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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 1997
REGISTRATION NO. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
New World Coffee, Inc.
----------------------
(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 13-3690261
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
379 West Broadway
New York, New York 10012
(212) 343-0552
(Address, including zip code, and telephone number, including area code, of registrant's
principal executive offices)
</TABLE>
----------------------
R. Ramin Kamfar
Chief Executive Officer and President
379 West Broadway
New York, New York 10012
(212) 343-0552
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
Copies to:
Alan I. Annex, Esq.
William N. Haddad, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019-4315
(212) 977-6600
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: FROM TIME TO TIME
AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED PURSUANT
TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING BOX.[ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED ON A
DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE SECURITIES ACT OF
1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH DIVIDEND OR INTEREST
REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
<PAGE>
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING PURSUANT
TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX AND LIST
THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE
REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE 462(c) UNDER
THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES ACT
REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION STATEMENT
FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE 434 UNDER
THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX. [ ]
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CALCULATION OF REGISTRATION FEE
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<S> <C> <C> <C> <C>
Title of each class of securities Amount to be Proposed Proposed Amount of
to be registered registered maximum offering maximum registration fee
price aggregate offering
Per Share (1) price (1)
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Common Stock, $0.001 par value 999,999 shs. $1.5625 $1,562,499 $474
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</TABLE>
(1) Estimated solely for purpose of calculating the registration fee pursuant to
Rule 457(c) on the basis of the average of the high and low prices per share
of the Common Stock reported on the NASDAQ-NMS on April 18, 1997.
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 SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SUCH SECTION 8(a), MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED APRIL 24, 1997.
PROSPECTUS
NEW WORLD COFFEE, INC.
COMMON STOCK
999,999 SHARES
This Prospectus relates to 999,999 shares of Common Stock (the "Shares")
of New World Coffee, Inc. ("New World Coffee" or the "Company"), which may be
offered from time to time by one or all of the selling shareholders named herein
(the "Selling Shareholders"). The Company will receive no part of the proceeds
of such sales. The Company has agreed to pay certain costs and expenses incurred
in connection with the registration of the Shares offered hereby, except that
the Selling Shareholders shall be responsible for all selling commissions,
transfer taxes and related charges in connection with the offer and sale of such
Shares. See "Plan of Distribution."
The Common Stock of the Company is traded on the NASDAQ National Market
System ("NASDAQ-NMS") under the symbol NWCI. On April 18, 1997 the closing
sale price of the Company's Common Stock on the NASDAQ-NMS was $1.625 per
share. The Selling Shareholders may sell all or a portion of the Shares offered
hereby in private transactions or in the over-the-counter market at prices
related to the prevailing prices of the Shares on the NASDAQ-NMS at the time of
sale. The Selling Shareholders may effect such transactions by selling to or
through one or more broker-dealers, and such broker-dealers may receive
compensation in the form of underwriting discounts, concessions or commissions
from the Selling Shareholders. The Selling Shareholders and any broker-dealers
that participate in the distribution may under certain circumstances be deemed
to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and any commissions received by such broker-
dealers and any profits realized on the resale of Shares by them may be deemed
to be underwriting discounts and commissions under the Securities Act. The
Company and the Selling Shareholders may agree to indemnify such broker-dealers
against certain liabilities, including liabilities under the Securities Act. In
addition, the Company has agreed to indemnify certain of the Selling
Shareholders with respect to the Shares against certain liabilities including
certain liabilities under the Securities Act. To the extent required, the
specified Shares to be sold, the names of the Selling Shareholders, the public
offering price, the names of any such broker-dealers, and any applicable
commission or discount with respect to any particular offer will be set forth in
a Prospectus supplement. Each of the Selling Shareholders reserves the right to
accept or to reject, in whole or in part, any proposed purchase of the Common
Stock. See "Plan of Distribution." Any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus.
-----------------------
AN INVESTMENT IN THE COMMON STOCK INVOLVES A
HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS APRIL __, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission" or "SEC"). Such reports,
proxy statements, and other information filed by the Company can be inspected
and copied, at the prescribed rates, at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Northeast Regional Office of the Commission at Seven
World Trade Center, Suite 1300, New York, New York 10048 and at the Midwest
Regional Office of the Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511. Copies may be obtained at prescribed
rates from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding the Company that is filed electronically with the Commission and the
address of such Web site is http://www.sec.gov.
The Company has filed with the Commission in Washington, D.C. a
Registration Statement on Form S-3 (together with all amendments thereto, the
"Registration Statement"), under the Securities Act, with respect to the shares
of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules filed therewith, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to the Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding
the contents of any contract or other document referred to are not necessarily
complete and, in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being deemed to be qualified in its entirety by such reference. The
Registration Statement, including all exhibits and schedules thereto, may be
inspected without charge at the principal office of the Commission, at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
Midwest Regional Office of the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at the Northeast
Regional Office of the Commission at Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies of such material may be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, upon the payment of prescribed fees.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents of the Company that have been filed with the
Commission are hereby incorporated by reference in this Prospectus: (a) Annual
Report on Form 10-KSB/A for the fiscal year ended December 29, 1996; (b) Current
Report on Form 8-K dated February 26, 1997; and (c) Amendment No. 1 to Current
Report on Form 8-K dated October 25, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Common Stock offered hereby shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing such documents. Any statement
contained in a document incorporated by reference shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement in
this Prospectus or in any subsequently filed document which also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person who receives this
Prospectus, upon written or oral request of such person, a copy of any of the
information that was incorporated by reference in this Prospectus (not including
exhibits to the information that is incorporated by reference unless the
exhibits are themselves specifically incorporated by reference). Such requests
should be made to Mr. Jerold Novack, Vice President-Finance, at New World
Coffee, Inc., 379 West Broadway, New York, New York 10012, (212) 343-0552.
