD, WISCONSIN
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 AND 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The summary of significant accounting policies of Cameron's Coffee Company, Inc.
(the Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management, who is responsible for their integrity and objectivity.
These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the financial
statements, including the use of management's estimates.
a. Organization and Operation - Cameron's Coffee Company, Inc., a
Wisconsin Corporation, is 100% owned by James H. Cameron. The
Company, located in Hayward, Wisconsin, is a specialty coffee
roaster with sales to wholesale and retail outlets within the
Midwest.
b. Cash and Cash Equivalents - The Company considers all
short-term investments with an original maturity of three
months or less to be cash equivalents.
c. Accounts Receivable - The majority of accounts receivable are
due from wholesale and retail outlets and are considered
collectible. Accordingly, no allowance for doubtful accounts
is required. If an account becomes uncollected, it will be
charged to operations when that determination is made. For the
fiscal years ended September 30, 1997 and 1996, $16,250 and
$3,804, respectively, were charged to bad debts.
d. Inventories - Inventories are stated at the lower of cost or
market. The unroasted coffee inventory cost is determined
using the specific identification method, and the packaging
supplies and other coffee inventories are determined using the
first-in, first-out (FIFO) method. See Note 3 for the
components and additional information relating to inventories.
e. Property and Equipment - Property and equipment are recorded
at cost and are depreciated using the straight-line method
over their estimated useful lives. When property or equipment
is sold or otherwise disposed of, the cost and related
accumulated depreciation are removed from the respective
accounts and the resulting gain or loss is reflected in
earnings. Expenditures for maintenance, repairs, and
improvements which do not materially extend the useful lives
of the assets are charged to earnings.
Items of property and equipment are depreciated for financial
reporting purposes
<PAGE>
based on the following estimated useful lives:
Buildings and improvements 39 years
Machinery and equipment 5-12 years
Office furniture and equipment 5-12 years
Company vehicles 5-7 years
Equipment- off premise 7-12 years
f. Income Taxes - Accounting policies used for federal and state
income tax purposes are consistent with those for financial
reporting purposes except for depreciation methods and useful
lives of fixed assets purchased, which are based on the
accelerated cost recovery system for income tax purposes.
These differences create a deferred tax liability which
represents the future tax consequences of those differences,
which will be taxable when the assets are recovered.
g. Reclassifications - Certain accounts in the prior year
financial statements have been reclassified for comparative
purposes to conform with the presentation in the current-year
financial statements.
h. Significant Customers - The Company has three significant
customers which account for approximately 55% and 59% of its
gross sales for 1997 and 1996, respectively. Accounts
receivable from these customers at September 30, 1997 and 1996
were as follows:
1997 1996
---- ----
Milwaukee Biscuit $ 51,086 $ -0-
Bradley Distributing 80,534 72,683
La Minita Coffee 49,020 -0-
--------- --------
$ 180,640 $ 72,683
========= ========
i. Use of Estimates - The preparation of the financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
NOTE 2 - ACCOUNTS RECEIVABLE:
At September 30, 1997 and 1996, accounts receivable included receivable from
shareholder and employees as follows: 1997 1996
Receivable from shareholder $ 350 $ 1,150
Receivable from employees 410 2,667
------- --------
Total $ 760 $ 3,817
======= ========
No interest income was recorded on those accounts for the years ended September
30, 1997 and 1996.
<PAGE>
NOTE 3 - INVENTORY:
Inventories at September 30, 1997 and 1996 consist of the following:
1997 1996
---- ----
Coffee-
Unroasted $ 410,381 $ 339,594
Roasted 65,270 109,941
Supplies 42,802 56,251
Packaging supplies 193,006 272,814
---------- ----------
$ 711,459 $ 778,600
Less- Writedown to market value 27,791 -0-
---------- ----------
$ 683,668 $ 778,600
========== ==========
NOTE 4 - OFF PREMISE BINS AND FIXTURES:
The Company provides display bins and fixtures to customers selling coffee at
the customer locations. The Company has determined the useful life of these
fixtures to be two years and amortizes the cost over that period. Bins and
fixtures consisted of the following as of September 30:
1997 1996
---- ----
Bins and fixtures $ 170,459 $ 169,474
Less- Amortization of cost (88,850) (93,153)
---------- ---------
$ 81,609 $ 76,321
========== =========
NOTE 5 - FIXED ASSETS:
Fixed assets at September 30, 1997 and 1996 consisted of the following:
1997 1996
---- ----
Land $ 34,764 $ 34,764
Building 46,771 42,091
Machinery and equipment 376,949 351,130
Furniture and fixtures 178,334 174,417
Company vehicles 148,394 211,855
Equipment- off premise 276,208 265,573
----------- -----------
$ 1,061,420 $ 1,079,830
Less- Accumulated depreciation (560,903) (470,599)
----------- -----------
$ 500,517 $ 609,231
=========== ===========
The depreciation expense was $125,825 and $120,581 for the years ended September
30, 1997
<PAGE>
and 1996, respectively.
NOTE 6 - DEBT:
a. Note Payable - Cameron's Coffee Company, Inc. has a revolving
line-of-credit, payable on demand for $450,000 from Heritage
Bank of Hayward. The note is secured by inventory, equipment,
vehicles, accounts receivable and real estate, per a revolving
credit and security agreement dated April 1, 1996, which
renews a former agreement. The note bears interest at one
percentage point over the Heritage Bank of Hayward's reference
rate, which was 9.5% at September 30, 1997, and interest is to
be paid monthly. As of September 30, 1997 and 1996, the
Company had $417,556 and $406,556 outstanding, respectively.
The terms and conditions of the revolving credit agreement can
be summarized as follows:
All outstanding debt under the agreement shall be
personally guaranteed by the Company's sole
shareholder.
Expenditures for fixed or capital assets shall not
exceed $50,000 in any fiscal year, excluding
off-premise fixed assets, without written permission
of the lender.
The Company's current ratio shall not be less than
1.00 to 1.00.
The Company shall maintain a ratio of total
liabilities to tangible net worth of not greater than
1.50 to 1.00.
Total borrowings may not exceed the sum of 75% of
inventory plus 75% of accounts receivable.
Various other restrictions on payment of dividends
and compensation to the Company's sole stockholder,
and assignment of $1,000,000 on the life of the sole
shareholder.
The Company shall maintain tangible net worth of not
less than $1,400,000.
The Company shall furnish borrowing base certificates
and monthly financial statements to the lender.
As of September 30, 1997, the Company was in non-compliance
with certain provisions of the credit agreement; however, the
Bank is aware of the conditions and is monitoring the
Company's progress toward achieving full compliance.
b. Short-Term Debt - The short-term debt consists of the
following at September 30, 1997 and 1996:
1997 1996
---- ----
Note payable, unsecured, due on
demand, including interest at 9.0% $ -0- $ 15,000
<PAGE>
Note payable, unsecured, due on
demand, including interest at 9.0% -0- 5,000
Note payable, unsecured, due on
demand, including interest at 8.0% 6,000 -0-
Note payable to Heritage Bank
of Hayward, due December 1, 1997
secured by fixtures, equipment,
and a general business security
agreement on vehicles, accounts
receivable, and inventories,
in one installment including
interest at 9.5% 202,855 -0-
Revolving line of credit 417,556 406,556
-------- --------
$626,411 $426,556
======== ========
c. Long-Term Debt - The long-term debt consists of the following
at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Note payable to Heritage Bank of Hayward,
due April 1, 1998, secured by vehicles
and a general business security agreement
on equipment, fixtures, inventories and
receivables, with monthly installments of
$4,378, including interest at 9.50% $ 33,652 $ 80,466
Note payable to Heritage Bank of Hayward,
due April 1, 1997, secured by fixtures,
equipment, and a general business
security agreement on vehicles, accounts
receivable, and inventories, with monthly
installments of $4,280, including
interest at 9.50% (Loan originally due
April 1, 1997, is expected to be
refinanced for two years at current rate) -0- 223,391
Note payable to First Federal Bank of Eau
Claire, FSB, due December 1998, secured
by a 1991 Ford Van, with monthly
installments of $195, including interest
at 9.50% -0- 4,728
Note payable to Heritage Bank of Hayward,
<PAGE>
due March 1, 1999, secured by three
trucks, with monthly installments of
$1,080, including interest at 8.5% 13,070 28,923
Note payable to Heritage Bank of Hayward,
due April 15, 2001, secured by 1997 Ford
Supercab, with monthly installments of
$463, including interest at 8.0% 17,235 21,223
Note payable to Heritage Bank of Hayward,
due December 1, 1999, secured by 1995
Nissan Quest, with monthly installments
of $456, including interest at 8.5% 11,164 15,470
--------- ---------
$ 75,121 $ 374,201
Less- Current maturities (55,763) (99,597)
--------- ---------
$ 19,358 $ 274,604
========= =========
</TABLE>
Aggregate annual principal and interest payments applicable to long-term debt
for the five years subsequent to September 30, 1997:
Year ending Principal Interest Total
----------- --------- -------- -----
1998 $ 55,763 $ 3,792 $ 59,555
1999 9,814 1,315 11,129
2000 6,426 488 6,914
2001 3,118 80 3,198
----------- ---------- ----------
$ 75,121 $ 5,675 $ 80,796
=========== ========== ==========
NOTE 7 - INCOME TAXES:
Prepaid income taxes consist of overpayments as of September 30 as follows:
1997 1996
---- ----
Federal $ -0- $ 47,004
State -0- 12,975
---------- ---------
Total $ -0- $ 59,979
========== =========
The net deferred tax liabilities in the accompanying balance sheets consist of
temporary differences, due to depreciation and asset gains/losses for September
30, 1997 and 1996:
1997 1996
---- ----
<PAGE>
Deferred tax liabilities $ 65,257 $ 68,531
========== =========
The provision for income taxes as of September 30 is comprised of the following
components:
1997 1996
---- ----
Current income tax expense-
Federal $ 154 $ -0-
State 25 25
--------- ---------
Current provision for income taxes $ 179 $ 25
--------- ---------
Deferred income tax expense-
Federal $ (2,615) $ 4,852
State (659) 1,224
--------- ---------
Deferred provision for income taxes $ (3,274) $ 6,076
--------- ---------
Total provision for income taxes $ (3,095) $ 6,101
========= =========
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (FAS 109). Under the provisions of FAS 109, an
entity recognizes deferred tax assets and liabilities for future tax
consequences of events that have been previously recognized in the Company's
financial statements or tax returns. The measurement of deferred tax assets and
liabilities is based on provisions of the enacted tax law; the effects of the
future changes in tax laws or rates are not considered.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
Cameron's Coffee Company, Inc. contracts for the purchase of unroasted coffee
beans in advance of taking delivery. The initial contract requires the Company
to determine the brand of beans to be purchased and the delivery date. The
Company can fix the price per pound based on current market prices at any time
up to the delivery date.
As of September 30, 1997 and 1996, the Company had fixed contracts totaling
$631,153 and $617,577, respectively. The market value of those contracts were
$636,188 and $630,784 as of September 30, 1997 and 1996, respectively. The
unfixed contracts totaled $1,466,100 and $1,242,360 based on the current market
prices as of September 30, 1997 and 1996, respectively. The actual amounts paid
on these unfixed contracts will vary, depending on the market price in effect
when the Company fixes the contract. The delivery dates on the September 30,
1997 contracts outstanding, fixed and unfixed, range from October 1996 through
December 1997. These commitments and contingencies will be included in the
financial statements as the Company receives delivery.
