AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 18, 1998
REGISTRATION NO. ____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
New World Coffee & Bagels, Inc.
(Exact name of registrant as specified in its charter)
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)
<PAGE>
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:
Stuart M. Sieger, Esq.
Herbert W. Solomon, Esq.
Hollenberg Levin Solomon Ross Belsky & Daniels, LLP
585 Stewart Avenue, Suite 700
Garden City, New York 11530
(516) 745-6000
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]
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. [ ]
CALCULATION OF REGISTRATION FEES
<TABLE>
<CAPTION>
Title of each Proposed Proposed Amount
class of Amount maximum offering maximum aggregate of
securities to to be price per offering registra-
be registered registered share (1) price (1) tion fees
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, 3,271,092 shs. $1.35 $4,415,974 $1,302.72
$0.001 par value
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
ii
<PAGE>
(1) Estimated solely for purpose of calculating the registration fee pursuant
to Rule 457(c) on the basis of the closing price per share of the Common
Stock reported on the NASDAQ-NMS on August 17, 1998, which was $1.3438.
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.
iii
<PAGE>
NEW WORLD COFFEE & BAGELS, INC.
Cross Reference Sheet Showing Location
in Prospectus of Information
Required by Items of Form S-3
Item and Heading Location in Prospectus
- ---------------- ----------------------
1. Forepart of the Registration Statement Outside Front Cover Page
and Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Inside Front and Outside
Pages of Prospectus Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors Summary of Prospectus;
and Ratio of Earnings to Fixed Charges Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page
6. Dilution Not Applicable
7. Selling Security Holders Selling Shareholders
8. Plan of Distribution Plan of Distribution
9. Description of Securities to be Description of Capital
Registered Stock
10. Interest of Named Experts and Legal Matters; Experts
Counsel
11. Material Changes Proposed Acquisition of
Manhattan Bagel Company, Inc.
12. Incorporation of certain information Incorporation of certain
information by Reference
13. Disclosure of Commission Position Disclosure of Commission
on Indemnification for Securities Position on Indemnification
Act Liabilities for Securities Act
Liabilities
14. Other Expenses of Issuance and Other Expenses of Issuance and
Distribution Distribution
15. Indemnification of Officers and Indemnification of Directors
Directors and Officers
16. Exhibits Exhibits
iv
<PAGE>
17. Undertakings Undertakings
v
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 18, 1998
PROSPECTUS
NEW WORLD COFFEE & BAGELS, INC.
1,000,000 SHARES OF COMMON STOCK OFFERED BY THE COMPANY
2,271,092 SHARES OF COMMON STOCK OFFERED BY SELLING SHAREHOLDERS
This is an offering of up to 1,000,000 shares of Common Stock of New World
Coffee & Bagels, Inc.(the "Company") by the Company. This is also an offering by
the Selling Shareholders named herein of up to 2,271,092 shares of common stock
heretofore issued to them. The selling shareholders may be deemed to be
underwriters when they sell their shares. See "Plan of Distribution."
The Company will pay certain costs and expenses incurred in connection with
the registration of the shares of Common Stock ("Shares") offered hereby, but
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 Company anticipates incurring expenses
totaling approximately $25,000.00 payable in connection with the sale of the
shares being registered hereby.
The Common Stock of the Company, par value $.001 per share, is traded on
the NASDAQ National Market System ("NASDAQ-NMS") under the symbol NWCI. On
August __, 1998 the closing sale price of the Company's Common Stock on the
NASDAQ-NMS was $_____ 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. Any securities covered by this Prospectus
which qualify for sale pursuant to Rule 144 under the Securities Act may be sold
by a Selling Shareholder under Rule 144 rather than pursuant to this Prospectus.
See "Plan of Distribution."
INVESTING IN THE COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE DATE OF THIS PROSPECTUS IS _________.
1
<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 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.
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 for the fiscal year ended December 28, 1997; (b) Quarterly
Report on Form 10Q-SB for the quarters ended March 29, 1998 and June 28, 1998;
(c) Report on Form 8-K dated July 29, 1997 and (d) all documents subsequently
filed by the Registrant (see below).
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
thereof 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
2
<PAGE>
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
& Bagels, Inc., 379 West Broadway, New York, New York 10012, (212) 343-0552,
extension 19.
FORWARD-LOOKING STATEMENTS
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 1995 with respect to
the financial condition and business of the Company. The words "estimate,"
"plan," "intend," "anticipate," "expect," "project," "should," "would,"
"forecast" and similar expressions, and all references to the acquisition of
Manhattan Bagel Company, Inc. and the effects of such acquisition, 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.