3
<PAGE>
THE COMPANY
New World Coffee, Inc. currently owns and operates 40 specialty coffee
cafes, consisting of 28 in New York, seven in Connecticut, three in Pennsylvania
and two in New Jersey, making the Company the second largest specialty coffee
retail chain in the northeastern United States. With its recent acquisition of
Willoughby's Incorporated ("Willoughby's"), the Company's coffee purveyor and
roaster since its inception, the Company has become vertically integrated in its
operations, reduced its coffee costs, improved its quality control, and entered
into the mail order and wholesale businesses. The Company seeks to differentiate
itself from other specialty coffee retailers by serving high quality, freshly
roasted coffee (generally delivered to its stores within 24 hours of roasting)
and a variety of fresh, high quality gourmet foods in a sophisticated, award-
winning cafe design environment.
In recent years, the specialty coffee retail business has grown rapidly.
Industry sources estimate that total retail sales of specialty coffee through
all distribution channels will grow to $5.0 billion by 1999 from an estimated
$1.5 billion in 1989 and that coffee stores, including espresso carts and
kiosks, will be the fastest growing distribution channel. The consumption of
specialty coffee drinks is also growing rapidly, with the percent of U.S.
population drinking cappuccino increasing 42% from 1995 to 1996. Management
believes this growth has been driven by (i) the increasing demand for premium
food and drink items, (ii) the popularity of coffee bars as gathering places,
and (iii) greater awareness and appreciation of gourmet coffee drinks.
In 1996, the Company restructured its operations and added senior
management personnel with significant experience in retailing and food service
as well as real estate development. Most importantly, the Company hired Bruce
Morningstar, previously the Director-Northeast Development of Starbucks
Corporation ("Starbucks"), as Vice President-Real Estate, and John DeNapoli,
previously Chief Operating Officer of Atlantic Foods Corporate, a Boston Market
franchisee, as Vice President-Operations. In addition, the Company deployed a
state-of-the-art, personal computer-based point-of-sale management information
system which significantly enhanced its ability to track and improve its store
profitability. The Company also refocused its site selection strategy to solely
target high-traffic, high-visibility residential and shopping locations. Such
locations typically generate higher revenue since they are open seven days per
week and attract breakfast, lunch and afternoon and evening traffic as compared
to business district sites which are open five days per week and do not attract
afternoon and evening traffic. In order to better serve this market, the Company
developed a larger, more comfortable store concept designed to create a
neighborhood gathering place environment. In addition, the larger store concept
offers expanded retailing space to enable the Company to better capture whole
bean and merchandise sales. The Company's existing stores vary in size from 225
to 2,670 retail square feet, with newer stores averaging approximately 1,800
retail square feet.
The Company was incorporated in Delaware in October 1992. The Company's
executive offices are located at 379 West Broadway, New York, New York, 10012,
and its telephone number is (212) 343-0552.
4
<PAGE>
RISK FACTORS
Each prospective investor should carefully consider, in addition to the
other information contained in this Prospectus, the following information in
evaluating the Company and its business before making an investment decision.
This Prospectus contains certain forward-looking statements or statements which
may be deemed or construed to be forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1996 with respect to the
financial condition and business of the Company. The words "estimate," "plan,"
"intend," "expect," and similar expressions are intended to identify forward-
looking statements. These forward-looking statements involve and are subject to
known and unknown risks, uncertainties and other factors which could cause the
Company's actual results, performance (financial or operating) or achievements
to differ from the future results, performance (financial or operating) or
achievements expressed or implied by such forward-looking statements. Investors
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to
publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
History of Operating Losses. The Company has been in existence since
October 1992 and opened its first specialty coffee cafe in February 1993. To
date, the Company has never reported net income for any fiscal year. Although
the Company has experienced significant revenue growth and store level profit
since inception, there can be no assurance that this growth will continue or
that the Company will be profitable on a quarterly or annual basis in the
future. As of December 29, 1996, the Company had an accumulated deficit of
$10,542,729.
Growth Strategy. The Company is pursuing an aggressive growth strategy,
the success of which will depend in large part upon its ability to open new
stores and to operate existing and new stores profitably. From the end of 1993
through 1996, the Company expanded the number of its stores from 3 to 40. This
expansion was achieved through the opening of new stores and the acquisition of
existing stores from other specialty coffee retailers. The Company currently
plans to add additional stores within the next 12 months. The Company's planned
expansion will present numerous operational and competitive challenges to the
Company's senior management and employees. There can be no assurance that the
Company will find attractive acquisition candidates in the future, that
acquisitions can be consummated on acceptable terms, that any acquired companies
can be integrated successfully into the Company's operations or that any such
acquisitions will not have an adverse effect on the Company's financial
condition or results of operations. The Company anticipates that expansion into
new geographic regions will entail opening multiple stores in those regions in a
relatively short period of time.
Achievement of the Company's expansion plans will depend in part upon its
ability to: (i) select, and compete successfully in, new markets; (ii) obtain
suitable sites at acceptable costs in highly competitive real estate markets;
(iii) hire, train, and retain qualified personnel; (iv) integrate new stores
into existing distribution, inventory control, and information systems; and (v)
maintain quality control. The Company will incur start-up costs in connection
with entering new markets, primarily associated with recruiting and training new
regional management and their support staff. In addition, the opening of
additional stores in current markets could have the effect of adversely
impacting sales at certain of the Company's existing stores. There can be no
assurance that the Company will achieve its planned expansion goals, manage its
growth effectively, or operate its existing and new stores profitably. The
failure of the Company to achieve its expansion goals on a timely basis, if at
all, manage its growth effectively or operate existing or any new stores
profitably would have a material adverse effect on the Company's results of
operations. In accordance with the Company's strategy of focusing on larger
stores in residential and shopping areas, the Company announced the closing of
five primarily business district stores in the second quarter of 1996. There
can be no assurance that the Company's strategy of targeting residential and
shopping areas will prove to be successful.