Cameron's Coffee Company, Inc. and Gourmet Regency Coffee Company agreed to
distribute their products through a co-owned distribution company. Accordingly,
they established Robert's Wholesale Foods, LLC. Each Company owns 50% of the
distribution company. The relationship with Bradley Distributing, Inc. was
termined October 14, 1997. In a complaint dated December 24, 1997, Bradley
Distributing, Inc. commenced suit in the United States Court for the District of
<PAGE>
Minnesota, alleging several counts, including breach of contract, and a claim
that Bradley Distributing, Inc. was a franchise of the Company and was wrongly
terminated.
In the opinion of management of Cameron's Coffee Company, Inc., the claims are
groundless and will vigorously contest all claims raised by Bradley
Distributing, Inc.
NOTE 9 - TREASURY STOCK:
At September 30, 1997 and 1996, the Company held 1,400 shares of its stock, at a
cost of $17.14 per share. The shares were purchased in fiscal year ended
September 30, 1987.
NOTE 10 - RETIREMENT BENEFITS:
On July 26, 1995, the Company established a salary deferral and profit sharing
plan under Section 401(k) of the Internal Revenue Code. On September 1, 1995,
the Plan became effective for deferrals. The Plan is eligible to all employees,
with six months of full-time employment service, and have attained the age of
18. Eligible employees may elect to contribute up to 15% of their compensation
to their 401(k) account subject to the Internal Revenue Service rules, with the
Company matching 20% of employees contribution up to 5% of compensation. As of
September 30, 1997 and 1996, the Company made contributions of $4,373 and
$5,391, respectively.
NOTE 11 - RELATED PARTY TRANSACTIONS:
Periodically, the Company advances funds to its sole shareholder. There is no
fixed repayment schedule for these advances; however, the Company receives
periodic repayments and anticipates that future bonuses declared by the Company
to the sole shareholder will be applied against the advances.
Interest charged to its sole shareholder for the years ended September 30, 1997
and 1996 was $42,835 and $39,802, respectively, and is included in the Company's
interest income. Interest was computed based on the lowest Applicable Federal
Rate which averaged 6.1% for 1997 and 6.63% for 1996.
The land and original building utilized by the Company are owned and leased to
the Corporation by Mr. Cameron, the sole shareholder. The rent paid for the each
of the years ended September 30, 1997 and 1996 was $42,000. The lease for the
land, buildings, and improvements is an annually renewable lease with a rent of
$3,500 per month. The Corporation pays all of the occupancy related
expenditures, including the insurance, real estate taxes, and maintenance. No
cash is transferred for the rent expense, but the shareholder account is reduced
accordingly.
Future minimum lease payments under the above lease are $42,000 per year.
Cameron's Coffee Direct, Inc., a wholly-owned Subsidiary of Cameron's Coffee
Company, Inc. was incorporated during fiscal year ended September 30, 1996. The
corporation was inactive for the fiscal years ending September 30, 1997 and
1996.
NOTE 12 - OTHER INCOME AND OTHER EXPENSE:
Other income as of September 30 consists of:
1997 1996
---- ----
<PAGE>
Gain on sale of fixed assets $ 9,071 $ 6,148
Interest income 44,136 41,018
Miscellaneous income 1,198 740
Insurance dividends 11,336 6,244
-------- --------
$ 65,741 $ 54,150
======== ========
Other expenses as of September 30 consists of:
Loss on sale/retirements of assets $ 21,333 $ 171
Interest expense 62,927 74,632
-------- --------
$ 84,260 $ 74,803
======== ========
NOTE 13 - LEASES:
The Company leases land, building, and warehouse from the sole shareholder. See
Note 11 for further comments.
The Company leases a vehicle from GE Capital for $371 per month. The lease
covers a 30-month period and expires April 10, 1997. In November 1996, the
vehicle was traded in on another vehicle which is leased for $368 per month. The
lease term covers a 36-month term and expires October 29, 1999. Lease expense
for years ended September 30, 1997 and 1996 was $3,683 and $4,457, respectively.
The Company leased a mailing machine and postage meter from Pitney Bowes for
$366 per month, which was cancelled in 1996. Lease expense for year ended
September 30, 1996 was $5,273.
The Company leases a mailing machine and postage meter from Pitney Bowes for
$531 per quarter. The lease covers a 63-month period and expires October 10,
2001. Lease expense for years ended September 30, 1997 and 1996 was $2,123 and
$531, respectively.
The Company leases a copy machine from HSI Business Center for $225 per month.
The lease covers a 36-month period and expires December 1999. Lease expense for
the year ended September 30, 1997 was $2,023.
The Company leases a building in Minocqua, Wisconsin, from an unrelated party,
for $500 per month the first year, $550 per month the second year, and $600 per
month the third year. The lease covers a three-year period and expires December
31, 1998. Lease expense for the years ended September 30, 1997 and 1996 was
$6,515 and $6,176, respectively.
Future minimum lease payments for noncancellable operating leases with initial
or remaining periods of one year or more at September 30, 1997 are as follows:
1998 $ 16,290
1999 11,040
2000 3,534
2001 2,123
<PAGE>
2002 -0-
---------
Total Future Minimum Rental Payments $ 32,987
=========
NOTE 14 - CONCENTRATION OF CREDIT RISK:
The Company's financial instruments that are exposed to concentrations of credit
risk consist primarily of cash and cash equivalents. The Company places its cash
with a high credit quality institution. At times, cash balances may be in excess
of the FDIC insurance limit.
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's sole shareholder, Mr. James Cameron, has an outstanding
shareholder loan of $778,260 for 1997, with interest accrued at an average rate
of 6.1% (based on the Applicable Federal Rates). This rate differs from those
noted on debt (See Note 6).
<PAGE>
CAMERON'S COFFEE CO., INC.
HAYWARD, WISCONSIN
(UNAUDITED)
BALANCE SHEET
AS OF DECEMBER 31, 1997
1997
CURRENT ASSETS
Cash 72,541
Accounts Receivable 320,585
Due from Subsidiary 0
Inventory - Coffee 717,240
Inventory - Packaging Supplies 166,797
Prepaid Insurance 0
Prepaid Income Taxes 0
Prepaid Expense 1,254
--------
TOTAL CURRENT ASSETS 1,278,418
OTHER ASSETS
Due from Stockholders 801,339
Customer Lists 510
Start-up Costs/Trademarks 4,472
Off Premise Bins and Fixtures 68,569
--------
TOTAL OTHER ASSETS 874,890
FIXED ASSETS
Building - Costa Rica 8,598
Leasehold Improvements 38,173
Machinery & Equipment 377,303
Land 34,764
Furniture & Fixtures 178,334
Company Vehicles 148,394
Accumulated Depreciation (434,792)
--------
350,774
Off Premise Assets - Equipment 276,641
Accum Depr-Off Premise Assets (156,711)
--------
119,930
TOTAL FIXED ASSETS 470,704
TOTAL ASSETS 2,624,012
<PAGE>
CAMERON'S COFFEE CO., INC.
HAYWARD, WISCONSIN
(UNAUDITED)
BALANCE SHEET
AS OF DECEMBER 31, 1997
1997
CURRENT LIABILITIES
Current Portion - L-T Debt 55,763
Notes Payable 404,556
Notes Payable - B. Harrison 0
Notes Payable - P Ringheim 0
Notes Payable - T. Heinemann 10,000
Note Payable - Heritage 202,855
Accounts Payable 654,485
Accounts Payable - Empl Benefits 4,220
Accrued Liabilities
Payroll Taxes 1,294
Salaries & Wages 19,315
401(k) Payable 0
Real Estate Taxes 6,540
Interest 6,113
Income Taxes 0
---------
TOTAL CURRENT LIABILITIES 1,365,141
LONG-TERM LIABILITIES
Deferred Income Tax Expense 65,257
Notes Payable - Heritage St. Bank 21,230
Notes Payable - Heritage 10,025
Notes Payable - Heritage Bank 10,088
Notes Payable - Heritage St. Bank 16,191
Less-Current Portion L-T Debt (55,763)
---------
TOTAL LONG-TERM LIABILITIES 67,027
TOTAL LIABILITIES 1,432,168
STOCKHOLDERS' EQUITY
Common Stock 32,396
Less-Treasury Stock (24,000)
Retained Earnings-Appropriated 11,842
Ret Earnings - Unappropriated 1,168,064
Net Income 3,542
---------
TOTAL EQUITY 1,191,844
TOTAL LIABILITIES & EQUITY 2,524,012
<PAGE>
CAMERON'S COFFEE CO., INC.
HAYWARD, WISCONSIN
(UNAUDITED)
INCOME STATEMENT
FOR THE THREE MONTHS ENDING 12/31/97 AND 12/31/96
<TABLE>
<CAPTION>
1997 1996
SALES
<S> <C> <C> <C> <C>
Sales 933,202 1,095,373
Sales - Cafe Granado 118,789 101,125
Sales - Minocqua 9,662 8,332
Refunds (2,917) (6,659)
Cost of Sales (829,661) (891,778)
-------- --------
GROSS PROFIT ON SALES 229,076 306,393
OPERATING EXPENSE
Occupancy Expense 9,388 4,497
Selling Expense 83,343 110,005
Administrative Expense 129,791 142,163
-------
TOTAL OPERATING EXPENSE 222,523 255,665
NET OPERATING INCOME (LOSS) 6,553 49,729
OTHER INCOME
Interest 11,764 11,655
Insurance Dividends 0 55
Miscellaneous 362 11,327
TOTAL OTHER INCOME 12,126 23,038
OTHER EXPENSE - INTEREST 15,137 17,340
TOTAL OTHER EXPENSE 15,137 17,340
INCOME BEFORE INCOME TAX 3,542 55,426
PROVISION FOR INCOME TAX 0 7,500
NET INCOME 3,542 47,926
===== ======
</TABLE>
<PAGE>
GOLDMAN & KRINITZ, CPA'S, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
425 MADISON AVENUE
NEW YORK, N.Y. 10017
------------
TEL: (212) 758-6334
FAX: (212) 753-3068
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Lloyd Ventures, Inc.
We have audited the accompanying balance sheet of Lloyd Ventures, Inc.
as of December 31, 1997, and the related statements of operations, changes in
stockholders' equity and cash flows for each of the two years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Lloyd Ventures, Inc.
as of December 31, 1997, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
/S/ Goldman & Krinitz, CPA's, P.C.
Goldman & Krinitz
New York, New York
February 4, 1998
<PAGE>
LLOYD VENTURES, INC.
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
Current Assets:
Cash $ 8,214
Cash held in escrow (Note 3) 91,103
--------
TOTAL ASSETS $ 99,317
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Escrow interest (Note 3) $ 3,171
Accrued professional fees 29,436
Other accrued expenses 4,417
--------
Total liabilities 37,024
--------
Stockholders' equity:
Common stock, $.001 par value:
Authorized - 35,000,000 shares
Issued and outstanding - 2,257,000
shares (Note 3) 2,257
Additional paid-in capital 128,443
Accumulated deficit (68,407)
--------
Total stockholders' equity 62,293
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 99,317
========
See accompanying notes to financial statements.
<PAGE>
LLOYD VENTURES, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Expenses:
Professional fees $ 23,656 $ 10,007
Other 5,754 2,346
----------- -----------
Total Expenses 29,410 12,353
----------- -----------
Net loss $ (29,410) $ (12,353)
=========== ===========
Net loss per weighted average common
share $ (0.01) $ (0.01)
=========== ===========
Weighted average number of common
shares outstanding 2,105,105 1,275,000
=========== ===========
See accompanying notes to financial statements.