3
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
The Company
- -----------
The Company owns, operates and franchises coffee bars and integrated coffee
bar/bagel bakeries in New York, New Jersey, Connecticut, Pennsylvania, Maryland
and Florida and in Germany. The Company's coffee operations are vertically
integrated, with the Company purchasing beans from around the world which are
roasted in its Connecticut plant and then supplied to both Company-owned and
franchised stores.
The Offering
- ------------
Securities Offered ........ 1,000,000 shares of Common Stock by the Company
2,271,092 share of Common Stock by the Selling
Shareholders
Use of Proceeds ........... The proceeds of the shares of Common Stock offered
by the Company will be used for general corporate
purposes. See "Plan of Distribution".
Shares to be outstanding
after the offering ........ 15,410,974 shares
NASDAQ/NMS Symbol ......... NWCI
Risk Factors .............. See "Risk Factors" below
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.
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 not had net income for any fiscal year. For the fiscal
year ended December 29, 1996, the Company had a net loss of $5,670,951. For the
fiscal year ended December 28, 1997, the Company had a net loss of $6,736,157.
At December 28, 1997, the Company had an accumulated deficit of $17,278,886. For
the six months ended June 28, 1998, the Company had net income of $133,948.
There can be no assurance that the Company will continue to be profitable in the
future. The securities offered hereby are highly speculative and should be
purchased only by persons who can afford to lose their investment.
NEED FOR ADDITIONAL FINANCING. In order to achieve and maintain the
Company's anticipated growth rate, including acquisitions, geographic expansions
and in order to make future debt payments, the Company believes that it will,
from time to time, have to obtain bank financing or sell additional debt or
equity (or hybrid) securities in public and private financings. 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. The Company has no present lines of credit or bank
financing. See "Proposed Acquisition of Manhattan Bagel Company, Inc." below.
GROWTH THROUGH FRANCHISING. New World is committed to grow through
franchising. As of June 28, 1998 there were 34 Company-owned and seven
franchised stores in operation. In addition, there were 36 franchises signed but
not yet operating. Achievement of the Company's expansion plans will depend 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) attract and
retain qualified franchisees; (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 and financial position. See "Proposed Acquisition of Manhattan Bagel
Company, Inc." below.
The Company will rely in part upon its franchisees and the manner in which
they operate their stores to develop and promote the Company's business.
Although the Company has developed criteria to evaluate and screen prospective
franchisees and has attracted franchisees, there can be no assurance that
franchisees will have the business acumen or financial resources necessary to
5
<PAGE>
operate successful franchises of the Company in their franchise areas. The
failure of franchisees to operate franchises successfully could have a material
adverse effect on the Company, its reputation, the Company's name and its other
prospective franchisees.
PROPOSED ACQUISITION OF MANHATTAN BAGEL COMPANY, INC. The Company has
entered into an acquisition agreement (the "Acquisition Agreement") for the
purchase of Manhattan Bagel Company, Inc. Debtor in Possession,("MBC"). See
PROPOSED ACQUISITION OF MANHATTAN BAGEL COMPANY, INC. below. The Company has
expended, and will expend, a significant amount of time and funds in connection
with the proposed acquisition of MBC. Should such acquisition, for any reason,
not be consummated, the Company will have been diverted for a significant period
of time from pursuing other acquisition opportunities and will have to write off
such costs as a charge against its income.
There is no assurance as to when such acquisition will be consummated or as
to the final terms of the acquisition, in that the same may be subject to
changes by interaction between the Company, MBC, the Bankruptcy Court and the
various creditors of MBC. Accordingly, it is possible that the Company may agree
to a final plan of reorganization which involves acquisition costs in excess of
those set for in the Acquisition Agreement, although the Company has no
obligations to do so.
The acquisition of MBC as proposed, will require the Company to incur a
significant amount of debt, approximately $14 million and incur other
obligations.
The debt and obligations described above will substantially increase the
aggregate indebtedness of the Company. Should the Company be unable to generate
sufficient cash flow to repay such indebtedness from operations or debt or
equity financings, such inability could have a material adverse effect on its
operations. Furthermore, since the funded debt and certain of the obligations to
MBC creditors are to be secured by the assets of the Company and its
subsidiaries, a default in payment of the funded debt could result in a change
in control of the Company.
The acquisition would represent a substantial expansion of the Company's
operations and would increase the Company's store base by approximately 700%
with the addition of approximately 290 franchised and 15 company owned stores.