Need for Additional Financing. In order to achieve and maintain the
Company's anticipated growth rate, including geographic expansions and in order
to make future debt payments including, but not limited to those in connection
with the acquisition of Willoughby's, the Company believes that it will have to
obtain bank financing or sell additional debt or equity (or hybrid) securities
in public and private financings. In addition, the Company may incur debt or
issue equity securities in order to finance acquisitions. Any such financing
could dilute the interests of investors in this offering. There can be no
assurance that any such additional financing will be available or, if it is
available, that it will be in such amounts and on such terms as will be
satisfactory to the Company.
5
<PAGE>
Seasonal Fluctuations and Quarterly Operating Results. Historically, the
Company's operations have been seasonal, with the lowest sales and profitability
occurring in the first quarter, reflecting decreased traffic as a result of
inhospitable winter weather and shorter days due to daylight savings time. The
Company's results of operations may also fluctuate from quarter to quarter in
the future as a result of the amount and timing of sales contributed by new and
acquired stores and the integration of new stores into the operations of the
Company, as well as other factors including marketing programs. The addition of
a larger number of stores as is anticipated with the Company's store expansion
program can therefore significantly affect results of operations on a quarter by
quarter basis.
Fluctuations in Availability and Cost of Green Coffee. The Company
depends upon both its outside brokers and its direct contacts with exporters in
countries of origin for the supply of its primary raw material, green coffee.
Coffee is the world's second largest traded commodity and its supply and price
are subject to volatility beyond the control or influence of the Company.
Although most coffee trades in the commodity market, coffee of the quality
sought by the Company tends to trade on a negotiated basis at a substantial
premium above commodity coffee pricing, depending upon the supply and demand at
the time of purchase. Supply and price can be affected by multiple factors in
the producing countries, including weather, political, and economic conditions.
In addition, green coffee prices have been affected in the past, and may be
affected in the future, by the actions of certain organizations and
associations, such as the International Coffee Organization or the Association
of Coffee Producing Countries, that have historically attempted to establish
commodity prices of green coffee through agreements creating export quotas or
restricting coffee supplies worldwide. No assurance can be given that such
organizations (or others) will not succeed in raising green coffee prices, or
that, if so, the Company will be able to maintain its gross margins by raising
its prices to its customers. As of the date of this Prospectus, green coffee
commodity contracts for near-term delivery months are trading at the $1.60 to
$2.00 per pound price level which is at a premium to their near recent
historical trading levels of $1.10 to $1.20 per pound. Increases in the price
of green coffees, or the unavailability of adequate supplies of green coffees of
the quality sought by the Company, whether due to the failure of its suppliers
to perform, conditions in the coffee-producing countries, or otherwise, could
have a material adverse effect on the Company's results of operations.
To mitigate the risks associated with increases in coffee prices and to
allow greater predictability in the prices the Company pays for its coffees over
extended periods of time, the Company typically enters into fixed-price purchase
commitments for a portion of its green coffee requirements. There can be no
assurance that these activities will successfully protect the Company against
the risks of increases in coffee prices or that they will not result in the
Company's payment of substantially more for its supply of coffee than it would
have been required to pay absent such activities.
Competition. The market for specialty coffees is fragmented and highly
competitive, and competition is increasing substantially. The Company's coffee
beverages compete directly against all restaurant and beverage outlets that
serve coffee and a growing number of espresso stands, carts, and stores. The
Company's whole bean coffees compete directly against specialty coffees sold at
retail through supermarkets and a growing number of specialty coffee stores.
Both the Company's whole bean coffees and its coffee beverages compete
indirectly against all other brands on the market. The coffee industry is
dominated by several large companies such as Kraft General Foods, Inc., Proctor
& Gamble Co., and Nestle, S.A., many of which have begun marketing gourmet
coffee products. While the market for specialty gourmet coffee stores remains
fragmented, the Company competes directly with the market leader, Starbucks,
among others. Starbucks is rapidly expanding geographically and has
substantially greater financial, marketing and other resources than the Company.
Other competitors, some of which may have greater financial and other resources
than the Company, may also enter the markets in which the Company currently
operates or intends to expand. The Company competes against other specialty
retailers and restaurants for store sites, and there can be no assurance that
management will be able to continue to secure adequate sites at acceptable rent
levels.
Geographic Concentration; Fluctuations in Regional Economic Conditions.
All of the Company's specialty coffee cafes are currently located in the
northeastern United States, with a majority located in New York City. As a
result, the Company's success will depend in large part upon factors affecting
general economic conditions and discretionary consumer spending in this region.
Any economic downturn or reduction in consumer spending in this region could
have a material adverse effect on the Company.
6
<PAGE>
Lack of Product Diversification. The Company's business is centered
around essentially one product, coffee. To date, the Company's operations have
been limited to the purchase and roasting of green coffees, the sale of whole
bean coffees and coffee beverages, along with related products, through its
specialty coffee cafes. Any decrease in demand for specialty coffee could have a
material adverse effect on the Company's business, operating results and
financial condition.
Reliance on Key Personnel. The Company's success will depend to a large
degree upon the efforts and abilities of its officers and key management
employees, particularly R. Ramin Kamfar, the Company's President and Chief
Executive Officer, Jerold Novack - the Company's Vice President-Finance, and
Bruce Morningstar, the Company's Vice President-Real Estate. The loss of the
services of one or more of its key employees could have a material adverse
effect on the Company's business prospects and/or potential earning capacity.
The Company has entered into employment and non-competition agreements with each
of its executive officers. The Company carries key person life insurance in the
amount of $1.5 million on Mr. Kamfar, of which the Company is the sole
beneficiary.
Influence by Certain Existing Stockholders. The Company's executive
officers and directors beneficially own approximately 17.7% of the outstanding
shares of Common Stock. As a result, such stockholders will be in a position to
influence the affairs of the Company and certain matters requiring a stockholder
vote, including the election of directors, the amendment of the Company's
charter documents, the merger or dissolution of the Company and the sale of all
or substantially all of the Company's assets.