<PAGE>
LLOYD VENTURES, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
Total Common Stock Addi- Accumu-
Stock Out- Amount tional lated
holders Standing Paid-in Deficit
Equity Shares Capital
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $ 5,856 1,275,000 $ 1,275 $ 31,225 $ (26,644)
Issuance of 203,750
shares of common stock
at $.10 per share 20,375 203,750 204 20,171 --
Net loss for the year (12,353) (12,353)
--------- --------- --------- --------- ---------
Balance, December 31, 1996 13,878 1,478,750 1,479 51,396 (38,997)
Issuance of 778,250
shares of common stock
at $.10 per share 77,825 778,250 778 77,047 --
Net loss for the year (29,410) (29,410)
--------- --------- --------- --------- ---------
Balance, December 31, 1997 $ 62,293 2,257,000 $ 2,257 $ 128,443 $ (68,407)
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LLOYD VENTURES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
---- ----
Cash flows from operating activities:
Net loss ($29,410) ($12,353)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Change in assets and liabilities:
Escrow interest 3,167 4
Accrued expenses 26,211 4,639
-------- --------
Net cash used in operating activities (32) (7,710)
Cash flows from financing activities:
Issuance of common stock and cash
provided by financing activities 77,825 20,375
-------- --------
Net increase in cash 77,793 12,665
Cash, beginning of period 21,524 8,859
-------- --------
Cash, end of period $ 99,317 $ 21,524
======== ========
See accompanying notes to financial statements.
<PAGE>
LLOYD VENTURES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Lloyd Ventures, Inc. (the "Company") was incorporated in February, 1995
in the State of Delaware, and intends to effect a merger, exchange of capital
stock, asset acquisition or other similar business combination or acquisition
with a business entity.
The Company has registered its securities with the Securities and
Exchange Commission and offered certain securities in a "blank check" offering
subject to Rule 419 of the Securities Act of 1933. The offering allows for the
Company to sell a minimum of 250,000 and a maximum of 1,000,000 shares of common
stock, $.001 per value, at $0.10 per share.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates:
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimated.
Cash Flows:
The Company presents cash flows under the indirect method by
reconciling net loss to net cash flow.
Concentration of Credit Risk:
The Company maintains its cash in an account insured by the Federal
Deposit Insurance Corporation up to $100,000. Cash held in escrow is a money
market account at a broker.
Fair Value of Financial Instruments:
The Company's financial instruments consist primarily of cash and
accrued expenses. The book values of the respective financial instruments are
representative of their respective fair values.
<PAGE>
LLOYD VENTURES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - CASH AND STOCK HELD IN ESCROW
Amounts received and securities purchased by investors through the
offering (982,000 shares at December 31, 1997) are deposited and held in escrow
until an acquisition meeting specific criteria is completed. Before an
acquisition can be completed and the securities and funds can be released from
escrow, the investors have to reconfirm their investments or can alternately
require the return of their investment plus interest, less certain deductions.
If the Company does not complete an acquisition within a certain time
frame, or if 80% of the investors do not confirm their investments, 90% of funds
in escrow will be returned to investors.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company incurred approximately $21,200 and $6,500 of professional
fees and reimbursable expenses to a director of the Company for the years ended
December 31, 1997 and 1996, respectively.
This same director is also providing office space to the Company at no
charge, pursuant to an oral agreement. The agreement remains in effect until a
business combination is consummated or until any escrow held from the offering
is terminated, upon 30 days prior written notice by either party to the
agreement.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY LLOYD. THIS RECONFIRMATION
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF ANY OFFER TO BUY
ANY SECURITIES IN ANY JURISDICTION IN WHICH LLOYD VENTURES, INC.
SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL.
THE DELIVERY OF THIS RECONFIRMATION 200,000 Shares
PROSPECTUS SHALL NOT UNDER ANY CIRCUMSTANCES
CREATE ANY IMPLICATION THAT THERE HAS NOT of Common Stock, $.001 par value per Share
BEEN ANY CHANGE IN THE AFFAIRS OF LLOYD SINCE
THE DATE HEREOF. IN THE EVENT ANY MATERIAL
CHANGES OR TRANSACTIONS NOT MENTIONED HEREIN
ARISE, LLOYD HAS UNDERTAKEN THE Until ninety (90) days after the registered
RESPONSIBILITY TO AMEND THIS RECONFIRMATION securities are released from escrow pursuant
PROSPECTUS AND THE REGISTRATION STATEMENT, OF to Rule 419 of Regulation C, promulgated
WHICH THIS RECONFIRMATION PROSPECTUS IS A under the 1933 Securities Act, as amended,
PART, THROUGH THE FILING OF POST-EFFECTIVE all dealers effecting transactions in the
AMENDMENTS, INDICATING THE EXISTENCE OF ANY securities whether or not participating in
SUCH MATERIAL CHANGES OR TRANSACTIONS WHICH this distribution, may be required to deliver
ARE NOT REFLECTIVE OR CONTAINED HEREIN. a prospectus. This is in addition to the
obligations of the dealers to deliver a
prospectus when acting as underwriters with
TABLE OF CONTENTS respect to their unsold allotments or
subscriptions.
Page
- ----
Available Information __
Reconfirmation Prospectus Summary __
Risk Factors __ --------------------
Investor's Rights and Substantive
Protection Under Rule 419 __
Lloyd __ PROSPECTUS
Dilution __
Use of Proceeds __
Lloyd's Capitalization __ --------------------
Market For Lloyd Common Stock __
Dilution Lloyd's Selected Financial Data __
Lloyd's Plan of Operation __
Directors, Executive Officers of Lloyd __
Executive Compensation of Lloyd Management __
Certain Transactions -- Lloyd __
Principals and Executive Officers of
Gourmet __
Certain Transactions -- Gourmet __
Principal Stockholders __
Description of Lloyd Securities __ Lloyd Ventures, Inc.
Method of Reconfirmation __ 39th Floor
Experts __ 41 East 57th Street
Index to Financial Statements __ New York, New York 10022
</TABLE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as hereinafter set forth there is no charter provision, bylaw, contract,
arrangement or statute under which any officer or director of the Registrant is
insured or indemnified in any manner against any liability which he or she may
incur in his capacity as such.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of The Delaware General Corporation Law, as amended, provides for
the indemnification of Lloyd's officers, directors and corporate employees and
agents under certain circumstances as follows:
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS; INSURANCE. - (a) A
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding, by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses
<PAGE>
which the Court of Chancery or such court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorney's fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b) of this
section. Such determination shall be made (1) by the board of directors by a
majority vote of a quorum consisting of the directors who were not parties to
such action, suit or proceeding, or (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested director so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses including attorneys'
fees incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under this section.
(h) For purposes of this Section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
including (any constituent of a constituent) absorbed in a consolidation or
merger which, if separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the
<PAGE>
resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
(i) For purposes of this section, reference to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involve services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
THE SECURITIES AND EXCHANGE COMMISSION'S POLICY ON INDEMNIFICATION
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 any provisions contained in its Certificate of
Incorporation, or by-laws, 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
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Item 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with this Offering are as follows:
Item Cost
---- ----
Cost of Printing and Engraving $2,500
Legal Fees $48,000
Accountants' Services and Expenses $11,000
"Blue Sky" Fees and Expenses (excluding legal counsel) $1,000
Miscellaneous Expenses $7,800
-------
<PAGE>
Total $70,300
Item 26. RECENT SALES OF UNREGISTERED SECURITIES
During the past three years, the Registrant has sold securities in the manner
set forth below without registration under the Securities Act of 1933, as
amended (the "Act").
Number of Purchase Price
Name of Investor Shares Acquired Per Share Aggregate
---------------- --------------- --------- ---------
Herbert Maxwell 50,000 $.10 $5,000
Leo Bloom 32,000 $.10 $3,200
Woodsher Resolution Corp. 20,000 $.15 $3,000
Abraham Mittelman, M.D. 20,000 $.15 $3,000
H.J. Petrocelly 20,000 $.15 $3,000
Richard N. Daniel 20,000 $.15 $3,000
Victoria Maxwell 20,000 $.15 $3,000
Xin Ming Mu 20,000 $.15 $3,000
A. Paul Shapansky 20,000 $.15 $3,000
Renato Valente 18,000 $.10 $1,800
Joseph Sierchio 15,000 $.10 $1,500
Such shares are "restricted securities," as that term is defined in the rules
and regulations promulgated under the Securities Act of 1933, as amended,
subject to certain restrictions regarding resale. Certificates evidencing all of
the above-referenced securities have been stamped with a restrictive legend and
will be subject to stop transfer orders.
The Registrant believes that each of the above-referenced transactions was
exempt from registration under the Act, pursuant to Section 4(2) of the Act and
the rules and regulations promulgated thereunder as a transaction by an issuer
not involving any public offering.
<PAGE>
Item 27. EXHIBITS
3(i) (1) Certificate of Incorporation*
3(ii) Bylaws*
4(i) (1) Form of Escrow Agreement*
4(i) (2) Form of Subscription Agreement*
4(i) (3) Specimen Stock Certificate*
4(i) (4) Opinion of Joseph Sierchio, Esq.*
4(i) (5) Form of Letter of Transmittal and Reconfirmation
<PAGE>
4(i) (6) Exchange Agreement
23(i) (2) Consent of Goldman & Krinitz, PC
23(i) (3) Consent of Larson, Allen Weishair & Co., LLP
24 Power of Attorney*
- ----------------
*Previously filed.
Item. 28. UNDERTAKINGS
(1) To file, during any period in which offers and sales of the securities
offered hereby are 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, as amended (the "Act"); and
(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) that, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
(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.
(2) That, for the purpose of determining any liability under the Act, 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 that remain unsold at the termination of the
offering.
(4) That all such post-effective amendments will comply with the applicable
form, rules and regulations of the Securities and Exchange Commission in effect
at the time of the filing thereof.
(5) In the event any material changes or transactions not mentioned herein
arise, Lloyd has undertaken the responsibility to amend this prospectus and the
Registration Statement, of which this prospectus is a part, through the filing
of post-effective amendments, indicating the existence of any such material
changes
<PAGE>
of transactions which are not reflected or contained herein, if such changes
occurs within ninety (90) days of the Effective Date.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Post-Effective
Amendment No. 1 to the Registration Statement to be signed on its behalf by the
undersigned, hereunto duly authorized in the City of New York, on the of
February, 1998.
LLOYD VENTURES, INC.
(Registrant)
By: /s/ Herbert Maxwell
------------------------------------------
Herbert Maxwell, President and Director
(principal executive officer, principal
financial officer and principal accounting
officer)
DIRECTORS:
*
--------------------------------------------
Herbert Maxwell, Director
*
--------------------------------------------
Anthony R. Russo, Director
*
--------------------------------------------
A. Paul Shapansky, Director
*By: /s/ Herbert Maxwell
-----------------------------------------
Herbert Maxwell, Attorney-in-Fact
EXHIBIT 4(i)(5)
LETTER OF TRANSMITTAL
TO
RECONFIRM THE ORIGINAL ACQUISITION OF SHARES
(THE "RULE 419 SHARES") OF THE COMMON STOCK
$.001 PAR VALUE PER SHARE (THE "LLOYD COMMON STOCK")
OF
LLOYD VENTURES, INC.
================================================================================
THE RECONFIRMATION OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON
MAY 11, 1998
================================================================================
To: Bernard Herold & Co., Inc.
555 Madison Avenue
New York, New York 10022
Telephone: (212) 371-3950
Facsimile: (212) 758-4967
DELIVERY OF THIS LETTER OF TRANSMITTAL AND RECONFIRMATION TO AN ADDRESS
OTHER THAN THAT SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE
NUMBER OTHER THAN THE ONE LISTED ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL RECONFIRMATION IS COMPLETED.