The Company plans to integrate its growing franchise operation with the existing
franchise operation of MBC. The Company may experience difficulties in dealing
with the MBC franchisee base as to its current issues with MBC, and/or the
upgrading of its reporting and control equipment and the introduction and
promotion of the Company's premium coffees. The Company believes that it has the
resources, including personnel, to manage these relationships in a successful
manner. The acquisition would also expand the Company's manufacturing facilities
by the addition of two operating bagel dough/cream cheese production facilities.
The Company has not had experience concerning bagel/creamcheese plant
operations, but believes that management of MBC who will be directly in charge
of these operations will provide significant expertise. However, there can be no
assurance that the Company will not experience difficulties which are presently
unforeseen concerning the integration of the operations of MBC with those of the
Company. Given the magnitude of the MBC acquisition, such could have a
materially adverse effect on the operations and financial condition of the
Company.
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
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<PAGE>
employees, particularly R. Ramin Kamfar, the Company's President and Chief
Executive Officer, and Jerold E. Novack, the Company's Chief Financial Officer.
The loss of the services of one or both 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.
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's bagel products compete directly against all bakery and
restaurant outlets that serve bagels, including the bakery section of
supermarkets, and a growing number of bagel bakeries. Although competition in
the bagel market is fragmented, the Company competes and, in the future will
increasingly compete with Einstein/Noah Bagel Corp., a Colorado based retailer
with over 550 stores, Bruegger's Bagels, a Vermont based retailer with over 300
stores, and MBC, which, however, the Company has agreed to acquire. In addition
to current competitors, one or more new major competitors with substantially
greater financial, marketing, and operating resources than the Company could
enter the market at any time and compete directly against the Company. In
addition, in virtually every major metropolitan area in which the Company
operates or expects to enter, local or regional competitors already exist.
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. The Company will
also face competition from franchisors in its industry and other industries for
the sale of franchises, many of which have substantially greater financial and
technical resources, marketing capabilities and experience than the Company.
There can be no assurance that the Company will be able to compete successfully
against these competitors in securing desirable franchisees.
GEOGRAPHIC CONCENTRATION; FLUCTUATIONS IN REGIONAL ECONOMIC CONDITIONS.
Most of the Company's stores are currently located in the northeastern United
States, with a significant concentration located in New York City. As a result,
the Company's success will depend, among other matters, 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. See "Proposed Acquisition of
Manhattan Bagel, Inc." below. This acquisition would broaden the geographic
scope of operations of franchisees of the Company.
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<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 fewer daylight hours. 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 large 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. 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.
LACK OF PRODUCT DIVERSIFICATION. The Company's business historically has
been centered around essentially one product, coffee. Until 1997, the Company's
operations had been limited to the purchase and roasting of green coffees, and
the sale of whole bean coffees and coffee beverages, along with related
products, through its specialty coffee cafes. Despite the Company's entry into
the bagel industry, any material decrease in demand for specialty coffee could
have a material adverse effect on the Company's business, operating results and
financial condition.
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,
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<PAGE>
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, at June 28, 1998, had 73.5 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
additional 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.
IMPACT OF GOVERNMENTAL REGULATION ON THE COMPANY'S OPERATIONS. The
Company's operations and properties are subject to regulation by various
federal, state, and local government entities and agencies. The operations of
the Company's facilities are subject to various federal, state, and local
environmental laws and workplace regulations, including but not limited to the
Occupational Safety and Health Act, the Fair Labor Standards Act, the Clean Air
Act, and the Clean Water Act. The Company believes that its current legal and
environmental compliance controls adequately address such concerns and that it
is in substantial compliance with applicable laws and regulations. However,
compliance with, or violation of, current and future laws or regulations could
require material expenditures by the Company or otherwise adversely affect the
Company's business or financial results.
PRODUCT LIABILITY; PRODUCT RECALLS. The Company may be liable if the
consumption of any of its products causes injury, illness or death. The
Company's current management is not aware of any material product liability
judgment against the Company. However, a product liability judgment against the
Company could have a material adverse effect on the Company's business or
financial results.
TRADEMARKS AND OTHER PROPRIETARY RIGHTS. The Company believes that its
trademarks and other proprietary rights are important to its success and its
competitive position. Accordingly, the Company devotes substantial resources to
the establishment and protection of its trademarks and proprietary rights.
However, the actions taken by the Company may be inadequate to prevent imitation
of its products by others or to prevent others from claiming violations of their
trademarks and proprietary rights by the Company. In addition, others may assert
rights in the Company's trademarks and other proprietary rights.