Authorization of Preferred Stock. The Company's Certificate of
Incorporation authorizes the issuance of preferred stock with such designations,
rights and preferences as may be determined from time to time by the Company's
Board of Directors. Accordingly, the Board of Directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely affect the voting power
or other rights of the holders of the Common Stock. Pursuant thereto, the
Company presently has 145 shares of Series A Preferred Stock and 137.5 shares of
Series B Preferred Stock outstanding. Issuance of the preferred stock could be
utilized, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company. Although the Company has no
present intention to issue any new shares of its preferred stock, there can be
no assurance that the Company will not do so in the future.
Absence of Cash Dividends. The Company has paid no cash dividends on any
of its shares of capital stock since its inception and at the present time does
not anticipate paying dividends on the Common Stock in the foreseeable future.
Any future dividends will depend on the earnings, if any, of the Company, its
financial requirements, contractual commitments and other factors.
Shares Eligible for Future Sale. Sales of a substantial number of shares
of Common Stock into the public market following the date of this Prospectus
could materially adversely affect the prevailing market price for the Common
Stock. The Company has filed a registration statement with respect to the
offering (the "Public Offering") of such number of shares of Common Stock
resulting in minimum and maximum gross proceeds of $4,000,000 and $6,000,000,
respectively. In addition to the shares of Common Stock offered pursuant to the
Public Offering, as of the effective date of the Registration Statement there
will be 6,245,498 shares of Common Stock outstanding, 1,447,369 of such shares
are "restricted securities" ("Restricted Shares") pursuant to Rule 144
promulgated under the Securities Act. In addition, if the outstanding shares
of Series A Preferred Stock and Series B Preferred Stock had been converted into
shares of Common Stock on March 1, 1997, the Company would have been required to
issue 1,142,917 additional Restricted Shares. On April 1, 1997, 153,841 of such
Restricted Shares will become eligible for sale in the public market pursuant to
Rule 144, all of which will be subject to the volume and other resale
restrictions under the Securities Act. The Company is obligated to file
registration statements covering the resale of all Restricted Shares. With
respect to the shares issuable upon conversion of the outstanding shares of
Series A Preferred Stock, the Company is currently obligated to fulfill its
registration obligation. The Company is negotiating with the holders of an
aggregate of 115 shares of Series A Preferred Stock to exchange such shares for
Series B Preferred Stock and/or unregistered shares of Common Stock. With
respect to the shares issuable in connection with the exchange of Series A
Preferred Stock and upon conversion of the Series B Preferred Stock, the Company
will become obligated to file a registration statement within 60 days after the
completion of the exchange of Series A Preferred Stock for the Series B
Preferred Stock and/or unregistered shares of Common Stock. Subject to certain
exceptions, no shares of Series B Preferred
7
<PAGE>
Stock may be converted into Common Stock until June 1, 1997 at which time such
shares of Preferred Stock may be converted at a rate not to exceed 25% per
month. The holder of 182,000 of the Shares has agreed not to offer, sell,
contract or otherwise dispose either directly or indirectly of such shares until
August 31, 1997. There can be no assurance that the resale of Restricted Sales
will not have an adverse impact on the market for shares of Common Stock in the
future.
8
<PAGE>
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
shares of Common Stock offered hereby.
9
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Shareholders on April 18, 1997, the
number of shares (the "Shares") covered by this Prospectus and the amount and
percentage ownership of the Selling Shareholder after the offering assuming all
the shares covered by this Prospectus are sold by the Selling Shareholders.
Except as otherwise indicated by footnote below, none of the Selling
Shareholders has had any position, office or other material relationship with
the Company within the past three years other than as a result of the ownership
of the Shares or other securities of the Company.
<TABLE>
<CAPTION>
COMMON STOCK BENEFICIALLY COMMON STOCK BENEFICIALLY
OWNED PRIOR TO THE OFFERING NUMBER OF OWNED AFTER THE OFFERING
---------------------------- SHARES --------------------------
REGISTERED
NAME OF SELLING SHAREHOLDER NUMBER PERCENT HEREUNDER NUMBER PERCENT
- ------------------------------------------ --------------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Lawrence Altshul 32,692 * 25,000 7,692 *
Jerry Bassin 23,062 * 15,370 7,692 *
Paul & Judith Berkman 12,800 * 12,800 0 *
Michael Bollag 66,373 1.0% 62,000 4,373 *
Benjamin Bollag 89,750 1.4% 62,000 27,750 *
EP Opportunity Fund, L.L.C. 181,818 2.8% 181,818 0 *
James Flaum 6,210 * 6,210 0 *
John Harte 10,240 * 10,240 0 *
Christopher Harte 10,240 * 10,240 0 *
James Jacobs 8,540 * 8,540 0 *
Robin Kachel 6,140 * 6,140 0 *
Natalie Karp 17,080 * 17,080 0 *
Helen Kohn 20,000 * 20,000 0 *
Ray Kralovic 6,140 * 6,140 0 *
Ronald Krinick 34,772 * 17,080 17,692 *
Jim Leibel Profit Sharing Trust 18,780 * 18,780 0 *
Mid-Lakes 33,316 * 10,240 23,076 *
Victor Mueller 6,140 * 6,140 0 *
Nadia One, Inc. 70,725 1.1% 70,725 0 *
Gary & Sally Nickele 6,210 * 6,210 0 *
Rahn & Bodmer 21,350 * 21,350 0 *
Edward Raskin Trust 19,216 * 15,370 3,846 *
Alan Rubin 21,350 * 21,350 0 *
Leonard Russin 20,492 * 12,800 7,692 *
Michael Schmerin 17,080 * 17,080 0 *
Judy Shapiro 23,062 * 15,370 7,692 *
Danielle Spira Irrevocable Trust 12,800 * 12,800 0 *
Steven Spira 20,492 * 12,800 7,692 *
Ronit Sucoff 20,000 * 20,000 0 *
Robertson Stephens Global Low-Priced
Stock Fund 479,500 7.4% 182,000 297,500 4.6%
Universal Partners 12,800 * 12,800 0 *
Windy City, Inc. 20,492 * 12,800 7.692 *
WNC Corporation 70,726 1.1% 70,726 0 *
</TABLE>
_________________________
* Represents less than one percent (1%) of the issued and outstanding Common
Stock.