The undersigned acknowledges receipt of the Reconfirmation Prospectus
dated March _____, 1998 (the "Reconfirmation Prospectus") of Lloyd Ventures,
Inc., a Delaware corporation ("Lloyd") relating to the offer of Lloyd and
Gourmet upon the terms and subject to the conditions set forth in the
Reconfirmation Prospectus and in this Letter of Transmittal and the instructions
hereto (which together with the Reconfirmation Prospectus constitute the
"Reconfirmation Offer") to have the Rule 419 Investors reconfirm their
acquisition of the Rule 419 Shares. Capitalized terms used but not defined
herein have the meanings given them in the Reconfirmation Prospectus. The
Reconfirmation Offer will expire at 5:00 P.M., New York City time, on May 11,
1998 (the "Expiration Date").
The undersigned has completed the appropriate boxes below and signed
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Reconfirmation Offer.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the condition of the Reconfirmation
Offer, the undersigned hereby (check one):
[ ] reconfirms his or her original acquisition of Lloyd Shares pursuant
to that Reconfirmation Prospectus dated March _____, 1998.
[ ] does not reconfirm his original acquisition of Lloyd Shares and
requests the return of his or her investment (less 10% thereof heretofore
delivered to Lloyd pursuant to Rule 419) plus any interest earned thereon.
The undersigned acknowledges that if the holders of more than eighty
percent (80%) of the Lloyd Shares reconfirm their respective investment, then
Lloyd will attempt to consummate the transactions contemplated by the Exchange.
If the holders of less than eighty percent (80%) of the Lloyd Shares reconfirm
their respective investments Lloyd will not consummate the Exchange, but will
endeavor to locate another acquisition candidate within the time frame permitted
by Rule 419.
The undersigned is aware that prior to the Reconfirmation Offer there
has not been a public market for the Lloyd Shares, and that a public market
therefor may not exist following the consummation of the Exchange.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to execute and deliver this Letter of Transmittal and
Reconfirmation.
The undersigned hereby agrees that all authority conferred or agreed to
be conferred by this Letter of Transmittal and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned.
List below the Lloyd Shares to which this Letter of Transmittal
Reconfirmation relates. If the space provided below is inadequate, the
certificate numbers and number of Lloyd Shares should be listed on a separate
signed schedule affixed hereto.
<PAGE>
================================================================================
DESCRIPTION OF LLOYD SHARES TENDERED
- ------------------------------------------ -------------------------------------
(1) Name(s) and Address(es) of Holder(s) (ii) Total Number of Lloyd Shares
(Please fill in if blank) Acquired
- ------------------------------------------ -------------------------------------
Total:
================================================================================
EXECUTION
- ---------
- ------------------------------------ -----------------------------------------
Name of Purchaser Name of Co-purchaser (if purchased as
joint tenants, tenants by entity, tenants
in common, or community property)
- ------------------------------------ -----------------------------------------
<PAGE>
INSTRUCTIONS
Forming part of the Terms and Conditions of the Reconfirmation Offer
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND RECONFIRMATION. For the
Original Offer of the Lloyd Shares to be effectively reconfirmed pursuant to the
Reconfirmation Offer, a properly completed Letter of Transmittal (or facsimile
thereof) duly executed by the registered holder thereof, and any other documents
required by this Letter of Transmittal, must be received by the Escrow Agent at
its address set forth at the head of the Letter of Transmittal and
Reconfirmation. The Letter of Transmittal and Reconfirmation should be delivered
only by hand or by courier, or transmitted by mail, and only to the Escrow Agent
and not to Lloyd, Gourmet or any other person.
The method of delivery of Letter of Transmittal and Reconfirmation and
all other required documents to Exchange Agent is at the election and risk of
the holder, but if such delivery is by mail, registered or certified mail,
properly insured and with return requested, is recommended.
If the Letter of Transmittal and Reconfirmation is sent by mail, it is
suggested that the mailing be made sufficiently in advance of the Expiration
Date to permit delivery to the Escrow Agent prior to 12:00 P.M., New York City
time, on the Expiration Date.
2. SIGNATURES ON THIS LETTER OF TRANSMITTAL AND RECONFIRMATION. The
signature herein must correspond exactly with the name as written on the face of
the certificate representing the Lloyd Shares reconfirmed hereby.
If this Letter of Transmittal and Reconfirmation is signed by the
registered holder or holders specified herein and tendered hereby, no
endorsements of certificates or separate stock powers are required.
If this Letter of Transmittal and Reconfirmation is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or other acting in a fiduciary or representative capacity, such
person should so indicate when signing and, unless waived by Lloyd, proper
evidence satisfactory to Lloyd of their authority so to act must be submitted.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for
assistance in connection with the Reconfirmation Offer, as well as requests for
information or additional copies of this Letter of Transmittal and
Reconfirmation, should be directed to Lloyd as follows:
Lloyd Ventures, Inc.
41 East 57th Street
New York, New York 10022
(212) 446-9500
EXHIBIT 4(i)(6)
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT (the "Agreement") is executed and entered into
the 27th day of February 1998, by and between LLOYD VENTURES, INC., a Delaware
corporation ("Lloyd"), and GOURMET REGENCY COFFEE COMPANY, a Minnesota
corporation ("Gourmet");
WITNESSETH:
WHEREAS, Gourmet is in the business of roasting and distributing coffee
and other specialty products in Minnesota and Wisconsin; and
WHEREAS, the respective Boards of Directors of Lloyd and Gourmet deem
it advisable and in the best interests of each corporation that Lloyd acquire
Gourmet pursuant to this Agreement and the applicable provisions of the laws of
the States of Delaware and Minnesota: and
WHEREAS, the Boards of Directors of Lloyd and Gourmet have approved and
adopted this Agreement, subject to approval of at least eighty percent (80%) of
the outstanding shares of both Lloyd and Gourmet; and
WHEREAS, following the consummation of the transaction contemplated
herein, Lloyd will own one hundred percent (100%) of the issued and outstanding
shares of Gourmet.
NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto and the mutual benefits to be gained by the performance hereof, the
parties hereto agree as follows:
ARTICLE I.
THE EXCHANGE
1.1) The Exchange. On the Effective Date, and subject to the terms and
conditions contained in this Agreement, each of the non-dissenting shareholders
of Gourmet shall sell, assign, transfer, convey and deliver to Lloyd, free and
clear of any liens, claims and encumbrances and Lloyd shall purchase, accept and
acquire from each of the non-dissenting shareholders of Gourmet, the Gourmet
Stock. In consideration of the Gourmet Stock purchased from the shareholders of
Gourmet, Lloyd shall deliver to each of the non-dissenting shareholders of
Gourmet, certificates representing one (1) share of Lloyd Stock for every one
(1) share of Gourmet Stock owned by the non-dissenting shareholders of Gourmet.
1.2) Instruments of Transfer. On the Effective Date, Gourmet shall
deliver to Lloyd stock certificates representing the Gourmet Stock owned by the
shareholders of Gourmet who do not dissent from the approval and adoption of
this Agreement at the duly called meeting of the
<PAGE>
shareholders of Gourmet plus a duly executed Assignment Separate from
Certificate in proper form to transfer to Lloyd good and marketable title to the
Gourmet Stock owned by such shareholder. Thereafter, Lloyd shall deliver to the
shareholders of Gourmet, stock certificates representing the shares of Lloyd
Stock to which the shareholders of Gourmet are entitled.
1.3) Articles of Exchange. On the Effective Date, the parties hereto
will cause the Articles of Exchange attached hereto as Schedule 1.3 (the
"Articles of Exchange") to be signed, verified and delivered to the Minnesota
Secretary of State. On the Effective Date, Lloyd will own one hundred percent
(100%) of the issued and outstanding shares of Gourmet.
1.4) Restated Certificate of Incorporation and Restated Bylaws.
Promptly after the Effective Date, the Restated Certificate of Incorporation
attached hereto as Schedule 1.4 will be signed, verified and delivered to the
Delaware Secretary of State by the appropriate officer of Lloyd and shall become
the Certificate of Incorporation of Lloyd until otherwise changed as provided by
law. In addition, the Restated Bylaws attached hereto as Schedule 1.4 shall be
signed by the appropriate officer of Lloyd and shall become the Bylaws of Lloyd
until they shall thereafter be duly amended.
1.5) Board of Directors. On the Effective Date, and thereafter until
otherwise changed as provided by law, the Board of Directors of Lloyd shall
consist of three (3) members who shall be Robert A. Paschke, Jacquelyn M.
Paschke and James H. Cameron.
1.6) Stock Option Plan and Stock Options. Promptly after the Effective
Date, the Gourmet Regency Coffee Company Incentive Stock Option Plan attached
hereto as Schedule 1.5 shall be assumed and adopted by Lloyd. In addition, each
option granted (whether or not exercisable or exercised and whether or not
granted pursuant to the Gourmet Regency Coffee Company Incentive Stock Option
Plan) to a current or former employee, director or independent contractor of
Gourmet shall be assumed by Lloyd and shall thereafter be deemed to constitute
an option to purchase Lloyd Stock on the same terms and conditions as were
applicable under such options.
1.7) Warrants. Promptly after the Effective Date, the warrants issued
to Daniel J. Shrader and Thomas D. Krosschell to each purchase up to eighteen
thousand seven hundred and fifty (18,750) shares of Gourmet Stock, dated
February 26, 1997, shall be assumed by Lloyd in accordance with the provisions
of such warrants and shall thereafter be deemed to constitute warrants to
purchase, on the same terms and conditions as were applicable under such
warrants, the same number of Lloyd Stock and at an exercise price to be
determined in accordance with the provisions of such warrants.
1.8) Closing. Unless the parties hereto agree otherwise, and subject to
the satisfaction of all of the conditions to closing set forth in Articles V and
VI, the execution of the Agreement by Lloyd shall take place at the offices of
Sierchio & Albert, P.C., 41 East 57th Street, 39th Floor, New York, New York,
10022. The execution of this Agreement by Gourmet shall take place at the
offices of Larkin, Hoffman, Daly & Lindgren, Ltd., 1500 Norwest Financial
Center, 7900 Xerxes Avenue South, Bloomington, Minnesota 55431 within
forty-eight (48) hours after the receipt of the executed Agreement from Lloyd by
Larkin, Hoffman, Daly & Lindgren, Ltd. (the "Closing"). The date on which the
Closing occurs shall be referred to as the "Closing Date." The effective date
(the "Effective Date") of the transactions contemplated herein shall
<PAGE>
be the day Lloyd receives Letters of Transmittal and reconfirmation from the 419
Shareholders, substantially in the form of Schedule 4.1, owning at least eighty
percent (80%) of the 419 shares reconfirming their investment in Lloyd Stock.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF LLOYD
Lloyd represents and warrants that the statements contained in this
Article II are correct and complete as of the Closing Date and Effective Date
and shall survive the Closing. Neither such survival nor the liability of any
party with respect to the party's representations and warranties shall be
reduced by any investigation made at any time by or on behalf of any party.
2.1) Organization. Lloyd is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Except as
provided on Schedule 2.1, Lloyd is now, and has been at all times since its
creation, duly authorized, qualified and licensed under all laws, regulations,
ordinances and orders of public authorities to carry on its business in the
places and in the manner as conducted at the time such activities were
conducted. Copies of Lloyd's Certificate of Incorporation (certified by the
Secretary of State of Delaware) and Bylaws (certified by the Secretary of
Lloyd), as amended, are attached hereto as Schedule 2.1.