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. As
of the date of this prospectus, there will be 15,638,570 shares of Common Stock
outstanding. Excluding the 2,271,092 shares being registered hereby for sale by
the Selling Shareholders, __________ of such shares are "restricted securities"
("Restricted Shares") pursuant to Rule 144 promulgated under the Securities Act
of 1933, as amended (the "Securities Act"). Absent registration under the
Securities Act, the sale of such shares is subject to Rule 144, as promulgated
under the Securities Act. In general, under Rule 144, subject to satisfaction of
certain other conditions, a person, including an affiliate of the Company, who
has beneficially owned Restricted Shares of Common Stock for at least one year
is entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of 1% of the total number of outstanding
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shares of the same class, or if the Common Stock is quoted on NASDAQ, the
average weekly trading volume during the four calendar weeks preceding the sale.
A person who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned the shares of
Common Stock for at least two years is entitled to sell such shares under Rule
144 without regard to any of the volume limitations described above.
LISTING AND QUALIFICATION ON NASDAQ. The Common Stock of the Company is
currently traded in the NASDAQ National Market and is quoted on the NASDAQ
System under symbol "NWCI." Continuation of quotations on NASDAQ is subject to
continued compliance with requirements imposed by NASDAQ. The Company presently
meets all minimum maintenance standards, and believes it will continue to do so.
However, if the Company's Common Stock is no longer quoted on NASDAQ, the
liquidity of the Common Stock offered hereby would be adversely affected.
THE COMPANY
New World Coffee & Bagels, Inc. ("New World" or the "Company") owns,
operates and franchises coffee bars and integrated coffee bar/bagel bakeries in
New York, New Jersey, Connecticut, Pennsylvania, Maryland, Massachusetts,
Florida and Germany. The Company's coffee operations are vertically integrated,
with the Company purchasing beans from around the world which are roasted in its
Connecticut plant and then supplied to both Company-owned and franchised stores.
The Company opened its first coffee bar in 1993. In 1997 the Company
launched its franchising program and its integrated coffee bar/bagel bakery
concept. Since launching its franchising program and coffee bar/bagel bakery
concept, the Company has signed franchise agreements in New York, New Jersey,
Maryland, Pennsylvania, Massachusett and Florida, its first supermarket
franchise, its first international franchise, and its first co-branding
franchise.
The Company differentiates itself from coffee bars or bagel bakeries by
offering an integrated coffee bar/bagel bakery serving fresh roasted coffees,
fresh brewed coffee and specialty beverages, fresh baked bagels, fresh prepared
bagel sandwiches, pastries and desserts. This integrated concept allows the
Company's stores to capture all three day parts, i.e. breakfast, lunch and
afternoon/evening neighborhood gathering place compared to coffee-only or
bagel-only retailers which generally capture two day parts.
The Company is in the process of converting its existing coffee bars to
integrated coffee bar/bagel bakeries, which the Company anticipates would lead
to substantial increases in same store sales. In addition, New World is in the
process of converting a number of its Company-owned operations to franchises
which the Company anticipates would improve operations at such stores and
generate significant cash from such sales. The Company anticipates that, over
time, the substantial majority of its existing stores will be converted to the
coffee bar/bagel bakery format and to franchised operations and that the
acquisition and development of additional stores shall be carried out only for
the purpose of selling and franchising of the same.
As of June 28, 1998 there were 34 Company-owned and 7 franchised stores in
operation. In addition, there were 36 franchises signed but not yet
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operating.
The U.S. coffee market has broad and deep demographics. Fifty-six percent
of American adults drink coffee and they drink an average of 3.5 cups per day,
according to the National Coffee Association of U.S.A., Inc.'s 1996 Winter
Coffee Study. The gourmet coffee segment of the industry has experienced strong
growth over the past decade and is expected to continue to grow through the end
of the century. According to the Specialty Coffee Association of America
("SCAA"), the market for gourmet coffee nearly doubled during the 1980s, as
retail sales grew from approximately $763 million in 1979 to approximately $2.0
billion in 1994. According to the SCAA the gourmet coffee industry is expected
to approach $5.0 billion in retail sales by the year 2000 and 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. The Company believes these are the most up to date reports available on
the specialty coffee industry.
The Company believes that the U.S. bagel market is large, growing and
fragmented. According to the American Bagel Association sale of bagels has grown
rapidly, from $429 million in 1993 to $2.3 billion in 1996. Industry sources
estimate that the bagel market is growing by approximately 20% per year.
According to the NPD Group, an independent research organization, the per capita
consumption of bagels rose 83%, from 14 per person in 1993 to an estimated 26
per person in 1996.