10
<PAGE>
PLAN OF DISTRIBUTION
The sale of all or a portion of the Shares by the Selling Shareholders may
be effected from time to time in private transactions or in the over-the-counter
market at prices related to the prevailing prices of the Shares on the NASDAQ-
NMS at the time of the sale or at negotiated prices. The Selling Shareholders
may effect such transactions by selling to or through one or more broker-
dealers, and such broker-dealers may receive compensation in the form of
underwriting discounts, concessions or commissions from the Selling
Shareholders. The Selling Shareholders and any broker-dealers that participate
in the distribution may under certain circumstances be deemed to be
"underwriters" within the meaning of the Securities Act, and any commissions
received by such broker-dealers and any profits realized on the resale of Shares
by them may be deemed to be underwriting discounts and commissions under the
Securities Act. The Company and the Selling Shareholders may agree to indemnify
such broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, the Company has agreed to indemnify certain of the
Selling Shareholders with respect to the Shares of Common Stock offered hereby
against certain liabilities, including certain liabilities under the Securities
Act.
To the extent required under the Securities Act, a supplemental Prospectus
will be filed, disclosing (a) the name of any such broker-dealers, (b) the
number of shares involved, (c) the price at which such shares are to be sold,
(d) the commissions paid or discounts or concessions allowed to such broker-
dealers, where applicable, (e) that such broker-dealers did not conduct any
investigation to verify the information set out or incorporated by reference in
this Prospectus, as supplemented, and (f) other facts material to the
transaction.
Each Selling Shareholder may be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M, which provisions may limit the timing of purchases of
any of the securities by the Selling Shareholders.
There is no assurance that any of the Selling Shareholders will sell any of
the Shares.
The Company has agreed to pay certain costs and expenses incurred in
connection with the registration of the Shares offered hereby, except that the
Selling Shareholders shall be responsible for all selling commissions, transfer
taxes and related charges in connection with the offer and sale of such Shares.
The Company has agreed to keep the registration statement relating to the
offering and sale by the Selling Shareholders of the Shares continuously
effective until such date as such Shares may be resold without registration
under the provisions of the Securities Act, under Rule 144 thereof or otherwise.
11
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, $0.001 par value, and 2,000,000 shares of Preferred Stock,
$0.001 par value. As of April 23, 1997, 6,452,915 shares of Common Stock, 145
shares of Series A Preferred Stock and 137.5 shares of Series B Preferred Stock
were outstanding.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and are entitled to receive such
dividends, if any, as may be declared from time-to-time by the Board of
Directors from funds legally available therefor, subject to the dividend
preferences of the Preferred Stock, if any. Each member of the Company's Board
of Directors stands for election at each annual meeting of the Company's
stockholders. Upon liquidation or dissolution of the Company, the holders of
Common Stock are entitled to share ratably in all assets available for
distribution after payment of liabilities and liquidation preferences of the
Preferred Stock, if any. Holders of Common Stock have no preemptive rights, no
cumulative voting rights and no rights to convert their Common Stock into any
other securities. Any action taken by common stockholders must be taken at an
annual or special meeting and may not be taken by written consent. The
outstanding shares of Common Stock are, and the shares of Common Stock to be
outstanding upon the completion of the offering will be, fully paid and
nonassessable.
PREFERRED STOCK
The Company's authorized capital stock includes 2,000,000 shares of
Preferred Stock, $.001 par value per share. As of March 24, 1997, the Company
had no shares of Preferred Stock outstanding except for 145 shares of Series A
Preferred Stock and 137.5 shares of Series B Preferred Stock described below.
The Company continues to negotiate with the holders of 115 shares of Series A
Preferred Stock to exchange such shares for Series B Preferred Stock and/or
unregistered shares of Common Stock. The Board of Directors of the Company has
the authority, without shareholder approval, to issue the Preferred Stock in one
or more series and to fix the relative rights and preferences thereof. The
terms of such Preferred Stock could include the right to vote, separately or
with any other series of Preferred Stock, on any proposed amendment to the
Company's Certificate of Incorporation or any other proposed corporate action,
including business combinations and other transactions. Such rights could
adversely affect the voting power of the holders of Common Stock. In addition,
the ability of the Company to issue the authorized but unissued shares of
Preferred Stock could be utilized to impede potential take-overs of the Company.
SERIES A PREFERRED STOCK
The Series A Preferred Stock ranks: (i) junior to any other class or
series of capital stock of the Company hereafter created specifically ranking by
its terms senior to the Series A Preferred Stock (collectively, the "Senior
Securities"); (ii) prior to all the Common Stock; (iii) prior to any class or
series of capital stock of the Company hereafter created not specifically
ranking by its terms senior to or on parity with any Series A Preferred Stock of
whatever subdivision (collectively, with the Common Stock, "Junior Securities");
and (iv) on parity with the Series B Preferred Stock and any class or series of
capital stock of the Company hereafter created specifically ranking by its terms
on parity with the Series A Preferred Stock ("Parity Securities") in each case
as to distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
The Series A Preferred Stock bears no dividends, and the holders of shares
("Holders") of Series A Preferred Stock shall not be entitled to received
dividends on the Series A Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the Holders of shares of Series A Preferred
Stock shall be entitled to receive, immediately after any distributions to the
Senior Securities required by the Company's Certificate of Incorporation or any
certificate of designation, and prior in preference to any distribution to
Junior Securities but in parity with any distribution to Parity Securities, an
amount per share equal to the sum of (i) $10,000 for each outstanding share of
Series A Preferred Stock and (ii) an amount equal to eight percent (8%) of
$10,000 per annum for the period that has passed since the date that, in
connection with the
12
<PAGE>
consummation of the purchase by Holder of shares of Series A Preferred Stock
from the Company, the escrow agent first had in its possession funds
representing full payment for the shares of Series A Preferred Stock.