2.2) Authority. Except for approval of the Lloyd shareholders all
action by Lloyd necessary to approve the transactions contemplated by this
Agreement has been taken. Except for the Post Effective Amendment, applicable
"blue sky" laws applying to the Gourmet shareholder, and requirements under the
applicable laws of the States of Delaware and Minnesota, Lloyd does not need to
give any notice to, or make any filing with, or obtain the authorization,
consent or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
2.3) Stock Ownership. Attached as Schedule 2.3 is a complete and
accurate list of all the shareholders of Lloyd as of the date of this Agreement.
All of the issued and outstanding shares of Lloyd are owned of record by such
shareholders. This Agreement is the valid and binding obligation of Lloyd and is
enforceable against it in accordance with its terms.
2.4) Capitalization. The authorized capital stock of Lloyd consists
solely of Thirty-Five Million (35,000,000) shares of voting common stock, $.001
par value ("Lloyd Stock"), of which, on the Closing Date, two million two
hundred and fifty-seven thousand (2,257,000) shares are issued and outstanding.
On the Effective Date, and upon effectuating a one-for-five reverse stock split,
there shall be four hundred and fifty-one thousand four hundred (451,400) shares
issued and outstanding. All of the issued and outstanding shares of Lloyd Stock
have been or, as of the Effective Date, will be, duly authorized and validly
issued, are fully paid and nonassessable, were offered, issued, sold and
delivered by Lloyd in compliance with all applicable state and federal laws
concerning the issuance of securities and none of such shares were issued
pursuant to awards, grants or bonuses nor in violation of the preemptive rights
of any past or present shareholder. The stock transfer records provided by Lloyd
to Gourmet correctly set forth all issuances, acquisitions and retirements of
Lloyd Stock since its inception. Except as contemplated by Rule 419 ("Rule 419")
as promulgated by the Securities and Exchange
<PAGE>
Commission (the "SEC") pursuant to the Securities Act of 1933, as amended (the
"Act"), and this Agreement, no subscriptions, options, warrants, puts, calls,
conversion rights or other commitments of any kind exist which obligates Lloyd
to issue any of its authorized but unissued capital stock or otherwise relate to
the sale or transfer by Lloyd of any securities of Lloyd (whether debt or
equity). In addition, Lloyd has no obligation (contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interests therein or to pay any dividend or make any distribution in respect
thereof. Except for the securities registered by Lloyd by the filing of a
registration statement with the SEC on Form SB-2 (the "Form SB-2 Registration"),
Lloyd has not agreed to register any securities under the Act, or under any
state securities law.
2.5) Predecessor Entities. Lloyd has never directly or indirectly
participated in any manner in any joint venture, partnership or other
noncorporate entity. Lloyd has never conducted any other business or activity.
Set forth on Schedule 2.5 is a list of the names of all predecessors of Lloyd,
and all trade names and "doing business as" names of Lloyd, including the names
of any entities substantially all of the assets of which were previously
acquired by Lloyd.
2.6) No Subsidiaries. Lloyd has never owned or controlled and does not
now own or control, directly or indirectly, any capital stock, securities
convertible into capital stock or any other equity interest in any corporation.
2.7) Financial Statements. Attached hereto as Schedule 2.7 is a true,
complete and correct copy of the financial statements, and all footnotes
thereto, of Lloyd which include Balance Sheets as of December 31, 1997 and
December 31, 1996 and a statement of income, cash flow and retained earnings for
the years then ended ("Lloyd Financial Statement"). The Lloyd Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
are true, complete and correct. Each of the balance sheets present fairly, in
all material respects, the financial condition of Lloyd as of the date indicated
thereon and each of the statements of income referred to above presents fairly,
on an accrual basis and in all material respects, the results of the operations
of Lloyd for the periods indicated thereon. All reserves for contingent risks
have been estimated in accordance with generally accepted accounting principles
and are appropriate and sufficient to cover all costs reasonably expected to be
incurred from such risks. Except as set forth on Schedule 2.7, since December
31, 1997, Lloyd has not (a) made any material change in its accounting policies
or (b) effected any prior period adjustment to, or other restatement of, its
financial statements for any period.
2.8) Accounts Receivable. Attached as Schedule 2.8 is a complete and
accurate list of all accounts and notes receivable of Lloyd as of December 31,
1997, including receivables from and advances to employees and also including
all such accounts and notes receivable which are not reflected in the Lloyd
Financial Statement.
2.9) Absence of Undisclosed Liabilities. Lloyd has no debt, liability,
or obligation of any nature, whether accrued, absolute, contingent, or
otherwise, and whether due or to become due, that is not reflected or reserved
against in the most recent balance sheet included in the Lloyd Financial
Statement, or on Schedule 2.9, except for those that may have been incurred
after the
<PAGE>
date of that balance sheet and in the ordinary course of business or in
connection with this transaction. All debts, liabilities, and obligations
incurred after that date were incurred in the ordinary course of business, and
are usual and normal in amount both individually and in the aggregate.
2.10) Inventory. Lloyd has no inventory of raw materials, work in
process or finished goods.
2.11) Proprietary Rights. Attached as Schedule 2.11 is a complete and
accurate list and summary description as of the date hereof of all permits,
titles (including motor vehicle titles and current registrations), fuel permits,
licenses, franchises and certificates, owned or held by Lloyd. None of such
permits, titles, licenses, franchises and certificates, have been claimed to or,
to the knowledge of Lloyd, infringe on the rights of others, and all of which
are now valid, in good standing and in full force and effect. In addition, Lloyd
has, as of the date of this Agreement, made available to Gourmet for its
inspection, all presently held records, correspondence, reports, notifications,
permits, pending permit applications, licenses and pending license applications,
environmental impact studies, assessments and audits and all notifications from
governmental agencies and any other person or entity and all other documents of
Lloyd.
2.12) Personal Property. Attached as Schedule 2.12 is a complete and
accurate list and a complete description as of the date hereof of all personal
property of Lloyd (excluding individual pieces of personal property valued at
less than $500), including true and correct copies of leases for equipment and
other personal property used in the operation of Lloyd. Lloyd has good title to,
or a valid leasehold interest in, the properties and assets used by it (other
than real property) as shown on Lloyd Financial Statements or acquired after the
date thereof free and clear of all security interests, liens or other claims.
2.13) Contracts. Attached as Schedule 2.13 is a complete and accurate
list as of the date hereof of all of the contracts, commitments and other
agreements to which Lloyd is a party or by which Lloyd is bound. Such list shall
include, but not be limited to, joint venture or partnership agreements,
contracts or collective bargaining arrangements with any labor organizations,
loan agreements, powers of attorney, indemnity or guaranty agreements, bonds,
mortgages, options to purchase land, liens, pledges or other security
agreements, agreements for the employment of any individual, agreements under
which Lloyd has advanced or loaned any amount to any employee, officer or
director of Lloyd. Such list shall also include any guaranties by Lloyd, any
agreement concerning confidentiality, nonsolicitation or noncompetition and any
other agreement under which the consequences of a default or termination could
have an adverse effect on the business, financial condition, operations or
prospects of Lloyd. None of the agreements listed on Schedule 2.13 have been
modified, altered, terminated or otherwise amended and there have been no
waivers, oral agreements, representations or other statements with relation to
any such agreements. Lloyd has complied with the obligations pertaining to it
contained in such contracts, commitments and other agreements, are not in
default thereunder and no notice of default has been received nor will the
consummation of the transactions contemplated by this Agreement result in such a
default. To the best knowledge of Lloyd, there is no default by any other party
to any contract, commitment or other agreement attached as Schedule 2.13 or
event which, upon the
<PAGE>
giving of notice or passage of time, or both, would constitute a default. There
are no outstanding powers of attorney executed on behalf of Lloyd.
2.14) Personnel. Schedule 2.14 contains a complete and accurate list of
all employees, officers and directors of Lloyd, and the rate of compensation of
each, as of the date hereof. Each of the employees of Lloyd is an employee at
will.
2.15) Employee Plans. Lloyd has never, or currently does, maintain or
contribute to any employee benefit plans, within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended, whether or not
any such employee benefit plans are otherwise exempt from the provisions of the
Employee Retirement Income Security Act of 1974.
2.16) Labor Relations/Employees. There is no unfair labor practice
complaint pending against Lloyd before the National Labor Relations Board or any
similar public agency. There is no labor strike, dispute, slowdown, stoppage or
other labor difficulty pending or, to the knowledge of Lloyd, threatened against
or affecting or involving Lloyd. To the best of Lloyd's knowledge, Lloyd is not
in violation of any employment related law, rule or regulation.
2.17) Compliance with Law. Except for Lloyd's periodic reporting
requirements under the Securities Exchange Act of 1934, to the best of Lloyd's
knowledge, Lloyd has complied in all material respects, with all applicable
federal, state or local statues, laws, and regulations.
2.18) No Breach or Violation. The execution, delivery and performance
of this Agreement, the consummation of any transactions herein referred to or
contemplated hereby and the fulfillment of the terms hereof and thereof will
not:
(a) conflict with, or result in a breach or violation of the
Certificate of Incorporation or Bylaws of Lloyd;
(b) To the best knowledge of Lloyd, conflict with, or result in a
breach under any document, agreement or other instrument to which Lloyd
is a party, or result in the creation or imposition of any lien, charge
or encumbrance on any properties of Lloyd;
(c) To the best knowledge of Lloyd, result in the termination or any
impairment of any permit, license, franchise, contractual right or
other authorization of Lloyd; or
(d) Except as may be required by Rule 419 and the applicable laws of
the States of Delaware and Minnesota, require the consent of, or the
filing with, any governmental authority or agency or any other third
party.
2.19) Taxes. Except as provided on Schedule 2.19, Lloyd has filed all
requisite federal, state, local and other tax returns due for all fiscal periods
ended on or before the Closing Date. There are no agreements to extend the
statutory period for the assessment of any taxes, examinations in progress or
claims against Lloyd for federal, state, local and other taxes (including
penalties and interest) for any period or periods prior to and including the
Closing Date and no notice of any claim, whether pending or threatened, for
taxes has been received. The amounts shown as accruals for taxes on the Lloyd
Financial Statements are sufficient in accordance with generally accepted
accounting principles as of such respective dates for the payment of all taxes
of
<PAGE>
the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before such date. Lloyd currently utilizes the accrual method of
accounting for income tax purposes and has not changed its method of accounting
since its initial creation.
2.20) Litigation. To the best knowledge of Lloyd, there is no claim,
litigation, action, suit or proceeding, investigation, formal arbitration,
informal arbitration or mediation, administrative, judicial or otherwise,
pending or threatened against Lloyd, or otherwise directly relating to the
business or affairs of Lloyd, at law or in equity, before any federal, state or
local court or regulatory agency, or other governmental or private authority, no
written notice of any of the above has been received by Lloyd and no facts or
circumstances exist which would give rise to any of the foregoing. In addition,
there are no instances where Lloyd is the plaintiff, or complaining or moving
party, under any of the above types of proceedings or otherwise.