Management believes this growth has been driven by (i) greater consumer
awareness and appreciation of gourmet coffee and fresh baked bagels as a result
Of their increasing availability, (ii) increasing demand for all fresh premium
food products where the differential in price from the commercial brands is
small compared to the improvement in product quality and taste, (iii) a switch
by consumers to low fat baked items such as bagels from high fat fried
alternatives, and (iv) the popularity of coffee bars as gathering places.
The goal of New World Coffee is to become a leading coffee bar/bagel bakery
chain in each market in which it operates. Each element of the Company's
strategy is designed to differentiate and reinforce New World's brand identity,
to engender customer loyalty and to position the Company as a leading coffee
bar/bagel bakery franchisor.
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.
PROPOSED ACQUISITION OF MANHATTAN BAGEL COMPANY, INC.
On July 28, 1998, the Company entered into an acquisition agreement (the
"Agreement") for the purchase of Manhattan Bagel Company, Inc., Debtor in
Possession, a New Jersey Corporation ("MBC"). MBC filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code in 1997. MBC presently
franchises, licenses or operates over 305 bagel stores and manufactures bagel
dough and cream cheese products at plants in Eatontown, New Jersey and Los
Angeles, California.
The acquisition would represent a substantial expansion of the Company's
operations and would increase the Company's store base by approximately 700%
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with the addition of approximately 290 franchised and 15 company owned stores,
which generate approximately $120 million in annual sales. As a result of the
addition of this franchise base the Company should experience a significant
increase in ongoing royalty income. In addition, the Company should experience a
significant increase in revenues from the addition of the company owned stores.
The Company plans to integrate its growing franchise operation with the
existing franchise operation of MBC. The Company may experience difficulties in
dealing with the MBC franchisee base as to its current issues with MBC, and/or
the upgrading of its reporting and control equipment and the introduction and
promotion of the Company's premium coffees. The Company believes that it has the
resources, including personnel, to manage these relationships in a successful
manner.
The acquisition would also expand the Company's manufacturing facilities by
the addition of two operating bagel dough/cream cheese production facilities
located in New Jersey and California, which primarily supply the Manhattan Bagel
franchise base. As a result, the Company should experience a significant
increase in factory revenues of approximately $25 million annually, based on
historical operations. The Company has not had experience concerning bagel/cream
cheese plant operations, but believes that management of MBC who will be
directly in charge of these operations will provide significant expertise.
Furthermore, New World's coffee factory sales are projected to increase by
supplying coffee to the Manhattan Bagel franchise base, which currently purchase
significant amounts of coffee from third party vendors. The Company believes
that the sale of its premium coffees by the MBC franchisees and the expansion of
their coffee product line will enhance their sales and operations. Similarly,
the Company also anticipates supplyingits coffee & bagel stores with bagels and
cream cheese from the MBC plants, resulting in a corresponding increase in
Manhattan Bagel's factory sales.
The agreement includes the acquisition of Manhattan Bagel's management
infrastructure. The Company expects to realize significant savings from the
consolidation of general and administrative expenses of New World and MBC.
The Company projects the acquisition to be accretive to its earnings.
Assuming the acquisition, the approval of a reorganization plan, the benefits of
cross selling and the consolidation of general and administrative overhead had
occurred at the beginning of each period, the transaction would have been
significantly accretive on a pro forma basis for the first and second quarters
of 1998. The pro forma analysis does not purport to be indicative of the results
that actually would have been obtained if the combined operations had been
conducted during the periods presented, nor does it purport to be indicative of
future periods of the combined operations.
Separately, New World has received proxies, exercisable under certain
circumstances, for approximately 2 million shares or approximately 27% of the
outstanding voting stock of MBC (prior to exercise of warrant discussed below).
New World has also received a warrant, exercisable under certain circumstances,
to purchase 4 million shares of newly issued shares, representing approximately
35% of the outstanding voting stock following such exercise, of MBC. Assuming
exercise of the warrant, the above would give New World a right to vote the
majority of the outstanding common stock of MBC under certain circumstances.
The total cost of the acquisition is presently estimated at approximately
$20 million including a combination of cash and common stock to be made
available to the creditors of MBC, and the assumption of certain liabilities to
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<PAGE>
MBC creditors. The Agreement, which is subject to bankruptcy court approvals,
requires New World to provide and assume certain debt. In addition under the
Agreement, New World represents that it has received an equity financing
commitment of two million dollars. This equity commitment is from an affiliate
of an existing institutional investor in the Company.