Each record Holder of Series A Preferred Stock shall be entitled, subject
to the Company's right of redemption under certain circumstances, to convert
Series A Preferred Stock (in multiples of one (1) share) into that number of
fully-paid and non-assessable shares of Common Stock calculated in accordance
with a formula set forth in the Certificate of Designation of Series A Preferred
Stock. Assuming conversion as of March 1, 1997, the outstanding shares of
Series A Preferred Stock were convertible into an aggregate 665,710 shares of
Common Stock.
The Holders of the Series A Preferred Stock have no voting power
whatsoever, except as otherwise provided by the General Corporation Law of the
State of Delaware ("Delaware Law").
Pursuant to the terms of the Certificate of Designation of Series A
Preferred Stock, the Company may not create a new series of stock on parity with
the Series A Preferred Stock without the prior approval of the Holders
representing at least 75% of the then outstanding shares of Series A Preferred
Stock and at least 75% of the then outstanding Holders. In connection with the
creation of the Series B Preferred Stock, the Company has obtained the consent
of at least 75% of the then outstanding Holders but has not yet obtained the
consent of at least 75% of the then outstanding shares of Series A Preferred
Stock.
Pursuant to the terms of a registration rights agreement, the Company is
obligated to file a registration statement under the Securities Act with respect
to the shares of Common Stock into which the shares of Series A Preferred Stock
may be converted. As of the date of this Prospectus, the Company has not
satisfied such obligation. The Company intends to file a registration statement
with respect to such shares following the date of this Prospectus.
SERIES B PREFERRED STOCK
The Series B Preferred Stock ranks: (i) junior to any other class or series
of capital stock of the Company hereafter created specifically ranking by its
terms senior to the Series B Preferred Stock (collectively, the "Senior B
Securities"); (ii) prior to all the Common Stock; (iii) prior to any class or
series of capital stock of the Company hereafter created not specifically
ranking by its terms senior to or on parity with any Series B Preferred Stock
(collectively with the Common Stock, "Junior B Securities"); (iv) on parity with
the Series A Preferred Stock and any class or series of capital stock of the
Company hereafter created specifically ranking by its terms on parity with the
Series B Preferred Stock ("Parity B Securities") in each case as to
distributions of assets upon liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary.
The Series B Preferred Stock bears no dividends and the holders of shares
of Series B Preferred Stock shall not be entitled to receive dividends on the
Series B Preferred Stock.
In the event of any liquidation, dissolution or winding up of the Company,
either voluntary or involuntary, the Holders of Series B Preferred Stock shall
be entitled to receive, immediately after any distributions to the Senior B
Securities required by the Company's Certificate of Incorporation or any
certificate of designation, and prior in preference to any distribution to
Junior B Securities but in parity with any distribution to Parity B Securities,
an amount per share equal to the sum of (i) $11,800 (the "Original Series B
Issue Price") for each outstanding share of Series B Preferred Stock and (ii) an
amount equal to eight percent (8%) of the Original Series B Issue Price per
annum for the period that has passed since the date of issuance of Series B
Preferred Stock by the Company.
Each record Holder of Series B Preferred Stock shall be entitled (at the
times and in the amounts set forth below) and subject to the Company's right of
redemption under certain circumstances to convert whole or (if necessary to
convert the maximum amount allowable) fractional shares of Series B Preferred
Stock as follows:
Lock Up Period: The Series B Preferred Stock shall not be convertible into
Common Stock until six (6) months following December 1, 1996 (the "Lock-Up
Period").
13
<PAGE>
Conversion Quota: Beginning on the first day following the termination of
the Lock-Up Period (the "Initial Conversion Gate"), each Holder shall accrue the
right to convert into Common Stock up to 20% of the aggregate number of shares
of Series B Preferred Stock issued to such Holder, and for each month that
expires thereafter, Holder shall accrue (the "Accrual Rate") the right to
convert an additional 20% of the shares of the Series B Preferred Stock issued
to such Holder (the number of shares that may be converted at any time, in the
aggregate, is herein referred to as the Conversion Quota), all at the Series B
Conversion Rate (as defined below). In the event that Holder elects not to
convert its full Conversion Quota during any month, the unconverted amount shall
be carried forward and added to the Conversion Quota. Each Holder may, from
time to time, convert any portion of the Conversion Quota; provided, however,
that in no event shall Holder convert during any month more than 25% of the
shares of Series B Preferred Stock issued to Holder.
If the Closing Bid Price (as defined in the Certificate of Designation of
Series B Preferred Stock) of the Common Stock is $3.40 or greater for twenty
consecutive trading days at any time before the end of the Lock-Up Period,
notwithstanding the Lock-Up Period, each Holder's Accrual Rate for each month
during which the twentieth day of such trading days falls shall equal 25% of the
shares of Series B Preferred Stock issued to such Holder.
The Initial Conversion Gate and each subsequent one month period referenced
above are hereinafter referred to singularly as a Conversion Gate. At the
applicable Conversion Gate and at any time thereafter, the percentage of Series
B Preferred Stock issued to such Holder which is available for conversion as set
forth above is convertible into that number of fully-paid and non-assessable
shares of Common Stock of the Company calculated in accordance with a formula
set forth in the Certificate of Designation of Series B Preferred Stock (the
"Series B Conversion Rate"). Assuming conversion as of March 1, 1997, the
outstanding shares of Series B Preferred Stock were convertible into an
aggregate of 477,207 shares of Common Stock.
The Holders of the Series B Preferred Stock have no voting power
whatsoever, except as provided by Delaware Law.
Pursuant to the terms of agreements entered into between the Company and
holders of shares of Series B Preferred Stock, the Company is required to
register under the Securities Act the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock within 60 days after the completion
of the exchange of the Series A Preferred Stock for Series B Preferred Stock
and/or unregistered shares of Common Stock. The Company intends to file a
registration statement with respect to such shares following the date of this
Prospectus.