2.21) Absence of Changes. Except as set forth on Schedule 2.21, since
the date of the Lloyd Financial Statements attached hereto, there has not been
any:
(a) material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
Lloyd;
(b) damage, destruction or loss (whether or not covered by
insurance) which, singly or in the aggregate, materially and adversely
affects the properties (whether owned or leased) or business of Lloyd;
(c) change in the authorized capital of Lloyd or in its
securities outstanding, any change in its equity ownership or any grant
by it of any subscriptions, options, warrants, puts, calls, conversion
rights or other commitments related to its equity interests;
(d) declaration or payment of any dividend or distribution in
respect of the capital stock of Lloyd or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of Lloyd;
(e) increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by Lloyd to any of its
officers, directors, employees, consultants or agents;
(f) work interruption, labor grievance or claim filed;
(g) sale or transfer of, or any agreement to sell or transfer,
any material assets, property or rights of Lloyd to any person not in
the ordinary course of the business of Lloyd;
(h) cancellation or agreement to cancel any indebtedness or
other obligation owing to Lloyd;
<PAGE>
(i) plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets,
property or rights of Lloyd or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(j) purchase or acquisition by any third party of, or any
agreement, plan or other arrangement by any third party to purchase or
acquire, any property, rights or assets of Lloyd other than in the
ordinary course of business;
(k) waiver of any rights or claims of Lloyd;
(l) breach, amendment or termination of any material contract,
license, permit or other agreement to which Lloyd is a party other than
in the ordinary course of business;
(m) transaction by Lloyd outside the ordinary course of its
business;
(n) amendment to the Certificate of Incorporation or Bylaws of
Lloyd;
(o) any other material occurrence, event, incident, action or
failure to act outside the ordinary course of business of Lloyd; or
(p) any action by Lloyd, or any employee, officer or agent of
Lloyd, committing to do any of the foregoing.
2.22) Bank Accounts; Depositories. Attached as Schedule 2.22 is a
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which Lloyd has
any account or safe deposit box;
(b) the names in which each account or box is held;
(c) the type of each account; and
(d) the name of each person authorized to draw on or have
access to each account or box.
2.23) Hazardous Materials; Disposal Sites. Lloyd has never owned,
leased, had an interest in, generated, transported, handled, recycled,
reclaimed, disposed of, or contracted for the disposal of, hazardous materials,
hazardous wastes, hazardous substances, toxic wastes or substances, infectious
or medical waste, radioactive waste or sewage sludges as those terms are defined
by the Resource Conservation and Recovery Act of 1976; CERCLA; the Atomic Energy
Act of 1954; the Toxic Substances Control Act; the Occupational Health and
Safety Act; any comparable or similar Minnesota statute; any other applicable
law; or the rules and regulations promulgated under any of the foregoing, as
each of the foregoing may have been amended. Lloyd has never owned, operated,
had an interest in, engaged in and/or leased a waste transfer, recycling,
treatment, storage or disposal facility, business or activity.
<PAGE>
2.24) Title to Assets. Lloyd has good and marketable title to all of
its properties and assets, including without limitation the assets reflected on
its balance sheets included in the Lloyd Financial Statement. Except as
contemplated by Rule 419, all such properties and assets are not subject to any
mortgage, pledge, lien, charge, security interest, encumbrance, restriction,
lease, license assessment, liability or claim of any nature whatsoever, direct
or indirect, whether accrued, absolute, contingent or otherwise.
2.25) Intellectual Property. Lloyd does not use any trademark,
servicemark, tradename, copyright or brand name in its business, nor does it own
any trademarks, trademark registrations or applications, trade names, service
marks, copyrights, copyright registrations or applications or brand names. No
person owns any trademark, tradename, trademark registration, or application,
servicemark, tradename, copyright, copyright registration or application, or
brand name, the use of which is necessary or contemplated in connection with the
performance of any contract, other than this Agreement, to which Lloyd is a
party. Lloyd does not infringe on the intellectual property rights of any third
party.
2.26) Corporate Documents. Lloyd has furnished to Gourmet a true,
correct and complete copy of the following for examination:
(a) The Certificate of Incorporation and Bylaws of Lloyd and any
amendments thereto;
(b) The minute book of Lloyd containing all of the records required to
be set forth in such records including, but not limited to, all
proceedings, consents, actions and meetings of the shareholder and
Board of the Directors of Lloyd; and
(c) The stock transfer books of Lloyd setting forth all transfers of
Lloyd Stock; and
(d) All other material data and information concerning the business,
finances and properties of Lloyd.
2.27) Complete Disclosure. To the best knowledge of Lloyd, this
Agreement and the schedules hereto and all other documents and information
furnished to Gourmet, or its representatives, pursuant hereto or pursuant to the
negotiation of this transaction or the investigations of Gourmet or the
employees or representatives of it, do not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein not misleading. If Lloyd becomes aware of any fact or
circumstance which would change a representation or warranty of Lloyd in this
Agreement, the party with such knowledge shall promptly give written notice of
such fact or circumstance to Gourmet. Neither such notification nor any
pre-Closing investigation made by Gourmet of Lloyd or its properties, businesses
or assets, or the Closing contemplated by this Agreement shall relieve Lloyd of
its obligations under this Agreement, including its representations and
warranties made in this Article II.
<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF GOURMET
Gourmet represents and warrants that the statements contained in this
Article III are correct and complete as of the Closing Date and Effective Date
and shall survive the Closing. Neither such survival nor the liability of any
party with respect to the party's representations and warranties shall be
reduced by any investigation made at any time by or on behalf of any party.
3.1) Organization. Gourmet is a corporation duly organized, validly
existing and in good standing under the laws of the State of Minnesota. Gourmet
is now, and has been at all times since its creation, duly authorized, qualified
and licensed under all laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as
conducted at the time such activities were conducted. Copies of Gourmet's
Articles of Incorporation (certified by the Secretary of State of Minnesota) and
Bylaws (certified by the Secretary of Gourmet), as amended, are attached hereto
as Schedule 3.1.
3.2) Authority. Except for approval of the Gourmet shareholders, all
action by Gourmet to approve the transactions contemplated by this Agreement has
been taken. Except for the Post Effective Amendment and requirements under the
applicable laws of the States of Delaware and Minnesota, Gourmet does not need
to give any notice to, or make any filing with, or obtain the authorization,
consent or approval of any government or governmental agency in order to
consummate the transactions contemplated by this Agreement.
3.3) Stock Ownership. Attached as Schedule 3.3 is a complete and
accurate list of all the shareholders of Gourmet as of the date of this
Agreement. All of the issued and outstanding shares of Gourmet are owned of
record by such shareholders. This Agreement is a valid and binding obligation of
Gourmet and enforceable against it in accordance with its terms.
3.4) Capitalization. The authorized capital stock of Gourmet consists
solely of Twelve Million Five Hundred Thousand (12,500,000) shares of voting
common stock, no par value ("Gourmet Stock"), of which Two Million Nine Hundred
and Ninety-Four Thousand Three Hundred Fifty (2,994,350) shares are issued and
outstanding. All of the issued and outstanding shares of Gourmet Stock have been
duly authorized and validly issued, are fully paid and nonassessable, were
offered, issued, sold and delivered by Gourmet in compliance with all applicable
state and federal laws concerning the issuance of securities and have not been
issued in violation of the preemptive rights of any past or present shareholder.
The stock transfer record provided by Gourmet to Lloyd correctly sets forth all
issuances, acquisitions and retirements of Gourmet Stock since its inception.
Except as provided on Schedule 3.4, no subscriptions, options, warrants, puts,
calls, conversion rights or other commitments of any kind exist which obligates
Gourmet to issue any of its authorized but unissued capital stock or otherwise
relates to the sale or transfer by Gourmet of any securities of Gourmet (whether
debt or equity). In addition, Gourmet has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any of its equity securities
or any interests therein or to pay any dividend or make any distribution in
respect thereof.
<PAGE>
3.5) Predecessor Entities. Except as set forth on Schedule 3.5, Gourmet
has never directly or indirectly participated in any manner in any joint
venture, partnership or other noncorporate entity. Gourmet was formed solely to
operate its current business and has never conducted any other business or
activity.
3.6) No Subsidiaries. Except as set forth on Schedule 3.6, Gourmet has
never owned or controlled and does not now own or control, directly or
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation.
3.7) Financial Statements. Attached hereto as Schedule 3.7 is a true,
complete and accurate copy of the financial statements, and all footnotes
thereto, of Gourmet which include Balance Sheet as of December 31, 1997 and
December 31, 1996 and a statement of income, cash flow and retained earnings for
the years then ended ("Gourmet Financial Statements"). The Gourmet Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
are true, complete and correct. Each of the balance sheets presents fairly, in
all material respects, the financial condition of Gourmet as of the date
indicated thereon and each of the statements of income referred to above
presents fairly, on an accrual basis and in all material respects, the results
of the operations of Gourmet for the periods indicated thereon. All reserves for
contingent risks have been estimated in accordance with generally accepted
accounting principles and are appropriate and sufficient to cover all costs
reasonably expected to be incurred from such risks. Since December 31, 1997,
Gourmet has not (a) made any material change in its accounting policies or (b)
effected any prior period adjustment to, or other restatement of, its financial
statements for any period.
3.8) Absence of Undisclosed Liabilities. To the best of Gourmet's
knowledge, Gourmet has no material debt, liability, or obligation of any nature,
whether accrued, absolute, contingent, or otherwise, and whether due or to
become due, that is not reflected or reserved against in the most recent balance
sheet included in the Gourmet Financial Statements except for those that may
have been incurred after the date of that balance sheet and in the ordinary
course of business or in connection with this transaction. All debts,
liabilities, and obligations incurred after that date were incurred in the
ordinary course of business, and are usual and normal in amount both
individually and in the aggregate.
3.9) Contracts. To the best of Gourmet's knowledge, Gourmet is in
compliance with all material terms of its contracts, commitments and other
agreements, is not in default thereunder and no notice of default has been
received nor will the consummation of the transactions contemplated by this
Agreement result in such a default.
3.10) Labor Relations/Employees. There is no unfair labor practice
complaint pending against Gourmet before the National Labor Relations Board or
any similar public agency. There is no labor strike, dispute, slowdown, stoppage
or other labor difficulty pending or, to the knowledge of Gourmet, threatened
against or affecting or involving Gourmet. To the best knowledge of Gourmet, it
is not in violation of any employment related law, rule or regulation.
<PAGE>
3.11) Compliance with Law. To the best of Gourmet's knowledge, Gourmet
has complied, in all material respects, with all, and is not in violation of
any, applicable federal, state or local statues, laws, and regulations.
3.12) No Breach or Violation. The execution, delivery and performance
of this Agreement, the consummation of any transactions herein referred to or
contemplated hereby and the fulfillment of the terms hereof and thereof will
not:
(a) conflict with, or result in a breach or violation of the Articles
of Incorporation or Bylaws of Gourmet;
(b) To the best knowledge of Gourmet, conflict with, or result in a
breach under any document, agreement or other instrument to which
Gourmet is a party, or result in the creation or imposition of any
lien, charge or encumbrance on any properties of Gourmet;
(c) To the best knowledge of Gourmet, result in the termination or any
impairment of any permit, license, franchise, contractual right or
other authorization of Gourmet; or
(d) Except as may be required by Rule 419 and the applicable laws of
the States of Delaware and Minnesota, require the consent of, or the
filing with, any governmental authority or agency or any other third
party.
3.13) Taxes. Except as provided on Schedule 3.13, Gourmet has filed all
requisite federal, state, local and other tax returns due for all fiscal periods
ended on or before the Closing Date. There are no agreements to extend the
statutory period for the assessment of any taxes, examinations in progress or
claims against Gourmet for federal, state, local and other taxes (including
penalties and interest) for any period or periods prior to and including the
Closing Date and no notice of any claim, whether pending or threatened, for
taxes has been received. The amounts shown as accruals for taxes on the Gourmet
Financial Statements are sufficient in accordance with generally accepted
accounting principles as of such respective dates for the payment of all taxes
of the kinds indicated (including penalties and interest) for all fiscal periods
ended on or before such date. Gourmet currently utilizes the accrual method of
accounting for income tax purposes and has not changed its method of accounting
since its incorporation.