There is no assurance as to when such acquisition will be consummated or as
to the final terms of the acquisition, in that the same may be subject to
changes by interaction between the Company, MBC, the Bankruptcy Court and the
various creditors of MBC. Accordingly, it is possible that the Company may agree
to a final plan of reorganization which involves acquisition costs in excess of
those set forth in the Agreement, although the Company has no obligation to do
so. See "Risk Factors".
USE OF PROCEEDS
The proceeds of the shares of Common Stock offered by the Company will be
used for general corporate purposes.The Company will not receive any of the
proceeds of the shares of Common Stock sold by the Selling Shareholders. See
"Plan of Distribution"
SELLING SHAREHOLDERS
The following table sets forth the number of shares of Common Stock
beneficially owned by each of the Selling Shareholders as of the date of this
Prospectus, the number of shares (the "Shares") covered by this Prospectus and
the amount and percentage ownership of the Selling Shareholders 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.
13
<PAGE>
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO NUMBER OF OWNED AFTER
THE OFFERING/3/ SHARES THE OFFERING
NAME OF SELLING ---------------- REGISTERED ------------
SHAREHOLDER NUMBER PERCENT HEREUNDER NUMBER PERCENT/1/
- --------------- ------ ------- --------- ------ ----------
Craig Ackerman/5/ 8,000 /4/ 5,000 3,000 /4/
Lawrence D. Altschul /2/ /2/ 19,039 /2/ /2/
Francis Anderson 3,150 /4/ 2,150 1,000 /4/
John Apgar/5/ /2/ /2/ 2,500 /2/ /2/
Darin Barker 5,688 /4/ 2,188 3,500 /4/
Ann W. Bell 27,500 /4/ 27,500 0 0
Alan Bienhacker 5,695 /4/ 2,195 3,500 /4/
Max Blisko 5,500 /4/ 5,500 0 0
Solomon Blisko &
Carol Blisko 5,500 /4/ 5,500 0 0
Benjamin Bollag 71,932 /4/ 68,750 3,182 /4/
Michael Bollag 83,123 /4/ 68,750 14,373 /4/
Christopher 5,688 /4/ 2,188 3,500 /4/
Brothers
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A. Eugene Case /2/ /2/ 45,430 /2/ /2/
Timothy Cherney 6,600 /4/ 6,600 0 0
IRA
James Cobb & 11,000 /4/ 11,000 0 0
Caren Cobb
William S. Cohen 5,500 /4/ 5,500 0 0
Congregation 44,000 /4/ 44,000 0 0
Ohel Yonah
Continental Capital 32,050 /4/ 32,050 0 0
John Corcoran/5/ 3,500 /4/ 2,500 1,000 /4/
Karen Ann Covais 950 /4/ 950 0 0
Timothy DeTraglia/5/ 34,299 /4/ 7,500 26,799 /4/
Dominion Income 265,526 1.8 265,526 0 0
Management Corp.
Paul Dorfman 148 /4/ 148 0 0
Farangis Eghbali 5,500 /4/ 5,500 0 0
Glenn Egli & 11,000 /4/ 11,000 0 0
Dorothy Egli, TTEE
Egli Trust
Entrepreneurial 1,142,857 7.9 571,429 571,428 3.7
Investors Ltd.
Equity Services 57,143 /4/ 57,143 0 0
Ltd.
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Michael Fenton 7,438 0 4,438 3,000 /4/
Florence Fernandez/5/ 3,000 /4/ 3,000 0 0
James Flaum /2/ /2/ 8,800 /2/ /2/
Dr.Prabhakar /2/ /2/ 39,996 /2/ /2/
Guniganti
John Hatsopoulos 12,385 /4/ 12,385 0 0
Beverly Ord
Houston 5,500 /4/ 5,500 0 0
Scott Jennings/5/ 3,300 /4/ 2,500 800 /4/
Harry & Rosalind 11,000 /4/ 11,000 0 0
Kabo
Allan B. Kachel 11,000 /4/ 11,000 0 0
Robin B. Kachel 11,000 /4/ 11,000 0 0
Frances Kehoe 475 /4/ 475 0 0
KLM Private
Funding, Inc. 90,909 /4/ 90,909 0 0
Harvey Kohn 87,903 /4/ 44,384 43,519 /4/
Michael Konig, 33,750 /4/ 33,750 0 0
PC
Raymond Kralovic, 27,500 /4/ 27,500 0 0
FB0 Kralovic Trust
Ronald M. Krinick 100,580 /4/ 38,500 62,080 /4/
Barry Levine/5/ 125,048 /4/ 45,048 80,000 /4/
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Steven Lorber /2/ /2/ 5,500 /2/ /2/
Christine Lordi/5/ /2/ /2/ 2,500 /2/ /2/
Lewis Mason 8,438 /4/ 4,438 4,000 /4/
Robert & Nancy 7,700 /4/ 7,700 0 0
McGuire
Douglas B. McLagan 61,000 /4/ 11,000 50,000 /4/
Skip & Carla 11,000 /4/ 11,000 0 0
Mendelson
Steven Meyer /2/ /2/ 2,500 /2/ /2/
David & Debbie /2/ /2/ 5,500 /2/ /2/
Morris
Kay Murcer /2/ /2/ 22,000 /2/ /2/