WARRANTS
As of February 28, 1997, the Company had outstanding warrants exercisable
for an aggregate of 757,398 shares of Common Stock at a weighted average
exercise price of $5.64 per share.
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer & Trust
Company.
LEGAL MATTERS
Certain legal matters in connection with the sale of the Common Stock
offered hereby will be passed upon for the Company by Camhy Karlinsky & Stein
LLP, New York, New York. A partner in such firm serves at the request of the
Board of Directors of the Company as Secretary of the Company. Such partner
beneficially owns 3,000 shares of Common Stock. In addition, such partner and
one other partner hold options to acquire an aggregate of 50,000 shares of
Common Stock at an exercise price of $5.50 per share.
14
<PAGE>
EXPERTS
The financial statements of the Company for the years ended December 31,
1995 and December 29, 1996 incorporated in this Prospectus by reference from
the Company's Form 10-KSB/A, as filed with the SEC on April 4, 1997, have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are incorporated herein in reliance upon
the authority of said firm as experts in accounting and auditing in giving said
report.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Registrant's Certificate of Incorporation limits, to the maximum extent
permitted by Delaware Law, the personal liability of directors for monetary
damages for breach of their fiduciary duties as directors (other than
liabilities arising from acts or omissions which involve intentional misconduct,
fraud or knowing violations of law or the payment of distributions in violation
of Delaware Law). The Certificate of Incorporation provides further that the
Company shall indemnify to the fullest extent permitted by Delaware Law any
person made a party to an action or proceeding by reason of the fact that such
person was a director, officer, employee or agent of the Company. Subject to the
Company's Certificate of Incorporation, the Bylaws provide that the Company
shall indemnify directors and officers for all costs reasonably incurred in
connection with any action, suit or proceeding in which such director or officer
is made a party by virtue of his or her being an officer or director of the
Company except where such director or officer is finally adjudged to have been
derelict in the performance of his or her duties as such director or officer.
The Company has not entered into indemnification agreements with any of its
directors. The Company expects to enter into separate indemnification agreements
with its officers and directors containing provisions which are in some respects
broader than the specific indemnification provisions contained in the Company's
Certificate of Incorporation and Bylaws. The indemnification agreements may
require the Company, among other things, to indemnify such directors and
officers against certain liabilities that may arise by reason of their status as
directors and officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
No dealer, salesperson or 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. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that there has been no change in the affairs of the Company
since the date hereof or that the information contained herein is correct as of
any date subsequent to the date hereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any securities offered hereby
by anyone in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making the offer is not qualified to do so or
to anyone to whom it is unlawful to make such offer or solicitation.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, payable in connection
with the sale of the Common Stock being registered hereby. Except for the SEC
registration fee, all expenses are estimated.
<TABLE>
<CAPTION>
Item Amount
---------------------------------------- -------
<S> <C>
SEC registration fee.................... $ 474
Printing and engraving expenses......... 5,000
Legal fees and expenses................. 5,000
Auditors' accounting fees and expenses.. 2,500
------
Total................................... 12,974
</TABLE>
In addition, the Selling Shareholders will be responsible for all selling
commissions, transfer taxes and related charges in connection with the offer and
sale of the Shares offered hereby.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant's Certificate of Incorporation limits, to the maximum extent
permitted by the General Corporation Law of the State of Delaware ("Delaware
Law"), the personal liability of directors for monetary damages for breach of
their fiduciary duties as directors (other than liabilities arising from acts or
omissions which involve intentional misconduct, fraud or knowing violations of
law or the payment of distributions in violation of Delaware Law). The
Certificate of Incorporation provides further that the Company shall indemnify
to the fullest extent permitted by Delaware Law any person made a party to an
action or proceeding by reason of the fact that such person was a director,
officer, employee or agent of the Company. Subject to the Company's Certificate
of Incorporation, the Bylaws provide that the Company shall indemnify directors
and officers for all costs reasonably incurred in connection with any action,
suit or proceeding in which such director or officer is made a party by virtue
of his or her being an officer or director of the Company except where such
director or officer is finally adjudged to have been derelict in the performance
of his or her duties as such director or officer.
The Company has not entered into indemnification agreements with any of its
directors. The Company expects to enter into separate indemnification agreements
with its officers and directors containing provisions which are in some respects
broader than the specific indemnification provisions contained in the Company's
Certificate of Incorporation and Bylaws. The indemnification agreements may
require the Company, among other things, to indemnify such directors and
officers against certain liabilities that may arise by reason of their status as
directors and officers (other than liabilities arising from willful misconduct
of a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance, if available on reasonable terms. The
Company believes that these agreements are necessary to attract and retain
qualified persons as directors and officers.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
4.1 Specimen Common Stock Certificate of Registrant/(1)/
4.2 Form of Representatives' Warrant Agreement, including form
of Representatives' Warrant/(1)/
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
4.3 Certificate of Designation of Series A Preferred Stock/(2)/
4.4 Certificate of Designation of Series B Preferred Stock/(3)/
4.5 Registration Rights Agreement with respect to Series A
Preferred Stock/(2)/
4.6 Registration Rights Agreement by and among the Registrant,
Barry H. Levine and Robert B. Williams/(4)/
4.7 Promissory Note by and between the Registrant and Robert B.
Williams/(4)/
4.8 Promissory Note by and between the Registrant and Barry H.
Levine/(4)/
4.9 Placement Agent Warrant Agreement (including form of
Warrant Certificate)/(5)/
5.1 Opinion of Camhy Karlinsky & Stein LLP
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Camhy Karlinsky & Stein LLP (included as part of
Exhibit 5.1)
24.1 Power of Attorney (contained on signature page)
</TABLE>
- -------------
(1) Incorporated by reference to Registrant's Registration Statement on Form
SB-2 (33-95764).
(2) Incorporated by reference to Registrant's Current Report on Form 8-K dated
July 12, 1996.
(3) Incorporated by reference to Registrant's Annual Report on Form 10-KSB/A
for fiscal year ended December 29, 1996.