3.14) Litigation. Except as provided on Schedule 3.14, to the best
knowledge of Gourmet, there is no claim, litigation, action, suit or proceeding,
investigation, formal arbitration, informal arbitration or mediation,
administrative, judicial or otherwise, pending or threatened against Gourmet, or
otherwise directly relating to the business or affairs of Gourmet, at law or in
equity, before any federal, state or local court or regulatory agency, or other
governmental or private authority, no written notice of any of the above has
been received by Gourmet and no facts or circumstances exist which would give
rise to any of the foregoing. In addition, there are no instances where Gourmet
is the plaintiff, or complaining or moving party, under any of the above types
of proceedings or otherwise.
3.15) Hazardous Materials; Disposal Sites. Gourmet has never owned,
leased, had an interest in, generated, transported, handled, recycled,
reclaimed, disposed of, or contracted for the
<PAGE>
disposal of, hazardous materials, hazardous wastes, hazardous substances, toxic
wastes or substances, infectious or medical waste, radioactive waste or sewage
sludges as those terms are defined by the Resource Conservation and Recovery Act
of 1976; CERCLA; the Atomic Energy Act of 1954; the Toxic Substances Control
Act; the Occupational Health and Safety Act; any comparable or similar Minnesota
statute; any other applicable law; or the rules and regulations promulgated
under any of the foregoing, as each of the foregoing may have been amended.
Gourmet has never owned, operated, had an interest in, engaged in and/or leased
a waste transfer, recycling, treatment, storage or disposal facility, business
or activity.
3.16) Intellectual Property. To the best of Gourmet's knowledge,
Gourmet does not use any trademark, copyright or brand name in its business that
infringes on the intellectual property rights of any third party.
3.17) Absence of Changes. Except as set forth on Schedule 3.17, since
the date of the Gourmet Financial Statements attached hereto, there has not been
any:
(a) material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), income or business of
Gourmet;
(b) damage, destruction or loss (whether or not covered by
insurance) which, singly or in the aggregate, materially and adversely
affects the properties (whether owned or leased) or business of
Gourmet;
(c) change in the authorized capital of Gourmet or in its
securities outstanding, any change in its equity ownership or any grant
by it of any subscriptions, options, warrants, puts, calls, conversion
rights or other commitments related to its equity interests;
(d) declaration or payment of any dividend or distribution in
respect of the capital stock of Gourmet or any direct or indirect
redemption, purchase or other acquisition of any of the capital stock
of Gourmet;
(e) increase in the compensation, bonus, sales commissions or
fee arrangements payable or to become payable by Gourmet to any of its
officers, directors, employees, consultants or agents;
(f) work interruption, labor grievance or claim filed;
(g) sale or transfer of, or any agreement to sell or transfer,
any material assets, property or rights of Gourmet to any person not in
the ordinary course of the business of Gourmet;
(h) cancellation or agreement to cancel any indebtedness or
other obligation owing to Gourmet;
<PAGE>
(i) plan, agreement or arrangement granting any preferential
right to purchase or acquire any interest in any of the assets,
property or rights of Gourmet or requiring consent of any party to the
transfer and assignment of any such assets, property or rights;
(j) purchase or acquisition by any third party of, or any
agreement, plan or other arrangement by any third party to purchase or
acquire, any property, rights or assets of Gourmet other than in the
ordinary course of business;
(k) waiver of any rights or claims of Gourmet;
(l) breach, amendment or termination of any material contract,
license, permit or other agreement to which Gourmet is a party other
than in the ordinary course of business;
(m) transaction by Gourmet outside the ordinary course of its
business;
(n) amendment to the Articles of Incorporation or Bylaws of
Gourmet;
(o) any other material occurrence, event, incident, action or
failure to act outside the ordinary course of business of Gourmet; or
(p) any action by Gourmet, or any employee, officer or agent
of Gourmet, committing to do any of the foregoing.
3.18) Title to Assets. Gourmet has good and marketable title to all of
its properties and assets, including without limitation the assets reflected on
its balance sheets included in the Gourmet Financial Statements. Except as
provided on Schedule 3.18 and except as contemplated by Rule 419, all such
properties and assets are not subject to any mortgage, pledge, lien, charge,
security interest, encumbrance, restriction, lease, license assessment,
liability or claim of any nature whatsoever, direct or indirect, whether
accrued, absolute, contingent or otherwise.
3.19) Corporate Documents. Gourmet has furnished to Lloyd a true,
correct and complete copy of the following for examination:
(a) The Articles of Incorporation and Bylaws of Gourmet and any
amendments thereto;
(b) The minute book of Gourmet containing all of the records required
to be set forth in such records including, but not limited to, all
proceedings, consents, actions and meetings of the shareholders and
Board of the Directors of Gourmet; and
(c) The stock transfer books of Gourmet setting forth all transfers of
Gourmet Stock.
3.20) Complete Disclosure. To the best knowledge of Gourmet, this
Agreement and the schedules hereto and all other documents and information
furnished to Lloyd, or its representatives, pursuant hereto or pursuant to the
negotiation of this transaction or the investigations of Lloyd or the employees
or representatives of it, do not and will not include any
<PAGE>
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein not misleading. If Gourmet becomes aware of any
fact or circumstance which would change a representation or warranty of Gourmet
in this Agreement, the party with such knowledge shall promptly give written
notice of such fact or circumstance to Lloyd. Neither such notification nor any
pre-Closing investigation made by Lloyd of Gourmet or its properties, businesses
or assets, or the Closing contemplated by this Agreement shall relieve Gourmet
of its obligations under this Agreement, including its representations and
warranties made in this Article III.
ARTICLE IV.
OBLIGATIONS AFTER CLOSING
4.1) Post Effective Amendment. Subject to review and approval by
Gourmet and its counsel, which may not be unreasonably delayed or withheld,
Lloyd shall:
(a) file with, and use its best efforts to cause to be declared
effective by the SEC, a post effective amendment (the "Post Effective
Amendment") amending its Form SB-2 Registration by setting forth
therein the information required by Rule 419; and
(b) not more than five (5) business days after the Post Effective
Amendment is declared effective, provide each shareholder who purchased
Lloyd Stock pursuant to the Form SB-2 Registration and whose shares are
being held in escrow pursuant to Rule 419 (the "Rule 419 Shareholders")
with a prospectus produced thereby containing the terms of the
reconfirmation offer of investment as required by Rule 419. Lloyd shall
provide each Rule 419 Shareholder no fewer than twenty (20), and no
more than forty-five (45) business days (the "Reconfirmation Offering
Period") from the effective date of the Post Effective Amendment to
decide to reconfirm his investment. Such reconfirmation shall be
evidenced by delivering to Lloyd the Letter of Transmittal and
Reconfirmation substantially in the form of Schedule 4.1.
4.2) Cooperation by Gourmet. Gourmet will cooperate and provide Lloyd
with, on a timely basis, any information concerning Gourmet including, but not
limited to, its affiliates, officers directors and employees required to be
included in the Post-Effective Amendment and will update such information as may
be required.
4.3) Prohibited Activities of Lloyd. Except as provided in Section 4.5,
between the Closing Date and the Effective Date, Lloyd shall not, without the
prior written consent of all the parties hereto:
(a) amend its Certificate Incorporation or Bylaws;
(b) change its authorized capital or grant any options, warrants, puts,
calls, conversion rights or commitments relating to the equity
interests of Lloyd;
(c) declare or pay any dividend or directly or indirectly purchase,
redeem or otherwise acquire or retire for value or issue any of its
shares of stock;
<PAGE>
(d) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures in excess of One
Thousand Dollars ($1,000) except in the normal course of business;
(e) increase the compensation payable or to become payable to any
officer, director, stockholder, employee, consultant or agent, or make
any bonus or management fee payment to any such person;
(f) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(g) negotiate to acquire any business or begin any new business or
project;
(h) merge or consolidate or agree to merge or consolidate with or into
any other business entity;
(i) waive any of its material rights or claims;
(j) enter into any transaction outside the ordinary course of its
business; or
(k) make any oral or written announcement concerning this transaction
except as may be required by law, all of which announcements, if any,
shall be forwarded to the other parties for review and comment at least
seven (7) days prior to dissemination.
4.4) Prohibited Activities of Gourmet. Except for the transaction
between Gourmet and Cameron's Coffee Company, Inc., which may be consummated at
Gourmet's sale and absolute discretion between the Closing Date and the
Effective Date, Gourmet shall not, without the prior written consent of all the
parties hereto:
(a) amend its Articles Incorporation or Bylaws;
(b) declare or pay any dividend or directly or indirectly purchase,
redeem or otherwise acquire or retire for value or issue any of its
shares of stock;
(c) sell, assign, lease or otherwise transfer or dispose of
substantially all of its property or equipment;
(d) merge or consolidate with or into any other business entity; or
(e) make any oral or written announcement concerning this transaction
except as may be required by law, all of which announcements, if any,
shall be forwarded to the other parties for review and comment at least
seven (7) days prior to dissemination.
4.5) Deposited Funds. Notwithstanding anything herein to the contrary,
Lloyd may distribute, on or before the Effective Date, all cash on hand
including, but not limited to, the remaining proceeds from the subscription of
the Rule 419 Shareholders as it determines, in its sole
<PAGE>
discretion provided, however, there shall be at least Twenty-Five Thousand
Dollars ($25,000) in the Lloyd bank account listed on Schedule 2.22 on the
Effective Date.
4.6) Consent of Gourmet Shareholders. On or before the Effective Date
and as may be required by applicable law, Gourmet shall use its reasonable best
efforts to obtain, and deliver to Lloyd, the following: (a) evidence that all
consents and approvals required to be obtained by Gourmet in connection with the
consummation of the transactions contemplated herein including, but not limited
to, the consent of at least eighty percent (80%) of its shareholders; and (b)
the stock certificates representing the Gourmet Stock; and (c) such other
documentation as required to be delivered by Gourmet pursuant to the terms of
this Agreement.
4.7) Consent of Lloyd Shareholders. On or before the Effective Date and
as may be required by applicable law, Lloyd shall use its reasonable best
efforts to obtain, and deliver to Gourmet, the following: (a) evidence that all
consents and approvals required to be obtained by Lloyd in connection with the
consummation of the transactions contemplated herein including, but not limited
to, the consent of eighty percent (80%) of its shareholders, including the
affirmative reconfirmation of investment by the Rule 419 Shareholders owning at
least eighty percent (80%) of the Rule 419; (b) shares and the stock
certificates representing the shares of Lloyd Stock; and (c) such other
documentation as required to be delivered by Lloyd pursuant to the terms of this
Agreement.
ARTICLE V.
CONDITIONS PRECEDENT TO OBLIGATIONS OF LLOYD
The obligations of Lloyd hereunder are subject to the completion,
satisfaction, or at its option, waiver, on or prior to the Effective Date of the
following conditions.
5.1) Representations and Warranties. The representations and warranties
of Gourmet that are contained in this Agreement shall be accurate on and as of
the Closing Date and Effective Date with the same effect as though such
representations and warranties had been made on and as of such dates.
5.2) Covenants. Except as otherwise provided herein, each and all of
the terms, covenants and conditions of this Agreement to be complied with and
performed by Gourmet on or before the Closing Date shall have been duly complied
with and performed.
5.3) Consents. All necessary notices to, consents of and filings with
any governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Gourmet shall have been obtained and made including, but not
limited to, the consent of the shareholders of Gourmet.
5.4) No Adverse Proceeding. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or, to the best
of Gourmet's knowledge, threatened to restrain or prohibit any of the
transactions contemplated by this Agreement.
<PAGE>
5.5) Certificates. Gourmet shall have each delivered to Lloyd a
certificate to the effect that each of the conditions specified in Sections 5.1,
5.2, 5.3 and 5.4 above have been satisfied in all respects.