Nancy Murdocco 1,200 /4/ 950 250 /4/
Jerold Novack/5/ 297,981 2.0 18,333 279,648 1.8
Sheldon Rabin /2/ /2/ 48,400 /2/ /2/
IRA Rollover
Rahn and Bodmer 50,850 /4/ 49,500 1,350 /4/
David Rosensaft 27,500 /4/ 27,500 0 0
& Debra Braverman
Steven Rubel /2/ /2/ 4,015 /2/ /2/
Morris & Elaine 27,500 /4/ 27,500 0 0
Rubin
Brunelle Salamon 725 /4/ 475 250 /4/
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Michael Schmerin 22,000 /4/ 22,000 0 0
Michael L. Shinn 11,000 /4/ 11,000 0 0
Alan and Judy /2/ /2/ 210,526 /2/ /2/
Shapiro
Darla Southworth/5/ /2/ /2/ 1,500 /2/ /2/
Robert Spira, 1,650 /4/ 1,650 0 0
Trustee,Benjamin
Spira Irrev. Trust
Lawrence Stanton/5/ 9,800 /4/ 6,500 3,300 /4/
Paul Stark 3,252 /4/ 3,252 0 0
Cary Sucoff 89,359 /4/ 44,384 44,975 /4/
CW Sunday 4,400 /4/ 4,400 0 0
Robert Williams/5/ 125,048 /4/ 45,048 80,000 /4/
/1/ Assumes the sale of all shares being registered.
/2/ To be provided by amendment hereto.
/3/ Includes shares purchasable under option or warrant contracts with the
Company.
/4/ Less than 1%.
/5/ Employee of the Company.
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PLAN OF DISTRIBUTION
The sale of 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 proposes 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,
but the Company may, at such time as it determines, file an amendment to remove
any unsold Shares.
The Company may offer its shares of Common Stock in the same manner as the
offering by the Selling Shareholders, and in addtion, may offer the shares to
19
<PAGE>
certain employees, to certain vendors and to satisfy other indebtedness.
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 August 13, 1998 15,410,974 shares of Common Stock, and
73.5 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 holders of Common Stock 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 June 28, 1998, the Company had
no shares of Preferred Stock outstanding except for 73.5 shares of Series B
Preferred Stock described below. 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 a change in control of the Company.
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
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
20
<PAGE>
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 (the "Series B Premium") for the period that has passed since the date of
issuance (the "Issue Date") 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. Beginning on the first day following the termination of a
six-month lock-up period (the "Initial Conversion Gate"), each Holder accrued
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. 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").
The Holders of the Series B Preferred Stock have no voting power
whatsoever, except as provided by Delaware Law.
WARRANTS
As of June 28, 1998, the Company had _______ warrants outstanding to
purchase Common Stock. These warrants have exercise prices ranging from $__ -
$__ per share and have terms ranging from __ to __ years.
TRANSFER AGENT
The transfer agent for the Common Stock is American Stock Transfer & Trust
21
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Company. The address and telephone number of the transfer agent are:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
(718) 921-8261
LEGAL MATTERS
Certain legal matters in connection with the sale of the Common Stock
offered hereby will be passed upon for the Company by Hollenberg Levin Solomon
Ross Belsky & Daniels, LLP, Garden City, New York.
EXPERTS
The financial statements of the Company for the years ended December 29,
1996 and December 28, 1997 incorporated in this Prospectus by reference from the
Company's Form 10-KSB, as filed with the SEC on April 13, 1998, 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.
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.