(4) Incorporated by reference to Registrant's Current Report on Form 8-K dated
November 12, 1996.
(5) To be filed by amendment.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) Include any Prospectus required by Section 10(a)(3) of the Securities
Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the Prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
registration statement;
(iii) To include any additional or changed material information on the plan
of distribution;
provided, however, that paragraph 1(i) and 1(ii) do not apply if the information
required in a post-effective amendment is contained in a periodic report filed
by the Company pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated by
reference in this registration statement.
2. That, for the purpose of determining liability under the Securities Act,
it shall treat each post-effective amendment as a new registration statement of
the securities offered, and treat the offering of the securities at that time as
an initial bona fide offering.
3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
II-2
<PAGE>
(b) The undersigned registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the provisions described in Item 15, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of the
Company 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 Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of New York, State of New York, on the 10th day of April,
1997.
New World Coffee, Inc.
By: /s/ R. Ramin Kamfar
------------------------------------
R. RAMIN KAMFAR
CHIEF EXECUTIVE OFFICER, PRESIDENT AND
DIRECTOR
By: /s/ Jerold E. Novack
------------------------------------
JEROLD E. NOVACK
CHIEF FINANCIAL OFFICER
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ R. Ramin Kamfar President, Chief April 22, 1997
- ------------------------------- Executive Officer and
R. RAMIN KAMFAR Director (Principal
Executive Officer)
/s/ Jerold E. Novack Vice President--Finance April 22, 1997
- ------------------------------- (Principal Accounting Officer)
JEROLD E. NOVACK
/s/ Keith F. Barket Director April 22, 1997
- -------------------------------
KEITH F. BARKET
/s/ Gwenn M. Cagann Director April 22, 1997
- -------------------------------
GWENN M. CAGANN
/s/ Jack E. Bush Director April 22, 1997
- -------------------------------
JACK E. BUSH
/s/ Steven A. Rothstein Director April 22, 1997
- -------------------------------
STEVEN A. ROTHSTEIN
/s/ Kevin R. Greene Director April 22, 1997
- -------------------------------
KEVIN R. GREENE
/s/ Edward McCabe Director April 22, 1997
- -------------------------------
EDWARD MCCABE
/s/ Ronald S. Hari Director April 22, 1997
- -------------------------------
RONALD S. HARI
</TABLE>
II-4
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints each of R. Ramin Kamfar and Jerold E. Novack, singly,
as his true and lawful attorney-in-fact and agent, with full power of
substitution for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments and post-effective amendments to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto each said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, thereby ratifying and confirming all that each said
attorney-in-fact and agent, or his substitutes, may lawfully do or cause to be
done by virtue thereof.
In accordance with the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates stated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Keith F. Barket
____________________ Director April 22, 1997
Keith F. Barket
/s/ Gwenn M. Cagann
____________________ Director April 22, 1997
Gwenn M. Cagann
/s/ Jack E. Bush
____________________ Director April 22, 1997
Jack E. Bush
/s/ Stephen A. Rothatein
________________________ Director April 22, 1997
Steven A. Rothstein
____________________ Director April , 1997
Kevin R. Greene
/s/ Edward McCabe
____________________ Director April 22, 1997
Edward McCabe
/s/ Ronald S. Hari
____________________ Director April 22, 1997
Ronald S. Hari
</TABLE>
II-5
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EXHIBIT 5.1
April 22, 1997
Board of Directors
New World Coffee, Inc.
379 West Broadway
New York, New York 10012
Re: New World Coffee, Inc.
Registration Statement on Form S-3
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Dear Sirs:
You have requested our opinion as counsel for New World Coffee, Inc.
a Delaware corporation (the "Company"), in connection with the Registration
Statement on Form S-3 being filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act") with respect to the issuance by the Company of up to
999,999 shares (the "Shares") of common stock, par value $.001 per share, of
the Company.
In rendering the opinions hereafter we have relied upon such
documents and instruments as we have deemed appropriate.
In conducting our examination, we have assumed, without
investigation, the genuineness of all signatures, the correctness of all
certificates, the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies and the authenticity of the
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Board of Directors
New World Coffee, Inc.
April 7, 1997
Page -2-
originals of such copies, and the accuracy and completeness of all records made
available to us by the Company.
The opinions hereinafter expressed are subject to the following
qualifications:
a. Our opinion in paragraph 1 below as to the good standing of the
Company is based solely upon a certificate from public officials.
b. Our opinions below are limited to the matters expressly set forth
in this opinion letter, and no opinion is to be implied or may be inferred
beyond the matters expressly so stated.
c. We disclaim any obligation to update this opinion letter for
events occurring after the date of this opinion letter.
d. We are members of the Bar of the State of New York. Our opinions
below are limited to the effect of the laws of the State of New York and of the
federal laws of the United States, except with respect to certain limited
matters governed by the laws of the State of Delaware, as to which laws we have
made what we deem to be a reasonable examination and upon reliance on
certificates of public officials in Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing,
and in good standing under the laws of Delaware.
2. The Shares are duly authorized, legally issued, fully paid and
nonassessable.
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Board of Directors
New World Coffee, Inc.
April 7, 1997
Page -3-
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not thereby admit that we
are in the category of persons whose consent is required pursuant to Section 7
of the Act or the rules and regulations of the Commission promulgated
thereunder.
This opinion letter is rendered solely for the benefit of the
addressee. Without our prior written consent, this opinion letter may not be:
(i) relied upon by any other party or for any other purpose; (ii) quoted in
whole or in part or otherwise referred to in any report or document; or (iii)
furnished (the original or copies thereof) to any other party.
Very truly yours,
/s/ Camhy, Karlinsky & Stein LLP
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CAMHY, KARLINSKY & STEIN LLP
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-3 registration statement of our report dated March 6,
1997 included in the Company's Form 10-KSB for the year ended December 31, 1996
and to all references to our Firm included in this Form S-3 registration
statement.
New York, New York ARTHUR ANDERSEN LLP
April 21, 1997