5.6) Post Effective Amendment. The Post Effective Amendment shall have
been approved and declared effective by the SEC.
5.7) Letter of Transmittal and Reconfirmation. Lloyd shall have
received the Letters of Transmittal and Reconfirmation substantially in the form
of Schedule 4.1 for the 419 Shareholders owning at least eighty percent (80%) of
the 419 Shares reconfirming their investment in the Lloyd Stock.
5.8) Good Standing Certificates. Gourmet shall have delivered to Lloyd
certificates, dated as of a date no earlier than ten (10) days prior to the
Closing Date, duly issued by the appropriate governmental authority or
authorities showing that Gourmet is in good standing in its state of
incorporation.
ARTICLE VI.
CONDITIONS PRECEDENT TO OBLIGATIONS OF GOURMET
The obligations of Gourmet hereunder are subject to the completion,
satisfaction, or at its option, waiver on or prior to the Closing Date, of the
following conditions.
6.1) Representations and Warranties. The representations and warranties
of Lloyd that are contained in this Agreement shall be accurate on and as of the
Closing Date and Effective Date with the same effect as though such
representations and warranties had been made on and as of such dates.
6.2) Covenants. Except as otherwise provided herein, each and all of
the terms, covenants and conditions of this Agreement to be complied with and
performed by Lloyd on or before the Closing Date shall have been duly complied
with and performed.
6.3) Consents. All necessary notices to, consents of and filings with
any governmental authority or agency or other third party relating to the
consummation of the Closing or the other transactions contemplated herein to be
made or obtained by Lloyd shall have been obtained and made including, but not
limited to, the consent of the shareholders of Lloyd pursuant to applicable
federal and state laws.
6.4) No Adverse Proceeding. No action or proceeding before a court or
any other governmental agency or body shall have been instituted or, to the best
of Lloyd's knowledge, threatened to restrain or prohibit any of the transactions
contemplated by this Agreement.
6.5) Lloyd Stock. Lloyd shall deliver to Gourmet the stock certificates
representing the Lloyd Stock registered in the name of the shareholders of
Gourmet.
<PAGE>
6.6) Post Effective Amendment. The Post Effective Amendment shall have
been approved and declared effective by the SEC.
6.7) Letter of Transmittal and Reconfirmation. Lloyd shall have
received and delivered to Gourmet and its counsel the Letters of Transmittal and
Reconfirmation, substantially in the form of Schedule 4.1, from the 419
Shareholders owning at least eighty percent (80%) of the 419 Shares reconfirming
their investment in the Lloyd Stock.
6.8) Certificates. Lloyd shall have delivered to Gourmet a certificate
to the effect that each of the conditions specified in Sections 6.1, 6.2, 6.3,
6.4, 6.5, 6.6 and 6.7 above have been satisfied in all respects.
6.9) Updated Material Agreements. Lloyd shall have delivered to Gourmet
a schedule (Schedule 6.9), dated the Closing Date, listing all material
agreements, together with copies thereof, entered into by Lloyd since the date
of the Lloyd Financial Statements together with an updated schedule of accounts
receivable and accounts payable of Lloyd as of the Closing Date.
6.10) Good Standing Certificates. Lloyd shall have delivered to Gourmet
certificates, dated as of a date no earlier than ten (10) days prior to the
Closing Date, duly issued by the appropriate governmental authority or
authorities showing that Lloyd is in good standing in its state of
incorporation.
6.11) Resignations. The current members of the Boards of Directors and
the officers of Lloyd shall have tendered their resignations effective as of the
Effective Date.
ARTICLE VII.
INDEMNIFICATION
7.1) Mutual Indemnification. Lloyd agrees to indemnify, defend and hold
harmless Gourmet (and its officers, directors and employees) and Gourmet agrees
to indemnify, defend and hold harmless Lloyd (and its officers, directors and
employees), from and against all liabilities, claims, damages, actions, suits,
proceedings, demands, losses, costs and expenses whatsoever (including
specifically, but without limitation, court costs, reasonable attorneys' fees
and expenses, and reasonable expenses of investigation) which result, either
before or after the date of this Agreement, from:
(a) any breach of, misrepresentation in, untruth in or inaccuracy in
the representations and warranties set forth herein or in the
Schedules, exhibits or certificates attached hereto or delivered at the
Closing pursuant hereto;
(b) nonfulfillment or nonperformance of any agreement or covenant made
in this Agreement;
<PAGE>
(c) except as otherwise disclosed herein, the existence of liabilities
in excess of the liabilities represented by the parties hereto on their
respective financial statements.
ARTICLE VIII.
MISCELLANEOUS
8.1) Arbitration. In the event there is any dispute between the parties
hereto arising out of or relating to this Agreement and the parties hereto
cannot resolve such dispute themselves, the parties hereto agree to refer and
submit such dispute to the American Arbitration Association, Minneapolis,
Minnesota (the "Association"), for arbitration, and any such proceeding shall be
conducted in the Minneapolis, Minnesota metropolitan area. Any such arbitration
shall be before a panel of three (3) arbitrators and shall be conducted in
accordance with the rules of the Association, except that the parties shall be
permitted discovery prior to any hearing in accordance with the Federal Rules of
Civil Procedure, and the Federal Rules of Evidence and Federal Rules of Civil
Procedure shall apply at any hearing. No arbitrator shall have any connection to
the parties to this Agreement. The arbitrators shall have the right to award or
include in their award any relief they deem proper, including without
limitation, money damages, interest, specific performance, attorneys fees, cost
and expenses incurred, but not exemplary or punitive damages. The award decision
of the arbitrators shall be conclusive and binding upon all parties and may be
entered in any court of competent jurisdiction. The parties agree to bring all
claims in this arbitration which relate to the original claim. This provision
shall continue after any expiration or termination of this Agreement.
8.2) Termination. Lloyd or Gourmet (as the case may be) may, with ten
(10) days prior written notice, terminate this Agreement on or before the
Effective Date in the event of a breach by Lloyd or Gourmet (as the case may be)
in the observance, or in the due and timely performance, of any of the
agreements or conditions contained herein or to be performed if such breach has
not been cured on or before the Effective Date. Notwithstanding the foregoing,
this Agreement will terminate if the Closing does not occur on or before April
30, 1998.
8.3) Assignment; Binding Effect; Amendment. This Agreement and the
rights hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto and the
successors of the parties hereto. This Agreement, upon execution and delivery,
constitutes a valid and binding agreement of the parties hereto enforceable in
accordance with its terms and may be modified or amended only by a written
instrument executed by all parties hereto.
8.4) Entire Agreement. This Agreement is the final, complete and
exclusive statement and expression of the agreement among the parties hereto
with relation to the subject matter of this Agreement, it being understood that
there are no oral representations, understandings or agreements covering the
same subject matter as this Agreement. This Agreement supersedes, and cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
discussions, correspondence, or oral or written agreements of any kind.
<PAGE>
8.5) Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
8.6) No Brokers. All of the parties hereto represent and warrant to
each other that they have had no dealings with any broker or agent so as to
entitle such broker or agent to a commission or fee in connection with the
within transaction. If for any reason a commission or fee shall become due, the
party dealing with such agent or broker shall pay such commission or fee and
agrees to indemnify and save harmless each of the other parties from all claims
for such commission or fee and from all attorneys, fees, litigation costs and
other expenses relating to such claim.
8.7) Expenses of Transaction. The parties hereto agree that they shall
pay all of their own costs and expenses incurred, or to be incurred, by them in
the negotiation and preparation of this Agreement and in closing and carrying
out the transactions contemplated by this Agreement.
8.8) Notices. All notices or other communications required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, by overnight courier or
by delivering the same in person to such party.
(a) If to Lloyd: with a copy to:
Mr. Herbert Maxwell Joseph Sierchio, Esq.
Lloyd Ventures, Inc. Sierchio & Albert, P.C.
41 East 57th Street 41 East 57th Street
39th Floor 39th Floor
New York, New York 10022 New York, New York, 10022
(b) If to Gourmet: with a copy to:
Mr. Robert A. Paschke Stephen J. Kaminski, Esq.
Gourmet Regency Coffee Company Larkin, Hoffman, Daly & Lindgren, Ltd.
5500 Cottonwood Lane 1500 Norwest Financial Center
Suite 108 7900 Xerxes Avenue South
Prior Lake, Minnesota 55372 Bloomington, Minnesota 55431
Notice shall be deemed given and effective the day personally
delivered, the day after being sent by overnight courier and three business days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received, if earlier. Any party may change the address for notice by notifying
the other parties of such change in accordance with this Section 8.8.
8.9) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Minnesota, without giving
effect to any choice or
<PAGE>
conflict of law provision or rule (whether of the State of Minnesota or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Minnesota.
8.10) No Waiver. No delay of or omission in the exercise of any right,
power or remedy accruing to any party as a result of any breach or default by
any other party under this Agreement shall impair any such right, power or
remedy, nor shall it be construed as a waiver of or acquiescence in any such
breach or default, or of or in any similar breach or default occurring later;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach of default occurring before or after that waiver.
8.11) Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
8.12) Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, it shall, to the extent possible, be modified
in such manner as to be valid, legal and enforceable but so as most nearly to
retain the intent of the parties. If such modification is not possible, such
provision shall be severed from this Agreement. In either case the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
8.13) Survival of Representations and Warranties, etc. The
representations, warranties and covenants contained in this Agreement or any of
the schedules or exhibits attached hereto, or in any certificate, document, or
instrument delivered in connection with the Agreement, shall survive the
execution and delivery of this Agreement and the Closing regardless of any
investigation connected by any party.
8.14) Publicity. Except as otherwise required by applicable law, all
notices to third parties and all other publicity concerning the transactions
contemplated by this Agreement shall be jointly planned and coordinated by and
among all of the parties hereto.
8.15) Construction. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute shall be deemed to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The parties
intend that representation, warranty and covenant contained herein shall have
independent significance. If any party has breached any representation, warranty
or covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter
(regardless of the relative levels of specificity) that the party has not
breached shall not detract from or mitigate the fact the party is in breach of
the first representation, warranty or covenant.
8.16) Further Assurance. From time to time on and after the Closing and
without further consideration, the parties hereto shall each deliver or cause to
be delivered to any other party at such times and places as shall be reasonably
requested, such additional instruments as any of the
<PAGE>
others may reasonably request for the purpose of carrying out this Agreement and
the transaction contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
LLOYD:
LLOYD VENTURES, INC.
Dated: By: /s/
-------------------------------------
Herbert Maxwell
Its: President
GOURMET:
GOURMET REGENCY COFFEE COMPANY
Dated: By: /s/
-------------------------------------
Robert A. Paschke
Its: President
EXHIBIT 23(i)(2)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
to the use of our report dated February 4, 1998, in the post effective amendment
to the Registration Statement (Form SB-2 No. 33-94470) and related Prospectus of
Lloyd Ventures, Inc. dated February ___, 1998.
/s/ Goldman & Krinitz
Goldman & Krinitz
New York, New York
February 25, 1998
EXHIBIT 23(i)(3)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 33-94470 of Lloyd Ventures, Inc. on Form SB-2 of our report dated
February 12, 1998, on the consolidated financial statements of Gourmet Regency
Coffee Company and Subsidiaries included in this Registration Statement, and to
the reference to our Firm under the caption "Experts" in the Prospectus which is
part of the Registration Statement.
/s/ Larson, Allen, Weishair & Co., LLP
LARSON, ALLEN, WEISHAIR & CO., LLP
Minneapolis, Minnesota
February 27, 1998