22
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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 on as having been authorized by the Company. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy, by any person
in any jurisdiction in which it is unlawful for such person to make such offer
or solicitation. Neither the delivery of this Prospectus nor any offer,
solicitation or sale made hereunder, shall under any circumstances create an
implication that the information herein is correct as of nay time subsequent to
the date of the Prospectus.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
PAGE
----
AVAILABLE INFORMATION ................................................. 2
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE .............................................. 2
FORWARD-LOOKING STATEMENTS ............................................ 3
PROSPECTUS SUMMARY .................................................... 4
RISK FACTORS .......................................................... 5
THE COMPANY ........................................................... 10
PROPOSED ACQUISITION OF
MANHATTAN BAGEL COMPANY INC. ........................................ 11
USE OF PROCEEDS ....................................................... 13
SELLING SHAREHOLDERS .................................................. 13
PLAN OF DISTRIBUTION .................................................. 19
DESCRIPTION OF CAPITAL STOCK .......................................... 21
TRANSFER AGENT ........................................................ 21
LEGAL MATTERS ......................................................... 22
EXPERTS ............................................................... 22
DISCLOSURE OF COMMISSION POSITION
ON INDEMNIFICATION FOR
SECURITIES ACT LIABILITIES .......................................... 22
NEW WORLD COFFEE &
BAGELS, INC.
1,000,000 Shares of Common Stock offered
by the Company
2,271,092 Shares of Common Stock
offered by Selling Shareholder
----------
PROSPECTUS
----------
______________, 1998
Until _____ __, 1998 (40 days from the date of this Prospectus), all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
23
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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, which
shall be borne by the Registrant. Except for the SEC registration fee, all
expenses are estimated.
ITEM AMOUNT
---------------------------------------- ----------
SEC registration fee.................... $ 1,147.46
Printing and engraving expenses......... 5,000.00
Legal fees and expenses................. 15,000.00
Auditors' accounting fees and expenses.. 3,000.00
Miscellaneous expenses.................. 852.54
----------
Total................................... $25,000.00
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.
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ITEM 16. EXHIBITS.
Exhibit
Number Description of Document
- ------ ----------------------
3.1 Articles of Incorporation/(1)/
3.2 By-Laws/(1)/
4.1 Specimen Common Stock Certificate of Registrant/(1)/
4.2 Form of Representatives' Warrant Agreement, including form of
Representatives' Warrant/(1)/
4.3 Certificate of Designation of Series B Preferred Stock/(3)/
4.4 Registration Rights Agreement by and among the Registrant, Barry H.
Levine and Robert B. Williams/(4)/
4.5 Promissory Note by and between the Registrant and Robert B.
Williams/(4)/
4.6 Promissory Note by and between the Registrant and Barry H. Levine/(4)/
5.1 Opinion of Hollenberg, Levin, Solomon, Ross, Belsky & Daniels, LLP
/(7)/
10.1 1994 Stock Plan /(2)/
10.2 Employment Agreement by and between the Registrant and Barry H. Levine
/(4)/
10.3 Employment Agreement by and between Registrant and Robert B. Williams
/(4)/
10.4 Employment Agreement with Ramin Kamfar /(5)/
10.5 Employment Agreement with Jerold Novack /(5)/
10.6 Stock Purchase Agreement by and among Barry H. Levine, Robert B.
Williams and Willoughby's Incorporated and the Registratn /(4)/
10.7 Agreement with Willoughby's Incorporated /(2)/
10.7a Amendment to Willoughby's Agreement /(6)/
10.8 Investor Rights Agreement /(2)/
10.9 Directors' Option Plan /(2)/
10.10 Form of Franchise Agreement /(6)/
10.11 Form of Store Franchise Sale Agreement /(6)/
10.12 Acquisition Agreement by and between Registrant and Manhattan Bagel
Company, Inc. /(7)/
24.1 Consent of Arthur Andersen LLP
25
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24.2 Consent of Hollenberg Levin Solomon Ross Belsky & Daniels, LLP
(included as part of Exhibit 5.1)
- ----------
(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 Report on Form 8-K dated November
12, 1996.
(5) Incorporated by reference from Registrant's Report on Form 10K-SB, for the
Fiscal Year Ended December 29, 1996.
(6) Incorporated by reference from Registrant's Report on Form 10K-SB, for the
Fiscal Year Ended December 28, 1997.
(7) 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
26
<PAGE>
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.
(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.
27
<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 17th day of
August, 1998.
NEW WORLD COFFEE & BAGELS, 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
In accordance with the Securities Act of 1933,this registration statement
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
By: /s/ R. RAMIN KAMFAR Date: August 17, 1998
---------------------
R. Ramin Kamfar
Director
By: /s/ KEITH BARKET Date: August 17, 1998
---------------------
Keith Barket
Director
By:
---------------------
Karen Hogan
Director
By: /s/ RONALD S. HARI Date: August 17, 1998
---------------------
Ronald S.Hari
Director
By: /s/ EDWARD MCCABE Date: August 17.1998
---------------------
Edward McCabe
Director
28
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our firm) included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
/s/
----------------------------
New York, New York
August 12, 1998
